Introduction to Cloud Enterprise Resource Planning: Part 1

This first article in our latest series introduces Cloud Enterprise Resource Planning.

Cloud ERP is an enterprise resource planning (ERP) system that runs on a vendor’s cloud platform as opposed to an on-premises network, allowing organisations to access over the internet. ERP software integrates and automates essential financial and operational business functions and provide a single source of data, including inventory, order and ecommerce whilst helping with procurement, production, distribution and fulfilment.

Given this scope, any ERP system must be highly available to all business units, wherever employees may be working, and deliver a unified, up-to-date view of data. Cloud-based ERP as a service meets these requirements. Because organisations access the software over the internet, all that’s needed is connection and a browser.

What Is Cloud ERP Software?

Because it’s hosted by the ERP vendor and provided as a service to businesses, cloud ERP software supports the same, or better, functionality as on-premises systems without most of downsides, like upfront licensing fees.

In its report, IDC said “demand for cloud-based ERP systems continues to grow because of their ability to access and analyse massive amounts of data in near real time.”

That means real-time inventory insights to sales teams and freeing finance teams to keep a close eye on cash runway and quickly respond to audits or other calls for performance data.

Video: What is Cloud ERP?

Components of Cloud ERP Software

All cloud-based ERP software provides core financial and accounting functionality. From there, the types of modules or applications an organisation chooses to implement depend on its industry and specific business needs. Available cloud ERP modules include:

  • Financials and accounting
  • Customer relationship management (CRM)
  • Inventory management
  • Order management
  • Procurement
  • Supply chain management
  • Project management
  • Ecommerce

Cloud ERP Concepts

It’s important to understand some basic concepts associated with cloud ERP as we dive deeper into the subject:

Deployment strategy: ERP software can be deployed on-premises/on private hosted servers or purchased in an “as a service” model. Cloud ERP functionality can usually be delivered more quickly, though in both cases, companies need to set aside time for planning, data migration, customisation and configuration and staff training.

Cloud-based ERP: Enterprise resource planning software that’s hosted offsite, on the ERP vendor’s servers and provided as a service, accessed through a web browser.

On-premises ERP: Enterprise resource planning software that’s installed locally, on a company’s computers and servers and managed by internal or contracted IT staff. The software and its supporting infrastructure are managed, stored and maintained in-house.

Hosted ERP: A company or a hosting provider manages the deployment of ERP software as well as associated infrastructure. Hosted deployment models are often utilised when businesses seek to outsource IT operations. While this setup provides some cloud benefits, it’s not a true “as a service” model.

End-to-end security: A secure and encrypted connection between a cloud-based ERP vendor and its customers.

Subscription licensing: The company pays a fixed subscription fee at specific time intervals (annually or monthly) to use the software. That fee normally includes all software maintenance and upgrades and may be charged per user or per organisation.

Cloud ERP vs. On-Premises ERP

The above breakdown likely begs the question: If cloud-based ERP and on-premises ERP systems provide similar functionality, why choose the cloud?

On-premises ERP software is installed and managed by a company’s IT staff or a managed service provider. The business licenses the core software platform upfront and then buys or leases enterprise-grade servers, networking and storage to physically run and house the software and associated data. Businesses using on-premises ERP incur additional costs for maintenance, troubleshooting, supplementary software, updates and customisations. Antivirus and security software as well as storage and server backup systems are also necessary additional costs.

True Cloud-based ERP, in contrast, is hosted and managed by the vendor, which provides the software in an “as a service” model through the cloud. The vendor is responsible for the application, data storage, the underlying operating system, servers, the physical data centre infrastructure and installing security updates and feature upgrades.

While the most obvious difference between on-premises and cloud ERP is where the software runs and who manages it, there are other important distinctions.

Types of Cloud ERP Software

For starters, not all clouds are equal. Some legacy ERP vendors have retrofitted their software to run from their own internet-connected data centres. Businesses that implement these ERP systems may miss out on the full benefits of cloud-based ERP, such as simplified upgrades and the strength of the cloud data centre model, where a massive pool of resources support applications versus dedicating infrastructure to individual software components.

There are also multiple types of cloud ERP software:

Multi-tenant SaaS: A single version of the ERP software and its associated infrastructure serves multiple organisations. However, while each organisation uses the same software and is hosted on the same servers, one company’s data remains inaccessible to others. A true cloud ERP system is typically a multi-tenant SaaS.

Single-tenant SaaS: A single version of the ERP software and its associated infrastructure serves just one organisation. In other words, an organisation’s data is hosted on private servers running a unique software instance. Some cloud ERP vendors will give customers the choice of running a private instance or a shared instance.

Public cloud: Owned by the service provider, multiple organisations share cloud computing services. However, each organisation’s data and applications are inaccessible to others. Examples of public cloud include Amazon Web Services, Google Cloud, Microsoft Azure and Oracle Cloud.

Private cloud: A service that is not shared with any other organisation.

Hybrid ERP: Just as it sounds, a hybrid ERP approach combines on-premises software with a private cloud or public cloud for computing, storage and services.

In our next article later in the month, we will explore in more detail why these differences are important.

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