9 Reasons Why Your Business Should Switch to a Cloud-Based ERP System

Cloud computing and software-as-a-service (SaaS) are quickly becoming mature technologies, and with that maturity comes the ability to take on the most demanding applications. Enterprise resource planning (ERP) software is among those, and cloud-based ERP solutions now offer an incredible range of possibilities and advantages to businesses large and small.

The numerous benefits of cloud-based ERP extend all the way up and down the supply chain and manufacturing process. Many businesses have already implemented cloud-based ERP solutions and are seeing impressive results. New opportunities are opening for these businesses thanks to the nine benefits that form the core value proposition of a cloud-based ERP solution, which are laid out here.

On-premises ERP systems have a reputation for cost overruns and difficult implementations — witness the example of Nestle’s early-2000s ERP disaster. However, businesses and ERP vendors learned from these missteps, and the new generation of cloud-based ERP systems use the SaaS model to provide software that sidesteps many common financial pitfalls. 

This approach has numerous financial advantages because it turns ERP systems from a capital cost into an ongoing operating cost, thus preventing the need for large-scale capital upfront. Hardware and infrastructure investment, labor costs to install the hardware and systems and training costs can all be tremendously reduced for companies using SaaS ERP systems. Thanks to these cost-saving qualities, the total upfront outlay required to implement a cloud ERP system is often significantly lower than what it would cost a business to implement an on-premises system. This reduced initial investment cost can be a lifesaver for small businesses that need to scale quickly but don’t yet have the capital to invest in their own server rooms and hardware infrastructure. 

The possible tradeoff here is that over the life of the system, the on-premises model can be seen as a better long-term investment once it’s paid for itself — but that argument holds less water now that the ERP industry is moving firmly in the direction of SaaS as the new standard. Thus, even if the costs of SaaS ERP and on-premises ERP do have an eventual convergence point, the likely eventual phase-out of on-premises ERP makes a cloud solution a better investment. 

Those high-profile ERP disasters often occur during the implementation stage because of difficulties in coordinating and planning the rollout across systems and departments. An on-premises ERP deployment is often a long and painful task that leaves each department struggling with its own issues while the IT department scrambles to keep up. Costs pile up, implementation difficulties result in production stoppages or slowdowns and innovation halts.

Cloud ERP software is designed to address these issues head-on. These systems are aimed specifically at creating solutions that are more responsive, more adaptable and easier to implement. On-premises deployments often take up to 12 months, while a typical cloud ERP deployment usually takes just three to six. This advantage is another important one for small businesses, which often don’t have the time or resources for an efficient on-premises ERP deployment — and, as most businesses are aware, even having the right resources won’t always salvage software that isn’t people-friendly.

Giving businesses the tools for improved interdepartmental cooperation is a standard feature of ERP — the cloud just makes it much simpler and faster than it’s ever been. Cloud ERP fosters transparency, cooperation and accountability throughout organizations by providing:

• Project management tools that simplify collaboration and communication strategies
• Real-time financial and performance reporting that creates situational awareness for decision-makers at every level
• Resource management options that help identify opportunities to streamline processes and eliminate waste, from procurement to accounting to the factory floor
• Efficient collaboration with third parties such as consultants and vendors by offering easy ways to share key data
• Increase security by showing user footprints throughout the system and allowing easy inventory monitoring

These features of cloud-based ERP help make it not just a functional improvement, but a true capacity upgrade that greatly improves a company’s ability to respond quickly and decisively to challenges. 

Security is a top concern with cloud-based applications, and it’s one of the biggest reasons that some businesses are still using legacy on-premises ERP systems. There’s a widespread perception that the cloud can’t provide the stability or security of an on-premises ERP system—but it’s an increasingly inaccurate view.

Today’s top cloud ERP systems provide a suite of security tools comparable to any on-premises system, and many actually offer some additional advantages that on-premises systems sometimes don’t:

• Simultaneous, automatic, system-wide updates that fix security flaws without users having to take any additional steps
• Multiple redundant layers of failsafes and backups 
• Systems protected by a team of dedicated cloud security professionals

What’s more, keeping pace with the current state of technology is an important component of maintaining a secure system. While it’s true that some organizations do still employ on-premises legacy ERP systems, these systems will become increasingly obsolete. 

The caveat on this point is that cloud systems put more security responsibility on the shoulders of employees. Since a cloud-based system gives many employees access to ERP data anytime and anywhere, the responsibility falls upon these employees to avoid potential security risks such as exposing data on unsecured public Wi-Fi networks. These dangers can, of course, be mitigated with proper training, but businesses should be aware of them when transitioning to cloud-based ERP.

For businesses that want an extra layer of assurance, employing a third-party security consultant to evaluate a cloud provider’s security measures can be a good investment. Security consulting can also give businesses insight about how to implement best practices for data protection in their training procedures. 

The update process is another area where cloud ERP systems offer major improvements over traditional on-premises ERP. All ERP software requires periodic updates to fix security vulnerabilities, improve performance and more. In on-premises ERP systems, this can be a long and arduous process that consumes significant IT labor resources and can involve production interruptions. Most problematic of all can be incompletely-applied updates, in which various users and departments end up with different versions of the software after an update. 

In a SaaS ERP system, software updates are deployed from the manufacturer or vendor’s cloud servers, removing the burden of constantly updating the system from overworked IT departments. Security patches, software updates, new modules and more are largely installed automatically — usually in the background – so that allow employees using the system experience minimal disruption. Version inconsistencies are both much less frequent and easier to address, as the service provider’s team usually has the ability to access and update any user’s account remotely.

Scalability can be a major downside of legacy on-premises ERP systems. An on-premises system is tethered to the limits of the hardware a business already has, and the difficulties of updating a large legacy ERP system are well-known. Add in technology that changes more rapidly every day and, potentially, significant investments in Internet of Things devices, and scalability becomes a key component of a flexible and adaptable system. 

Good ERP systems are built to be scalable. Almost all cloud-based ERP software offers scalability options that are perfect for growing businesses, such as adding more users and licenses when a business hires more employees, providing more storage and adding capabilities for new plants and manufacturing processes. Case studies have often demonstrated that adopting a cloud-based ERP system can improve a company’s ability to scale quickly and take on new employees and partners. While scaling any ERP system inevitably presents challenges, cloud ERP has proven that its operating principles are uniquely well-suited to meet them.

The mobile device has long been an essential business tool, but cloud-based ERP supercharges their power and allows sophisticated access and control through ERP-enabled mobile devices. One feature of cloud ERP that makes it perfect for mobile systems is its ability to offer centralized access to data from across an organization, but in a decentralized manner that removes traditional barriers to efficiency.

Using a mobile-enabled cloud ERP software is key for achieving full integration of important mobile tools such as phones and tablets. This newly free flow of information, accessible remotely and on demand, presents major benefits for every side of a business:

- Allows executives access to data whenever and wherever they need it 

- Facilitates efficient manufacturing operations by providing real-time updates from the floor

- Gives sales staff the most up-to-the-minute information that can be crucial for making the best deals

These powerful tools foster collaboration and transparency on unprecedented levels and in new environments — often in the palm of one’s hand.

Many businesses don’t stop to think about the amount of energy that an on-premises server room consumes — but it’s huge. Data centers in the U.S. alone consumed about the same amount of power as 6.4 million homes in 2016 and accounted for two percent of the country’s total energy consumption. 

Of course, energy savings are also quite good for the bottom line, and they represent another potential advantage of leaving server maintenance and power costs to the software solution provider. Many cloud ERP systems are hosted on multitenant servers, which consolidate numerous different clients onto servers designed to manage storage space and bandwidth efficiently. So, although one business switching from on-premises ERP to the cloud might seem like a drop in the ocean, it’s actually a big deal with so many businesses going in the same direction.

With an increasing number of cloud-based ERP choices on the market, it’s easier than ever for a business to find the one that fits its needs. Some of the many choices available for cloud-based ERP systems include:

- Oracle NetSuite ERP, an incredibly popular cloud ERP solution with successful deployments at over 40,000 businesses worldwide. NetSuite’s always-current updates and flexible scalability have made it a leader in adaptable solutions, and it integrates with a huge variety of popular platforms such as Quickbooks and Salesforce. 

- Sage 300 Cloud and its enterprise counterpart Sage Business Cloud Enterprise Management, two ERP solutions that prioritize offering the most elegantly powerful solutions through extensive customization.

- Epicor Kinetic, a SaaS ERP platform that offers particularly robust data and reporting features. Epicor is a veteran of the ERP software industry with over 45 years’ experience, and they leverage that expertise to provide powerful data-driven ERP solutions.

Each cloud ERP software suite has strong points of its own, and every business has to evaluate how each option meets or doesn’t meet its needs. But what they have in common is their commitment to pushing the ERP software market forward through the power of cloud-based solutions. Read our cloud ERP guide If you would like to dive deeper into the topic.

Less than a decade ago, cloud-based ERP software was an exciting but largely unproven technology. Now, it’s clear that not only is the technology prime-time ready, but it’s rapidly becoming the gold standard. By some estimates, two-thirds of businesses using ERP software now use cloud-based options. The wave of the future is in SaaS and cloud computing technologies that offer flexible solutions, low barriers to entry and fast time to value.

Using the many new tools and opportunities offered by cloud-based ERP, businesses of all kinds are continuing to push forward, innovate and optimize at every stage of their processes. For businesses looking for more information on the best SaaS ERP solutions, Top 10 ERP provides detailed information and comparisons of the industry’s top names.