Cloud ERP: the risk and the reward
Mike Rogers, sales and marketing director, FormpipeLasernet
Enterprise Resource Planning (ERP) systems are the beating heart of organisations operating across multiple industries, from manufacturing to retail, public services to utilities. ERP enhances the management of core business processes, including planning, purchasing, inventory management, logistics and finance. Joining up the dots of different departments, removing silo working cultures, promoting transparency, and aiding efficient collaboration with suppliers and customers, it’s safe to say ERP has transformed the way businesses function for the better.
Coupled with effective customer communication management, which controls the process of designing, defining the use and managing the destination of business documents within an ERP system, companies can simplify, systemise and economise a multitude of processes, from invoice generation to label creation. Implementation of customer communication management software can give businesses long term cost savings, through reducing the need for hardware, printers and excessive manual administration. Effective output management can also strengthen an organisation’s brand, by offering users a quick and easy means of creating and upholding consistent communication within customer-facing documents that are pre-aligned with corporate brand guidelines.
As consumers we are becoming more comfortable with the cloud as a concept, from the weekly food shop to streaming music instead of hoarding CDs, and the acceptance isn’t far behind for the business community either. In fact, according to the Cloud Industry Forum (CIF), 63 per cent* of UK businesses are planning to move their entire IT estate to the cloud in the near future. And although some way behind other SaaS offerings, ERP systems have also begun the slow migration to the cloud, with giants like Microsoft launching the first cloud version of its flagship ERP system, Dynamics AX – now known as Dynamics 365 – in 2016.
The slow yet steady shift is happening in the ERP market, and those who haven’t yet converted are beginning to consider the possible risks and rewards associated with the move. So, with leading ERP vendors investing heavily in cloud technology, what’s preventing more businesses taking the leap right now?
Barriers to uptake
Although the adoption of cloud ERP has been steady and looks to be undertaken by many more UK businesses in the future, for companies in some countries there are more challenges to overcome first. Although technological advances are being made every day, legislation and regulations aren’t necessarily following at the same pace and, as a result, some countries are being restricted on the uptake of services, such as cloud ERP. For example, the law in Switzerland currently states that all data must stay in the country. There is an overall lack of trust in documents being stored in the cloud with some governments questioning its security, therefore many businesses are reluctant to fully embrace the cloud and instead opt for an on premise ERP solution.
Market leaders like Microsoft are encouraging people to engage with cloud ERP and have focused efforts on launching and actively promoting cloud ERP solutions over on premise alternatives. This investment demonstrates a confidence in cloud and where Microsoft leads, others will of course follow. However this also presents a problem for some businesses, particularly in the manufacturing sector where there is a reluctance to make a move to the cloud due to concerns about the possible implications that it would have on trade. A number of manufacturers work on remote sites where a reliable internet connection is sometimes hard to secure. Losing access to such a vital system could have a detrimental impact on a manufacturing business and cause any number of issues from a delay in production to a breakdown in communication between production and logistics leading to missed shipments to customers. For some businesses, in some sectors or in certain locations, the risk of cloud ERP still out ways the reward and, until legislation is updated and access to high speed internet access catches up with developments in cloud technology, maintaining an on premise solution may be the best way forward.
But when it works, it really works
Although there are challenges for some, for most businesses, the reality is that there are many rewards associated with converting to cloud ERP over sticking with an on premise solution. For starters, cloud ERP solutions are much quicker to implement than on premise, which can take anywhere between 2-5 years to fully install and can take longer to update. Whereas an average cloud ERP implementation can be completed under a year.
Businesses can also enjoy large financial savings as capital hardware costs are removed with the cloud ERP solution. In contrast, on premise ERP systems require significant capital investments, which only increase when buying new hardware or high end servers. On average it’s considerably cheaper to implement a cloud solution over on premise. The cloud solution carries further financial benefits, as due to its subscription license agreement, upfront costs are removed in favour of monthly fees, giving businesses more financial flexibility
Research has shown that concerns about cloud ERP security have fallen to 25 per cent**, from the 29 per cent** recorded last year, showing that there may be an opportunity for vendors to engage with businesses and challenge common misconceptions surrounding cloud ERP; tackle the question of security, reassure customers and promote the efficiency and cost saving available. Another selling point for most organisations looking to streamline their ERP function is the issue of maintenance. A solution hosted in the cloud ensures that maintenance is carried out directly by the vendor, meaning there is less chance of the system crashing or general aspects of the service failing. This also has the potential to reduce staffing costs, as there is less need for in-house IT support.
Ultimately, there are many variants for businesses to consider when embarking upon an installation of ERP and customer communication software. To ensure customers’ needs are met, and all points considered, an individual assessment should be a vital first step. With the cloud ERP market still somewhat in its infancy, it may take a while for businesses to fully embrace it and for on premise solutions to become obsolete but there’s no doubt that that cloud represents the future of ERP. A future full of rewards for those brave enough to take the leap and open the doors for others to follow.