In order to increase their profitability, majority of companies across industries are adopting an Enterprise Resource Planning (ERP) software. The reasons they have for the implementation may vary. For example, some may cite streamlining the business processes as a reason to implement the ERP, while some other may call the implementation a part of their business integration process or a tool to increase the efficiency.
At the core of it, however, remains the single objective of making more money and increasing the profitability. So once these companies decide to go for an implementation, they have this herculean task upfront of determining whether to go for on-premise or on the cloud ERP?
Hence, before proceeding, it is important for them to know which solution is apt for their business requirements. Organizations generally have a decent understanding of the pros and cons of the on-premise ERP, which is also the traditional ERP and has been around for a while now. However, they have little knowledge when it comes to the cloud ERP, which is in greater demand these days. With more and more companies moving to cloud ERP, it is important to understand its strengths and limitations. So for all such companies which are eyeing a move to cloud ERP, here’s a rundown of its advantages and disadvantages:
1. Cost advantage: One of the biggest reasons why companies prefer cloud-based ERP over on-premise ERP is the cost advantage. A traditional ERP system has various hidden expenses such as licensing fees, data storage fees, costs for updates and upgrades, support and maintenance fees etc., beyond the initial software purchase price. Then there are other expenses too, which pop up from time to time. But with a cloud-based ERP, there’s no hole in your pocket as you don’t pay licensing, registration, or maintenance fees. All you need to pay is an affordable monthly fee, that’s it.
2. Flexibility: We love flexibility and convenience, don’t we? Cloud-based ERP allows you that flexibility as it can be accessed from anywhere, anytime. That means you don’t have to be in your office all the time to access critical data and make business decisions. No matter where you are, if you have your internet-enabled laptop, tablet or mobile phone, you can access real-time data and share it across your departments.
3. 24×7 support: Another important advantage of cloud-based ERP solutions is that they offer continued support. As a result, the issues get resolved then and there itself. Apart from this, the cloud-based ERP is updated or upgraded on a regular basis, ensuring no system or security update is missed and also pushed to all the users immediately. The 24×7 support feature of cloud ERP also tends to increase productivity of the employees, as the issues raised get fixed on the spot, eliminating the downtime.
4. Scalability: A cloud-based ERP system offers a high degree of scalability, i.e. the capacity to handle growth and change, to your business. So whether you are a startup or a fast-growing company, a cloud-based ERP system can allow you to add unlimited number of users to your system on demand and save you from having to invest in new hardware or additional software.
5. Agility: Cloud-based ERP is faster to implement and operate. As a result, your data is accessible to you as easily, as fast, and as secure as they can possibly make it. The world-class data centers, where your data is stored, ensure back-up and storage of your data in multiple places so that nothing gets lost.
1. Limited customizations: The cloud-based ERP products are becoming more and more configurable with every release, thus reducing the scope of customizations. So, if your business requirements demand heavy customizations to your software, on-premise ERP is the best option for you.
2. Not so cost-effective in the long run: While the monthly fee as against a heavy investment upfront is often an advantage, there are cost considerations to be made for a cloud-based ERP in the long run. There are updates, patches, and upgrades that occur from time to time. If deemed necessary, they may incur substantial costs and may disturb your monthly budgets.
3. Limited control over data: In case of cloud-based ERP, you completely rely on the cloud provider. The data is stored on the off-site servers, and not locally. If you don’t have a back-up of your data on your servers, you are under constant threat of losing your data in the wake of a mishap or a disaster at the vendor’s end.
4. Security risks: Since your data isn’t stored locally, there’s always this question that arises, whether your data is safe or not? You have no clue who all have access to your critical data, including trade secrets and worse, you are not sure if the provider will ever share your data with any third party? In addition, cloud-based ERPs are at risk of malicious attacks from the hackers as well.
5. Technical issues: A cloud-based ERP is dependent on the internet, which is subject to breakdown due to several reasons ranging from technical to climatic. So when your internet service provider hits a snag that may end for minutes or even hours, it can bring your work/operations to a standstill.
Conclusion: Just like any other solution, a cloud-based ERP system too has certain boons and banes. While it may be a blessing to a certain firm, its implementation may spell doom for some other company, because every business has its unique, different needs which require a specific solution. Thus, by carefully going through the above mentioned advantages and disadvantages in relation to your business needs, you will be able to determine whether a cloud-based ERP solution is the right decision for your company or not.
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