Manufacturing Cloud ERP: What can we agree upon?

After more than a decade of controversy, there is now unanimity of thought on many of the benefits and evolution of Cloud ERP.

Indeed, today, there is common thinking among business and market analysts, software vendors and system integrators about the role of Cloud ERP.

At last, this consensus is finally trickling down to end-users. Before discussing those commonly held beliefs about Cloud ERP, facts that are difficult to refute, let’s quickly review what is meant by Cloud ERP.

With Cloud ERP, using the Software as a Service (SaaS) model, users are provided access to ERP software and databases in a newer manner. Instead of managing the infrastructure and platform upon which the ERP software suite runs, the cloud providers do so for them. The end user accesses Cloud ERP via a web browser or mobile app while the software and user’s data are stored on the provider’s servers at a remote location.

Thus, an organization can reduce its IT operational costs by outsourcing hardware and software maintenance and support to the cloud provider. In addition, with the ERP system hosted centrally, updates can be released without the need for the users themselves to install new software. Another major benefit of Cloud ERP is that it lets an enterprise get their ERP solutions up and running faster with improved manageability and less maintenance.

As a result, Cloud ERP will be one of the most radical, sweeping upgrades in manufacturing technology over the next decade. It will become a major consideration for every manufacturing or supply chain entity. As smart phones have become to the individual businessperson, it is not a question of “if” organizations will adopt a Cloud ERP solution, but “when.”

The benefits of Cloud ERP speak for themselves. Cloud ERP deploys faster. It’s easier to use. Access to information is from anywhere, at any time and by any device. Pricing is more attractive because the “up front” costs of typical On-Premise ERP systems are deferred and spread over the life of the use of the software. Companies that implement a Cloud ERP solution are yielding cost reductions in both IT staff and hardware infrastructure. Because of such impressive benefits, the interest in Cloud ERP is growing and installations are multiplying.

Who are the early adaptors? Who are the laggards?

Those companies that are presently considering the adoption of Cloud ERP are newer companies that are growing and have no On Premise ERP system installed. They are unencumbered by either having to get additional ROI out of a presently-installed system or the fear of change.

Today, most of the ERP systems that are installed are On Premise ERP systems. Some will change over sooner than later. The laggards, though, the last to adopt, will be those very large companies that have SAP or ORACLE on premise in the majority of their plants. It is possible that some of these companies, however, could include the next wave of Cloud ERP buyers for their smaller plants in a two-tiered ERP strategy. Ultimately, though, they too will have to consider Cloud ERP as their primary ERP.

For those companies using On Premise systems, will they continue to use them? Will there be minimal consideration of a Cloud ERP system until the company encounters one or more of the following?

1. The On Premise ERP system is no longer supported (effectively) by the software vendor.

2. The On Premise ERP system can no longer keep up with the ever-changing technological advancements, such as mobile.

3. The company now has multiple divisions with differing ERP systems that cannot give it the global deployment and integration of systems that it needs. Triggering a cost/benefit analysis for a new enterprise-wide system will often lead to the conclusion that access to and cost to maintain multiple On Premise ERP versions and systems is cost-prohibitive versus a Cloud ERP system.

4. The younger generation of employee users will resist using the archaic On Premise ERP system and demand the benefits of Cloud ERP, blaming their company’s/department’s/employees’ substandard performance on the old ERP.

Only time will tell!

Pat Garrehy is president & CEO of Rootstock.