Is Cloud ERP Right For You?

Dror Orbach

If you’ve been looking for a new ERP system or looking to get the most out of your current system, you’ve probably noticed a lot of content online about the dramatic shift toward cloud ERP systems. However, in spite of the tremendous interest in this topic, there is also tremendous confusion around what cloud ERP is, and the different forms it takes. In my next few posts, I’ll try to explain what it is and some of the things you should consider.

What is cloud ERP?

Cloud ERP uses cloud-based computing platforms to provide more flexibility to organizations than traditional ERP solutions. Rather than investing heavily in on-premises hardware, software, and data storage, organizations can work with reputable service and hosting providers to obtain access to ERP solutions that host some or all of these system components in the cloud.

There are many reasons why cloud ERP can work for an organization. It allows them to scale their ERP solution according to their business growth, allows for regular, transparent updating of multi-tenant ERP software, and provides better data security than many individual organizations can maintain.

What types of cloud ERP are available?

There are a number of different ERP service models to choose from, based on the needs and preferences of the business. When choosing an ERP solution, you should consider whether to go with an on-premise, cloud, or hybrid model.

On-premise: Under this model, a company purchases a perpetual license for an ERP solution and hosts the related hardware, software, and network components in-house. This approach typically comes with a high upfront implementation cost, representing a capital expense that is amortized over time. A benefit of this model is that your company maintains complete control over all the systems and the security of your data. Challenges with this model can include the skill sets, budgets, and management attention required for internal staff to operate, maintain, and support the system.  In addition, companies – particularly in the mid-market – may find it quite costly to set up computing environments with high availability and disaster recovery capabilities. Many of these challenges may be mitigated through utilizing private cloud offerings, as described below, while still using ERP solutions designed for on-premises environments.

Cloud-based: The term cloud loosely refers to any resource or service made accessible by a service provider through the Internet, as opposed to being located in-house. There are many different cloud services, including some that provide managed computing platforms, others that provide information services for use by third-party applications, and still others that provide complete application systems (like ERP) as a service.

Under this model, in its most complete flavor, an organization can subscribe to a cloud ERP service that enables it to manage most aspects of its day-to-day operation at a fixed monthly fee. This type of cloud application service would typically include a high degree of standardization across customers, while allowing for some customer-specific tailoring, but it would not support the same level of customization afforded by on-premises software solutions. It would usually entail a shorter, less costly implementation, and solution enhancements and upgrades would be prioritized and timed by the service provider.

One challenge of this model is that organizations must put their trust in the service provider, who is responsible for maintaining the accessibility, performance, and security of the system, as well as the privacy of each of its customers who share the application software and operational infrastructure.

Hybrid: A hybrid model combines the benefits of both on-premises and cloud-based models according to the needs of a specific company. For example, an organization might choose to support some of its business functions — such as human resources management, procurement, and travel — through cloud-based application services, while keeping others — such as financial management, inventory management, and manufacturing — in-house. This approach has the benefit of allowing an organization to continue using a tailored solution in areas where full control and customization abilities are key, while reaping the benefits of cloud applications in areas where it can operate in an industry-standard fashion.

In my next post I’ll discuss a few more considerations to help you make the right decision for your business.

For more information on cloud ERP, please check out our new thought leadership paper, Cloud ERP for Asset Intensive Industries.

About Illumiti

Illumiti is a leading systems integration and management consulting company with offices in Canada, the United States, and Switzerland, serving customers globally. Its team enables customers to realize their vision by leveraging the world’s leading on-premise and cloud-based business applications. Illumiti helps its clients achieve optimized operations in the key areas at the core of their business by implementing SAP software solutions faster, at a lower cost, and at a lower risk than other alternatives. Illumiti is a member of United VARS, which is an SAP platinum partner. For more information, please visit www.illumiti.com.


About Dror Orbach

Dror is the Chief Operating Officer of Illumiti. During the last 30+ years Dror has acquired a unique combination of Marketing, Strategy, Product, and Delivery / Operations experience. He has an unceasing appetite for technology-enabled business innovation. Dror's articles are published on Illumiti's web site at www.illumiti.com.