The Advantages (and Disadvantages) of a Cloud-Based ERP

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Thursday, January 12, 2023

Considering a move to cloud-based ERP? Be sure to do your research on the implications - both positive and negative - of this shift for your company and its employees.

Article 4 Minutes
The Advantages (and Disadvantages) Of A Cloud-Based ERP

Enterprise resource planning (ERP) can spell the difference between success and failure for a business. Get it right, and you'll achieve greater consistency and efficiency across a range of critical functions, from inventory and order management to accounting and HR.

Recent IFP research highlighted the current state of ERP in finance and other sectors, revealing key findings including:

  • 67% of firms using ERP software reported improved data visibility
  • More than half are benefiting from optimized processes
  • In the finance sector, enhanced productivity and collaboration are the main reasons to invest in ERP for nearly two-thirds of companies
  • 87% of ERP users are satisfied with the results achieved after implementing their new system

The survey of more than 200 professionals in the US and the UK also found that more than half of companies use cloud-based ERP software, while a quarter use a hybrid of on-premises and cloud solutions.

If you're considering using a cloud vendor to host your ERP system, make sure you're fully aware of what this option entails and the outcomes it could deliver for your business.

Reduced upfront costs

From a purely financial perspective, a key benefit of cloud-based ERP is the removal of the upfront costs associated with managing your software on-site, such as purchasing servers, building databases and paying the IT staffing and consulting fees required for implementation. 

On-premises ERP also puts the onus on you to cover ongoing costs for maintenance, upgrades and additional server capacity as the company grows and your requirements increase. When your ERP is based in the cloud, the responsibility for these jobs lies with your vendor.

Enhanced visibility and accessibility 

In the current era of increased remote, hybrid and flexible working, it's essential that businesses are able to provide full data visibility and accessibility to all employees and other parties who need it, wherever they're based and whatever hours they work.

The universal nature of the cloud means users can access your ERP software from anywhere and view information in real time. This is hugely valuable for ensuring that large and geographically dispersed teams are always working with the right data and collaborating as efficiently as possible.

Ongoing maintenance and support

Another clear advantage of outsourcing the hosting of your ERP software to a cloud provider is that a number of time-consuming and complex jobs will be taken off your hands. Your supplier will assume responsibility for key tasks such as maintaining databases and servers for optimum performance, and rolling out updates and patches to maintain high levels of security.

If and when problems occur, you'll have access to specialist tech support from your vendor to identify the necessary solutions and minimize the impact on your business.

Scalability

As your business gets bigger, you'll need your tech infrastructure and core services to grow with you. Scalability is one of the most valuable benefits of any form of cloud computing, giving you the ability to increase or decrease your resources as required, in line with organizational or customer demands. 

This is in stark contrast to on-premises hosting, which brings financial and logistical challenges such as having to add more servers and locations as the company grows.

Security and data backup 

While some businesses may still hold reservations about storing critical data in the cloud, there's a strong argument to be made that cloud hosting is now a safer option than using on-premises infrastructure.

There are various reasons for this, one of which is that specialist vendors are likely to have more resources and expertise to dedicate to security than will be available to you internally. Cloud-based ERP also offers the reassurance that your data is being securely backed up, and that disaster recovery procedures are in place to deal with adverse events.

What about the disadvantages?

Like any investment or new tech initiative, cloud-based ERP has a range of potential drawbacks that should be given just as much consideration as the benefits.

Some of the possible disadvantages of this technology that you should be aware of include:

  • Long-term cost: While less upfront investment is required for cloud-based ERP, you need to be prepared to cover your vendor's ongoing fees for the entirety of the service. These costs will increase as your business grows and your ERP needs become more complex.
  • Access to sensitive data: Retaining a cloud vendor to host your ERP means giving that company access to your private data. You can implement internal measures to manage employee use of this data, but controlling third-party provider access is likely to prove more difficult.
  • Reduced control: Lack of ownership of cloud-based ERP means you have limited control over the software and how it's managed. You have little say in updates being implemented by the vendor, for example, even if these changes aren't well-suited to your business and its needs.

Researching the various ways a transition to cloud-based ERP could impact your business will help you evaluate different vendors and service options, to ultimately make the right decision for the company, your workforce and your customers.

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