Cloud ERP is an enterprise resource planning system that will run on a vendor’s cloud platform, which is different from an on-premises network. ERP allows organizations to access the internet, and the software has an interface that operates with financial and operational business functions that provide a source of data. This data includes inventory, order and supply chain management, procurement, production, distribution, and fulfillment.
This knowledge means that any ERP system should be available to all businesses, no matter where the employees may be. Cloud ERP meets these requirements as a service because organizations have access to the software through the internet.
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What Is Cloud ERP Software?
Since the software is hosted by the vendors and provides a service to the businesses, cloud-based distribution ERP software is supported by the same or even better functionality as the on-premises systems without most of the drawbacks. This is because organizations have access to the software over the internet, and all you need an internet connection and a browser system.
The IDC had stated that “the demand for cloud-based ERP systems continues to grow because of their ability to access and analyze a large amount of data in close to real time.” That means that there are inventory insights in real-time getting to the sales teams, finance the teams in order to keep a close eye on runaway cash, and respond to audits or other calls for performance data more quickly.
Cloud-based ERP Software Components
All ERP software provides accounting and financial functionality. Then, the organization will choose which types of modules or applications to implement depending on the industry and the need of each specific business. The available ERP modules are:
- Financials and accounting
- Human Capital Management (HCM) and Human Resource Management Software (HRMS)
- Customer Relationship Management (CRM)
- Inventory management
- Order management
- Supply Chain management
- Project management
- Material requires planning
- Cloud-based ERP Concepts
It is also essential to understand some basic concepts associated with Cloud-based ERP as there is more into the subject:
- Deployment Strategy: The ERP software can be deployed on-premises and on private servers. The functionality can be delivered more quickly, but some companies need to set aside some time for planning, data migration, customization, and staff training.
- Cloud-based ERP: The enterprise resources planning software is hosted offsite on the ERP servers provided as a service.
- On-Premises ERP: The ERP planning software installed on the company’s computers and servers locally. These servers are managed by internal or contracted IT staff, and the software is managed and maintained in-house.
- Hosted ERP: A company or provider host manages the software and the infrastructure. Deployment models are utilized when businesses seek to outsource operations.
- End-to-end Security: There is a secure and encrypted connection between the cloud-based ERP and the customers.
- Subscription licensing: The company will pay a fixed subscription fee at specific time intervals. The fee will typically include software maintenance and upgrade and may be charged per user and organization.
Types of Cloud-Based ERP Software
Not all cloud-based software is equal, and some vendors have modified their software to run from their own data centers. Any business that implements this ERP system may miss the opportunity on the benefits such as simple upgrades and the strength of the center model, which is where a pool of resources support the applications.
There are also various types of ERP software:
- Multi-tenant Saas: A single version of the ERP software and its associated infrastructures that serve various organizations. However, although some organizations use the same software and are hosted on the same servers. A general cloud-based ERP system is usually a multi-tenant Saas.
- Single-tenant Saas: A single version of the software and the infrastructure serves multiple organizations. This means that an organization’s data is presented on private servers that run a unique software. Some ERP vendors will give the customers the choice of running a private or shared instance.
- Public Cloud: Owned by the service provider, various organizations share the same services. Although, each organization’s data and applications are not accessible to others. An example would be the public cloud, including Amazon Web Services, Oracle Cloud, Microsoft Azure, and Google Cloud.
- Private Cloud: This is known as a service that is not shared with any other organization.
- Hybrid ERP: Approaches combined on-premises software with a private or public cloud for storage, computing, and services.
8 Benefits of Cloud-Based ERP Software
1. Upfront Infrastructure and Operating Costs: The best benefit of a cloud-based distribution ERP software is the overall reduced costs, which will begin at implementation. With on-premises ERP, the business will tell you the upfront costs when purchasing servers, database creation, initial implementation, IT staffing, security, and backup. Companies that use on-premises ERP systems will encounter some additional costs for maintenance, which are specialized in-house or on-call resources, upgrades and updates, and additional servers as the company grows. The general ERP costs are about 30% less than on-premises ERP. This is because the ERP vendor hosts and manages the software on their own servers. Many businesses avoid the upfront infrastructure costs as well as the additional costs for IT staff, maintenance, security, and updates. But, the vendors will provide the customers with ongoing IT support all the time.
2. Implementation Speed: One of the most enormous hurdles of any new solution is the implementation time, which will directly affect the business’s downtime and valued time. There was one study where half of the businesses that were tested said that their implementations finished in the projected time. A business will usually be up and running more quickly than on-premises since it doesn’t require setting up the hardware or hiring or training the IT staff.
3. Accessibility: ERP users can access their business information from anywhere and on any device around the globe. This software will ensure that the employees across the organization are using and working with the same data and make decisions faster and more confidently.
4. Scalability: The cloud-based ERP makes scaling a business easier without the challenges of adding more users or servers, locations, or subsidiaries. An organization can begin with having the basic core functionality and add more details as needed without having to add more hardware to the system. An ERP solution will allow users across the globe to access business information by just connecting to the internet. There’s no need for local servers, and as the company grows, there will be new units that can be brought online quickly. The vendors will typically on data centers around the world. They will have each customer’s data in multiple locations, which will provide better and more reliable service than most businesses. Software vendors will work towards 99.99% availability, which will result in customers seeing less than eight minutes of unplanned downtime every year.
5. Customizations and Agility: Cloud-based ERP systems can be customized to fit business needs as the business grows and evolves. The customizations that can be made are usually tied to the current software and may be challenging to re-implement with future versions. This is one reason why some businesses will try to avoid upgrading their ERP systems and continue to run the out-of-date technology. Also, ERP systems integrate with other cloud-based products and new modules. This kind of agility will allow businesses to stay proactive instead of reactive, which will help with adjusting more quickly to the industry changes.
6. Upgrades: ERP vendors well typically manage most of the system upgrades and updates while keeping up with evolving business needs and ensuring that the customers are using the most up-to-date technology. Updating or upgrading earpiece software requires time and sometimes even involves hiring contractors to manage the process. ERP updates can take as little as 30 minutes and usually will happen during the off hours to prevent business disruptions.
7. Security, Compliance, and Disaster Recovery: relying on external vendors to safely keep a company’s business data will understand many organizations’ concerns. However, ERP providers may offer better security than other companies could afford. Also, a business can remain confident about its data being backed up and that the vendor is armed with planned and practiced recovery procedures. Unless an organization has a recovery procedure, on-premises solutions may come with risks of catastrophic data loss because of hardware or software failure or a natural disaster such as a fire or break-in. The cloud providers will usually offer high-grade security and encryption of data between the vendor and the organization. It should also be noted that the companies are responsible for identity and access to the management of users.
8.Storage Resilience and Access: If the on-premises hardware fails to work, then a company spending a lot of time and money transferring the data to a new storage system. With cloud-based ERP, the data is kept in the provider’s data centers and usually geographically dispersed. This is also beneficial when providing access to business information and data over the internet. This is an essential consideration as some more jobs and operations are moving online, and companies seek to automate and streamline business processes.
Recommended read: Cloud ERP vs On-Premise ERP: A Comprehensive Comparison