In today's business landscape, cloud technology has revolutionized countless operations, and Enterprise Resource Planning (ERP) systems are no exception. Cloud-based ERP systems are simply a suite of ERP applications delivered to users over the Internet, usually accessed via a standard web browser. While these systems share most of the same features as “on-premise” ERP systems (ERP software that runs on in-house servers), there are several critical areas we discuss with our clients when considering the advantages and disadvantages of purchasing a cloud-based ERP vs. on-premise systems.
Cloud-based ERP solutions offer a tempting alternative to traditional on-premise systems, promising increased agility, reduced costs, and seamless scalability. However, there are potential drawbacks that should be considered. The best choice will depend on the organization’s structure and business strategy.
What are the Benefits of Cloud-based ERP?
Cloud-based ERP systems come packed with potential benefits that can entice businesses of all sizes. These solutions can streamline your operations, boost accessibility, and unlock cost-saving opportunities. Advantages include:
- Ease of Implementation: Cloud ERP systems are faster to implement than on-premise ERP systems. The technical environment for cloud technology can be configured in as little as 24 hours.
- Limited “In-House” IT Resources: We rarely hear of companies where the IT department is looking for things to do. With cloud-based solutions, the provider takes care of hosting the solution and the support, so there’s no need to hire and train additional IT resources.
- Scalability: One of the most appealing features of any cloud-based ERP is the ability to easily scale as a company’s needs change. For an on-premise system, it is a time and labor-intensive process to upgrade and scale.
- Mobility and Access to Information: Mobile devices are now firmly embedded as essential business tools. Where on-premise ERP software has been slow to adapt to the mobile world, cloud-based software allows sophisticated access and control through ERP-enabled mobile devices.
- End User Adoption: Cloud technology typically has modern user interfaces that make them easier to adopt than on-premise software, so employees may be quicker to embrace software changes.
- Regular Upgrades: With cloud-based ERP, software updates are deployed from the manufacturer or vendor’s cloud servers, removing the burden of constantly updating the system from IT departments.
What are the Disadvantages of Cloud-based ERP?
While the cloud's allure is undeniable, it's crucial to approach any technology with a balanced perspective. Gain insights into potential disruptions caused by internet outages and the importance of carefully evaluating your specific needs before taking the plunge. Potential drawbacks of cloud-based ERP include:
- Data Security: There is an ongoing debate about whether cloud or on-premise ERP systems are more secure, with the widespread perception that the cloud is unable to provide the stability or security of an on-premise ERP system. The main concern for cloud system security is that there is no luxury of assuming that the service will have a secure moat built around it. This places more security responsibility on the shoulders of a client’s employees.
- Customization Limitation: Customization options are restricted in cloud-based software, this is why some manufacturers are still utilizing on-premise ERP systems that are best suited for their specific operations.
- Price/Cost Savings: While the initial cost of cloud technology is lower than on-premise technology, subscription costs add up over time, and many business leaders are more concerned about minimizing capital expenditures than reducing operating costs.
In conclusion, cloud-based ERP systems offer compelling benefits for small businesses, including cost efficiency, ease of implementation, scalability, and end-user adoption. However, it's imperative to navigate potential drawbacks such as data security concerns, customization limitations, and price. By exploring both the benefits and potential drawbacks of cloud-based ERP, you'll be equipped to make an informed decision for your business. Please contact a Meaden & Moore ERP expert today, if you have questions.
