Understanding Cloud ERP: A Guide to Cloud-Based ERP Software

Enterprise resource planning software is among the core technologies for companies that want to maximize their resource management benefits. Learn how to use such software in the presented article!

Usually, ERPs come in two types: cloud-based and on-premise ones. On-premise ERPs are notable for working on a company’s servers. In turn, cloud-based ERP is a technology that works primarily on the servers of dedicated hosting companies. These companies offer clouds, where it’s possible to perform the majority of the configuration without encountering problems with, for instance, maintenance. Generally, cloud ERPs are easier to maintain and offer simpler access to the Internet. Hence, the main goal of the presented article is to clearly outline the core benefits of cloud ERP software, helping users install these solutions in their firm.

What Does Cloud ERP Stand For?

Cloud ERPs are enterprise resource planning solutions that use modern cloud-centric innovations to function. While the on-premise approach, as mentioned previously, is based on company PCs, cloud solutions use popular services on the market. What are those services? For example, a common approach is to install a cloud ERP into Amazon cloud. Using such a solution, the relevant stakeholders get to reduce costs spent on maintenance and maximize connectivity from a myriad of locations.

What Are the Core Functions of Cloud ERPs?

Cloud ERPs don’t have any specific, unique functions in comparison to on-premise ones. In many ways, this term represents the usage of cloud technology for enhancing the already existing frameworks in terms of business efficiency. For instance, you can install your custom ERP into the cloud to boost the overall customer experience for all stakeholders. All your infrastructure would be located within the cloud rather than on some dedicated servers of your company. As a result, the overall performance level of the presented solution should be much higher than in other cases. 

Cloud vs. On-Premise ERPs

In the end, let’s take a look at the difference between two types of cloud ERP software, cloud and on-premise ERPs. We believe that it’s quite significant:

Ownership cost

A cloud-based ERP app can be cheaper than an on-premise one in the majority of cases. How exactly? Firstly, there’s no need to deal with server maintenance. Secondly, many proprietary solutions using the cloud as their basis exist online. All this greatly reduces the overall maintenance expenses of your solution. 

Deployment complexity

It’s much more difficult to deploy an on-premise ERP because you need to configure every aspect of it during installation. In turn, a cloud-based ERP can, in cases of proprietary solutions, offer you a more or less pre-packaged solution that one can use without major configuration from the get-go.

Required expertise

Similarly, you need much higher expertise when using an on-premise ERP. This type of solution is notable for its major configuration requirements. At the same time, modules like customer relationship management can already be preconfigured in cases of cloud-based solutions, decreasing the need for technological knowledge.

Ability to scale

On-premise solutions have one more problem: they require you to personally invest in infrastructure to scale. This means that supply chain management can be very difficult to configure, for instance, if your company is dynamic. Cloud services don’t face this problem. They have vast resources that allow them to expand their operations as much as possible without worrying about resource exhaustion.

Upgrade simplicity

It’s very easy to upgrade cloud ERP software. Why? Cloud solutions offer you clear tools for version management, making changes easy and non-invasive. Simultaneously, even small elements like inventory management can be costly to upgrade in on-premise systems, as you have to configure all fall-back systems yourself.

Control over data

On-premise solutions have rather significant problems with long-term data preservation. Even one minor mistake in configuration can easily lead to the loss of tremendous volumes of information down the line. In the case of cloud systems, you get tools that fully record all your activities. Consequently, supply chain management and other data-intensive activities become much easier with the use of those frameworks. There’s no risk of losing data due to an incident, thanks to these systems.

Performance levels

Performance level is one more aspect that greatly differs between an average cloud-based ERP solution and an on-premise one. Typically, cloud solutions are faster than non-cloud ones because they have a higher ability to work with large amounts of data input. On-premise solutions are less capable of strong performance due to relying on the internal servers of certain corporations. Cloud vendors like Amazon are, in turn, available everywhere.

Accessibility

On-premise solutions are much more expensive and, as a result, require much larger resources from hosting companies. This means that they’re less accessible to the average company on the market. Cloud-based ERP solves this problem once and for all by allowing you to host a solution at a relatively low price.

Maintenance complexity

Cloud-based solutions are easier to maintain in most cases, but usually offer fewer opportunities for configuration. On-premise solutions, however, give better project management capabilities. They enable you to configure the smallest elements of your app, maximizing positive impacts for all relevant stakeholders.

Safety levels

On-premise ERPs are also potentially safer than cloud-based ones. The reason is rather simple: you can completely disconnect them from the Internet. A typical cloud-based ERP system, at the same time, is much more susceptible to outside attacks in most cases. Consequently, one of the main reasons to install on-premise solutions is the ability to increase security levels.

Readiness for mobile platforms

Mobile platforms represent one of the most important technologies in the modern world. For instance, billions of people use it for financial management of all types. In this light, the integration of ERP software into mobile platforms is essential. Ultimately, cloud-based ERP software is simpler to integrate into mobile platforms. The core reason has to do with the capability of the relevant platforms to connect to a maximum number of locations. The top cloud solutions on the market are, more or less, notable for being available almost everywhere.

Customization capabilities

Lastly, a big aspect of success for all types of ERP software is customization. Most cloud-based ERPs are proprietary, fitting the general business requirements of the market. This means that they’re less customizable than the on-premise solutions. As a result, one more reason to install on-premise software is, undoubtedly, a focus on customization.

Cloud-Based ERP Types

There are multiple types of apps in which an average cloud-based ERP solution can manifest. Here are some of the most vital types of apps available through a public cloud provider:

Public cloud-based ERP

The most popular type of solution for ERP is public cloud-based software. These are solutions managed by third-party companies, which provide both content and security patches for them. In cases of such solutions, the users typically pay for using a certain platform, having no ownership over its components.

Private cloud-based ERP

A private cloud-based ERP, in turn, is a solution that is typically bought by certain companies and owned by them. For example, let’s imagine that you’ve paid a custom development company to create your own cloud-based solutions. This is a private cloud-based ERP: you have full ownership over this type of app.

Hybrid cloud-based ERP

The final type of solution to consider is hybrid cloud-based ERP. In this respect, hybrid solutions are noteworthy for a double ownership model that is great for certain workflows. On the one hand, they’re owned by a third-party company. On the other hand, the buyers also receive some form of full-scale license over a solution. Typically, this occurs in the case of so-called white-label software. In such solutions, a third-party vendor develops cloud ERP software and then sells it to other companies, allowing them to use their internal branding on the relevant tools.

Multi-user SaaS

A multi-user SaaS enterprise resource planning software is a solution that is used by multiple users at the same time. The core idea behind this platform type is to enable multiple companies to communicate information. More importantly, the approach is typically cheaper than single-user solutions. In cases where you have many suppliers, these cloud solutions are typically the most efficient.

Single-user SaaS

You can also get entire cloud-based ERP software under your control. This is possible with the help of so-called single-user SaaS. Single-user SaaS is the provision of ERPs for one specific firm, rather than for a set of companies on the market.

Cloud ERP Benefits

Modern cloud ERP has several major benefits for its users that you need to consider. Here are the core benefits of using this technology:

1. Great accessibility

Cloud ERPs are accessible from any location that has an Internet connection. This means that they enable distance work and other alternative models of labor. On-premise solutions can’t be as accessible by themselves.

2. Strong scalability

A typical cloud platform is usually easier to scale. Cloud software enables you to buy additional gigabytes of storage with several clicks. As a result, there’s no risk of encountering large-scale problems with solution scalability. You can expand your app as much as possible with the help of the presented solutions.

3. Fund expenditure efficiency

The core problem with on-premise solutions is the need to maintain every aspect of their everyday work, which elevates the cost of ownership. In turn, cloud-based systems solve this problem once and for all by pushing all those costs upon cloud software maintainers. They host massive servers, which, in many cases, enable the users to avoid large-scale payments for various aspects of maintenance. After all, maintaining one large server is typically cheaper than a smaller solution due to the so-called economies of scale.

4. Automatic update systems

A big aspect of success for cloud-based ERP is the ability to update them automatically. In this regard, many third-party owners of the relevant solutions make major investments in developing newer versions of their apps. Hence, you get an opportunity to enjoy solutions that are as novel as possible.

5. Safety and reliability

While on-premise solutions can be safer, cloud ones are nonetheless quite strong in this regard. Firstly, they use economies of scale protection solutions developed by big cloud companies. Secondly, they have numerous benefits in terms of data management, as it’s easy to restore older versions of certain documents and files with the help of those apps.

How Does Cloud ERP Function?

You need the following actions to fully configure an average system of this kind:

Step 1: Subscribing to a service

The first aspect you need to focus on is choosing the right service. Typically, ERPs work along the subscription model. Thus, you’ll have to choose the subscription that best fits your business. In this regard, our recommendation is to select a solution based on the scope of your business: there are ERPs for both small and larger companies.

Step 2: Configuring core functions

Once you have subscribed, it’s time to configure the core functions of your ERP. In this respect, our recommendation is simple: enable the modules that your company needs and avoid the excessive ones to minimize subscription payments. What are some core configurations for cloud ERP software? In our opinion, they go as follows: your company name, core financial criteria, nature of the supply chains, and number of employees. In short, you need to integrate all the core aspects of firm information for those systems to function well.

Step 3: Migrating information

After you’ve established the basic characteristics of cloud-based ERP software, it’s time to migrate information. If you have other systems, such as the ones for inventory management, you should use file format integration or manual data transition to move information between the relevant systems. This will allow you to maximize the positive impacts of using these systems from the onset. 

Step 4: Integrating with all systems

It’s also vital to integrate your cloud ERP with other systems. For example, you should establish strong connections to mobile devices. This approach will assist you with promoting the digital transformation even further. The more devices you cover, the higher the likelihood of achieving maximal employee buy-in.

Step 5: Training users

All ERP systems have some unique functions that may be difficult for users to adjust to in the beginning. As a result, your main goal is to train users regarding the use of an average cloud-based ERP solution. The more you explain various functions, the better. Proper training is one of the best ways to ensure long-term employee buy-in.

Step 6: Using and managing software

After establishing all integration, it’s time to use the relevant apps. We can’t say much here: your goal is to simply get maximal benefits from your cloud ERP software.

Step 7: Updating and maintaining software

With an on-premise solution, you have to do all the maintenance tasks yourself. Cloud-focused ones require minimal action on your part. In general, maintenance within such platforms involves a focus on cleaning up unnecessary bits of information.

Step 8: Troubleshooting

In case some bugs appear, you should also do some troubleshooting. In this respect, the idea is to review the essence of bugs and report them to the relevant decision-makers.

Cloud-based ERPs in Different Industries

Are you interested in the capabilities of the cloud solutions? In that case, you should look at the following sectors to understand how powerful they can be:

Retail

For a retail firm, a cloud-based ERP can assist by, above all, collecting data on all wares. You’ll have full insights into your inventories and know how much income this or another type of product brings in for your company.

Building

Builders may also need some features of cloud ERPs. What exactly do they require? For example, a cloud application can automatically restock certain tools. In this way, the construction process will face minimal barriers.

Ware manufacturing

Manufacturing businesses are among the core benefactors of cloud enterprise resource planning. In this regard, a cloud-based ERP can become a full-scale digital twin for them. It’ll reflect all processes in a firm and help optimize them based on the deficiencies in the calculation model of the ERP platform.

Transportation

Logistics companies also need to invest in cloud solutions. In this respect, cloud-based ERP software can help them clearly understand the state of supply chains. For example, an ERP is capable of showing whether this or that supply route is efficient for a particular firm on the market.

Automotive production

Automotive firms deal with a tremendous number of small parts when creating or maintaining vehicles. In this light, asset management tools in ERPs are essential for reducing equipment downtime and the loss of various production elements.

Oil and gas producers

Oil and gas producers also work with a tremendous number of small assets in their every day business process. Consequently, our recommendation here is to also use ERPs, as they can simplify the usage of those assets and prevent core equipment losses.

Medical sector

Medical companies need ERPs to process a large number of assets and, for example, to work with difficult rules regarding insurance. Many ERP frameworks are more than capable of integrating those tasks within one powerful platform, making them perfect for business application.

Insurance

Insurance companies are also among the big benefactors of ERP software. How exactly do they benefit from this type of app? ERPs can help navigate difficult calculations relating to risks. In this way, they’ll minimize the negative impacts of potential errors during risk calculations for enterprise business.

Communication

Communication companies face two problems. They need to work with many assets and a large number of clients. Typical ERPs are capable of recording information on all these aspects, enhancing user experience.

Property management

Lastly, a cloud-based ERP solution will likely benefit a property management business. In this regard, it can serve as a strong repository of data about various assets that are being sold.

Core Problems of Cloud ERP Software

In our opinion, cloud ERP software has several core problems that every user needs to consider in the operating cost for such apps. Here they’re:

1. Security problems

Cloud solutions are open to the Internet. Thus, there’s always a high likelihood of them being hacked in some way. Even the best defenses can fail. Ultimately, the best level of security is typically present only in on-premise frameworks.

2. Lacking control

Cloud-based solutions typically belong to particular vendors. In this light, you may have minimal control over the key functions of the involved technology. Hence, the developers can bring about changes that your company will dislike. For example, UI/UX transformation often makes apps less usable. On-premise apps are good in the sense that they offer manufacturing software development opportunities not available in other solutions.

3. Reliance on a vendor

If you have too much information within a certain system, you’ll start relying on a certain vendor too much. This can lead to a vendor lock-in: the vendor will be able to make any changes to pricing or functions, and you won’t be able to change an app without facing major transition costs.

4. Regulation issues

Different countries have different regulations. Consequently, you can face major problems with using certain cloud apps in your country. What’s a solution to this issue? Try using custom software, which will adjust specifically to the needs of your business.

When Should I Switch to a Cloud ERP?

In the end, the best time to switch to a cloud ERP is when you need to scale your business. The core goal should be to maximize the positive impacts of the technology on your firm. Such moments usually happen during periods of fast expansion within certain businesses.

FAQ

What positives can a cloud ERP give my business?

It can enhance your ability to manage finances and assets through data-driven analytics.

Which cloud ERP should you choose?

Everything depends on your needs regarding functions. We don’t have any clear answer here: try to collect as much data about existing solutions as possible while preparing for the usage of enterprise resource planning software.

How does Cloud ERP software help businesses?

A typical cloud ERP helps businesses by collecting all information on their firm in one place.

How much does ERP software cost?

You should think about not only subscription fees but also training and other implementation costs.

How should an ERP software vendor be selected?

You should look at the price of their solution, existing functions, and level of support offered, in our opinion.