Enterprise resource planning (ERP) has quickly become one of the most popular software solutions for businesses. Cloud-based ERP platforms promise to expand on this trend, offering some novel advantages, but implementation should always follow careful consideration. Organizations must consider the advantages and disadvantages of cloud computing, what the best cloud-based ERP for small businesses is and more.
Nearly 50% of companies today are planning to acquire or upgrade ERP systems. Businesses looking to take part in that trend face a choice between two main categories — cloud and on-premise ERP. While both consolidate data from across an organization and streamline administrative tasks, they each have unique strengths and weaknesses.
Advantages of Cloud ERP
Learning the advantages and disadvantages of cloud computing for enterprise resource planning is the first step in deciding between cloud and on-prem solutions. Both on-premise and cloud-based tools improve data visibility, boost efficiency and minimize errors by providing a single access point for company data and processes. Cloud solutions come with some added benefits, too.
The most important advantage of cloud-based ERP systems is their scalability. In a cloud model, users only pay for what they use and can grow or shrink without worrying about their hardware. Consequently, cloud ERP is far easier to implement and expand as a company grows. These reduced hardware needs can also minimize costs.
Cloud computing comes with managed services to remove much of the management and security burden from users. A lack of talent is the most significant barrier for 64% of emerging technologies, so reducing IT staff demands can be a crucial advantage.
Because users don’t manage their ERP servers in a cloud setup, they can enjoy more reliability and security. The cloud also makes ERP data and processes accessible from anywhere, supporting remote work and streamlining collaboration.
Disadvantages of Cloud ERP
Of course, there are some disadvantages to cloud computing for ERP as well. One of the most significant is regulatory compliance. While the cloud has many security advantages, some regulations restrict the usage of third-party clouds or require more control over data storage. Only some clouds can meet those requirements.
Another challenge with cloud ERP is it may take longer to get used to. This issue is common across all cloud computing applications, with 50% of businesses in 2022 citing it as their greatest barrier to cloud adoption. These systems operate differently than the on-prem alternatives many employees and organizations are more familiar with. Consequently, learning to use them effectively can take time, slowing ROIs.
That lack of experience can increase the likelihood of errors, potentially introducing security risks. While many of the best cloud-based ERP solutions for small businesses include extensive security features, human error can still introduce vulnerabilities.
When to Use Cloud vs. On-Premise ERP
Given the advantages and disadvantages of ERP, the best way forward may vary between businesses. Generally speaking, cloud ERP is more beneficial than on-premise solutions for many companies, but there are exceptions to every rule. Businesses should carefully compare what each option can offer them before making a decision.
Because scalability is a substantial advantage of cloud-based ERP systems, these solutions are ideal for growing companies. If an organization is experiencing significant growth or expects to in the future, cloud ERP is likely the most cost-effective option. The same goes for businesses aiming to reduce their IT sprawl.
If a company — like 73% of IT leaders today — is struggling to acquire tech talent, cloud ERP may be the best way forward. The best cloud-based ERP solutions for small businesses take care of the most challenging or error-prone processes to enable easier implementation.
Organizations facing stringent data storage regulations should review what these requirements say about cloud storage before deciding. Leading cloud ERP providers will offer compliance with regulations like HIPAA or the GDPR, but specifics vary. In some cases, it may be safer to use an on-premise solution, but a compliant cloud solution may be perfectly suitable.
Find the Optimal Enterprise Resource Planning Solution
Virtually every business can benefit from enterprise resource planning. For many organizations, cloud-based solutions offer the optimal way to capitalize on this technology. Cloud ERP’s flexibility, cost efficiency, lower barrier to entry and security advantages warrant consideration in any context.
Some organizations’ regulatory needs or lack of cloud experience may make cloud ERP less appealing, but it’s still worth looking into. Businesses can make the best decision when they know what they need and under