Enterprise resource planning (ERP) is a type of business management software that allows organizations to manage their day-to-day business operations in a centralized and integrated manner. It gives its users a comprehensive understanding of the
There are two types of ERP systems: on-premise and cloud.
An on-premise ERP system is a system that runs, well, on-premise; using in-house servers at your own location or at a location of your choice.
The benefit of this is that an on-premise ERP system doesn’t require internet access and, as a consequence, it can’t be used outside of its physical location.
Another downside of an on-premise ERP system is that it is hosted on a single server, which can lead to power issues and end-user problems, especially if several people are accessing the server at once.
The first solution you might think of is to add more servers, but that is expensive.
If you remember a couple of paragraphs ago, I said there were two types of ERP systems, and I’m kind of going out of my way to mention the problems of on-premise ERP systems.
I bring these issues up because the second option, a cloud ERP solution, can solve those problems and operate at a lower cost with higher scalability.
Here and below, I will discuss what cloud ERP is and the benefits of cloud ERP solutions in brief.
What is Cloud ERP?
A cloud ERP (enterprise resource planning) solution falls under the category of SaaS (Software as a Service), allowing users to store data in data centers that only the user and the company’s users can access.
This centralized platform allows a business to manage and automate its business processes, including financial management, supply chain management, inventory management, human resources, customer relationship management, and more.
Unlike traditional on-premise ERP systems, which require significant hardware and software investments and maintenance, cloud ERP solutions are hosted and maintained by the vendor on their servers.
This means that businesses can avoid the upfront costs and IT headaches associated with managing their own infrastructure.
Additionally, cloud ERP solutions offer greater flexibility, scalability, and accessibility, as they can be accessed from anywhere with an internet connection and can easily adapt to changing business needs.
What are the benefits of cloud ERP solutions?
- Scalability: Scalability is an essential tool for SMEs. With a cloud ERP solution, users can upgrade their system as their business grows by paying a bit more to their cloud ERP provider. Because of this simplicity, users can add more tools and data storage capacity without significantly increasing operational expenses.
- Accessibility: Unlike an on-premise ERP solution, cloud ERP lets users access their business anytime, anywhere. Users can access their business from their phones just to check in, even if they’re across the world on vacation.
- Cost Savings: Not only is a cloud ERP solution less expensive than an on-premise ERP solution, but the cloud ERP provider also takes care of all of the maintenance and updating, meaning you don’t need an in-house team to ensure the system runs smoothly.
- Automatic Updates: Cloud ERP services have made it easier for vendors to offer new and improved functionalities through software upgrades, especially so without interfering with a company’s day-to-day operations. A company could have a software update deployed over the course of a day, and none of their workers might even be able to notice.
- Disaster Recovery: In the event of a disaster, most (if not all) cloud ERP solutions offer disaster recovery as a service (DRaaS), meaning keeping a total system backup that allows for business continuity in the event of system failure. As opposed to on-premise ERP solutions, which could be damaged by physical factors such as natural disasters or workplace mishaps, cloud ERP solutions have no such vulnerability.
- Increased Agility: Cloud ERP allows users to access, update, and input new data at the point of work using mobile devices like phones and tablets. Similarly to the benefit of accessibility, this helps users take their business on the go.
Types of Cloud ERP Solutions
Within cloud ERP solutions there are three types: public, private, and hybrid clouds. Depending on the situation, you may want to choose one ERP solution over the other.
A public cloud ERP solution is one owned and remotely hosted by a cloud service provider. This falls under the category of SaaS and is paid for using a standard subscription model.
This model of cloud ERP solution is best for collaborative projects and less-confidential information that wouldn’t mean a fully compromised operation in the event of a security breach.
- Pay-as-you-go subscription model
- Zero maintenance
- Near-infinite scalability
- Unlimited storage
- Lack of customization
- Potential security concerns
- Less flexibility and control over the cloud environment
A private cloud ERP solution is fairly similar to an on-premise ERP solution, where your data is stored on servers managed by the company. This hosting can also be done in a single-tenant environment in a third-party’s data center.
As this is a private cloud solution, a private cloud is best for businesses with tight regulatory requirements or highly confidential information.
- Highly secure, more so than a public cloud
- Greater flexibility and control over the cloud environment
- Incredibly customizable
- Capital costs
- High IT overheads
- Less scalable
A hybrid cloud ERP solution combines on-premise and cloud ERP solutions in two tiers. In this ERP solution, a company would use company servers for corporate functions, while cloud ERP is used for other business operations.
- Flexible and scalable
- Manageable and secure
- Fewer IT overheads
- Unlimited storage with cloud capabilities
- Network complexity and compliance issues
- Difficult to implement
- Can be incredibly expensive
In short, a cloud ERP solution can greatly help your business in its resource planning efforts, and at a lower cost than an on-premise solution.