What Is Cloud ERP & How Are Businesses Benefiting From Its Deployment

ERP Software / February 2024

Cloud ERP is the name given to an enterprise resource planning system that is accessed on a vendor’s server via an internet connection.

The cloud is simply “other company’s compute power” and, together with ERP, the cloud has transformed how businesses operate. CIOs, IT leaders, and other key roles are under pressure to adopt what is a winning formula.

As of 2022, 64.5% of companies chose the cloud to host their ERP Software over on-premise solutions. When comparing the two, cloud ERPs provide organisations with several benefits such as:

  • Reduced upfront costs
  • 24/7 access to real-time operational data
  • Greater options for scalability
  • Access to the latest data security updates and patches
  • Improve flexibility and agility when expanding

Cloud provision has also eliminated or reduced the need for costly data centres, servers, and complex networking infrastructure. Software as a service (SaaS) increasingly delivers value in the cloud, slashing the need for large software license fees.

However, there are challenges to be wary of too with cloud ERP deployment, including additional system training and troubles with migrating data from legacy systems.

What Is Cloud ERP?

Any enterprise resource planning (ERP) application running outside of the business hardware is considered a cloud ERP. Running on either a vendor or partner’s cloud over the internet, the cloud enables a company to scale their seats or user numbers as they grow and use greater compute and storage resources as their data volumes increase.

The Benefits of Implementing Cloud ERP Software

Cloud ERP systems unify your business. ERP aligns the strategy with operations, providing data for managers to maximise efficiency across buying, production processes, supply chain and beyond. Leaders gain:

  • A unified view of business data
  • Insights to drive growth by optimising current operations
  • The ability to economise smartly during tough periods
  • Understand future opportunities and when to launch them

Today, any business can deploy huge amounts of computing power thanks to the cloud – built around data centres with high-powered processors and huge volumes of storage, linked to fast and high-bandwidth networks. None of which your business has to worry about managing.

Workers can access and collaborate with cutting-edge ERP and other applications from day one, all of which function in a largely secure environment, reducing the need for expensive IT and security roles.

All of this is great news if your business is struggling to wrangle its data and needs an ERP in a hurry. Or, if high-growth opportunities require careful management and analysis to ensure your teams don’t spin out of control.

With a cloud ERP, your teams are more responsive, knowledge experts can collaborate with others, and the tempo of business is faster.

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The Benefits of Implementing a Cloud ERP System

The primary benefits of the cloud are immediacy, scalability, and affordability for any growing business. 55% of SMBs choose to implement a cloud ERP due to its convenience (29%) and adaptability (27%).

For service companies the operational and strategic benefits include a more structured approach to creating, refining and updating processes. For product firms and manufacturers, cloud ERPs support supply and demand efforts, sourcing, manufacturing processes and customer orders, and logistics

Whatever the business type, the cloud helps deliver:

  • Speed and mobility: Growing companies can rapidly adopt and deploy a cloud ERP, workers can access information from laptops or mobile devices wherever they are located.
  • Lower cost of adoption: Compared to monolithic software licensing, the costs are reduced and scale with your growth. Bills are less complex and typically per user or seat, with add-ons billed only as they are needed.
  • Enterprise-class functions: Whatever the size of your business, you get ERP features like HR, accounting, process management and others that were traditionally the preserve of major corporations.
  • Ease of implementation and integration: While a cloud ERP adoption process for an enterprise can take many months or longer, ERP vendors focus on making the process as simple as possible with plug-ins, APIs, and third-party providers delivering vertical-specific support.
  • Continuous innovation: Cloud ERPs deliver new features and updates regularly with no need to update your applications or pay for new features.
  • Increasing automation: In the era of AI in ERP and process automation, ERPs are evolving to reduce the workload for users and managers, providing real-time insights and AI-based analytics, faster response times to issues and delivering a competitive advantage.
  • Always-on security: Cloud systems typically come with enterprise-level security, backup solutions and disaster recovery tools built in to protect the business, users and data. Security is a vendor’s lead priority with the risk of a breach now likely a devastating one for businesses.

How Cloud ERP Benefits SMBs

  • Most SMBs lack the resources for extensive IT adoption, and the cloud saves time and effort that can be focused on the business and product
  • Leaders get used to seeing business strengths and weaknesses faster, and respond with data-based insights to make better decisions
  • Reduced per-user costs mean more capital for the business
  • New features are instantly available and users can leverage them faster

How Cloud-Based ERPs Benefit Enterprises

  • They were slower to adopt cloud than their SMB cousins, but the pace is picking up year-on-year as confidence and necessity grow.
  • Enterprises see the cloud as more secure and reliable than previous generations of applications
  • Enterprises are more prone to digital transformations and system-wide upgrades with ERP in the cloud widely promoted
  • The rewards of timely business intelligence from ERP are now proven

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What Business Types Benefit From Cloud ERP

In terms of size, any growing business can benefit from ERP, and the sooner they adopt it, the better their prospects are. Larger enterprises with complex IT footprints are the largest adopters of ERP in the cloud as they look to simplify their costs and operate more rationally and efficiently.

For companies with a remote, mobile or hybrid workforce, ease of access is a powerful feature of a cloud ERP. Although full security features must be enabled to ensure data and privacy protection.

By industry, both service- and product-focused businesses are eager adopters of ERP. Manufacturers typically adopt products with features aligned to their markets and verticals. All users can benefit from improved product/vendor/service integration, less time processing invoices and licensing flexibility.

Why Data Security Is Key To Cloud ERP Adoption & Success

The cloud enables high-value applications to deliver ERP and other services efficiently, seamlessly and with high-level security. All cloud and ERP vendors require class-leading IT security or they will not win customers.

Even so, users need security training. But as long as application instances and the devices they are used on are professionally managed and maintained, business can be safely executed.

The same goes for data backups and disaster recovery. While largely automated, they should be orchestrated by IT security experts.

Still, security breaches can and will happen, with the constant hacker threat using automated attacks against all businesses and cloud services. Therefore, regular vigilance is required across all endpoints, networks and safe practices drilled into users.

Cloud ERP systems help reduce the risk through unified services, reduced weak points and constant vigilance from automated scanning and vulnerability inspection tools.

5 Types of Cloud ERP Options to Choose From

1. Public Cloud

The public cloud isn’t “public” like a library, but offers shared ownership of a single huge pool of resources (compute, storage and infrastructure) for the most efficient pricing. Individual clouds are separated by access rights.

2. Private Cloud

A private cloud is a limited but scalable set of resources that is exclusively reserved for the customer, providing privacy and security benefits. For those with specific needs, private clouds represent a more secure and flexible approach.

3. Hybrid Cloud

The hybrid cloud gives the best of both worlds and mixes the above schemes with on-premises and other solutions such as edge networks. This gives larger enterprises the ultimate flexibility across their extensive organisations and territories.

4. Multi-Tenant Cloud

A multitenant cloud is an enterprise-class instance from a vendor as a single cloud. Used by multiple cloud customers (the tenants), they efficiently share scalable computing resources, which can be managed as a public or private cloud.

5. Single-Tenant Cloud

Conversely, a single-tenant cloud is for the exclusive use of one customer. They have total control over that cloud, but at typically greater cost in terms of management, and less flexibility.

As real-world examples, most vendors want to appeal to the broadest possible set of customers, so offer flexible cloud offerings. For example:

  • Infor CloudSuite ERP offers multi-tenant cloud services, typically hosted on Amazon AWS (public or private clouds)
  • Oracle ERP usually runs on a public cloud, but also offers Cloud at Customer for an on-premise (private) edition
  • SAP’s S/4HANA Cloud is available in a public or private edition

ERP buyers will find most vendors can tailor a solution to meet their needs, but a clear understanding of those needs, a business growth strategy and regulatory requirements are needed to make the best selection.

Cloud ERP Vs. On-Premise ERP: What’s the Difference?

Whereas a cloud ERP solution is hosted on a vendor’s server and accessed via an internet connection, an on-premise system is installed and run on the site of a business. This requires a business to install its own hardware infrastructure and have dedicated teams for keeping the system updated and running smoothly.

Startups and many SMBs know nothing but the cloud. Their users’ email is primarily hosted in the cloud, while productivity and office applications are cloud-powered, enabling collaboration and easy access. But there are benefits for both cloud ERP and on-premise ERP systems:

ERP Cloud Benefits

ERP On-Premise Benefits

  • No hardware needed
  • Can deploy globally
  • Faster startup time
  • Greater control and security
  • Reduced reliance on external providers
  • Dashboard-controlled growth
  • Cost-control in one place
  • Can control performance through hardware upgrades
  • New features instantly and easily available
  • Can control the pace of updates and change to meet security/compliance needs
  • Easily support remote and hybrid work
  • IT can control access with greater security and granular user rights

Whatever the application, Software as a Service (SaaS) can be used in the cloud, or on-premise, that is installed locally on servers or data centres your business owns or operates. Cloud also supports Platform as a Service (PaaS), and Infrastructure as a Service (IaaS) use cases for the development and management of more customised ERP and other applications.

Firms with regulatory or high-security requirements (such as financial services, government or healthcare) are more likely to operate an on-premises solution, even these are adopting more open clouds as they become battle-tested for millions of users.