Cloud Based ERP: The Ultimate Guide to Follow

By TechFunnel Contributors - Published on June 8, 2020
Explained what is cloud based erp

As companies integrate their systems together and grow, having important software incorporated in the cloud is becoming popular. This is where Cloud Based ERP shines and can be valuable to a business.

Cloud based systems include applications, services, and resources that can be accessed through the internet rather than on local data servers. ERP stands for Enterprise resource planning which are management systems that include various services that aid a business such as manufacturing, supply chain, accounting, interpretation of data, marketing, and others.

Hosting these systems in the cloud can help with operational efficiency, automating analytics and reporting, and improving business functionality.

What is Cloud Based ERP?

Cloud Based ERP helps automate and help the efficiency of connecting and collaborating with teams across the company. It helps bridge the gaps between these teams, as systems are streamlined for easy access. This creates a matched insight with all teams in a business, allowing them access to perspective to data that can help with their tasks.

By allowing this system to live in the cloud, this can free up local data servers at the company for other information that is more vital and sensitive to the business. When using the cloud, this can allow employees to access these systems remotely and at any time, giving them an advantage when making informed decisions quickly.

How Does Cloud Based ERP Software Works?

Cloud based ERP works as a service that helps businesses give their employees access to software applications that operate on shared resources online. It is a system that helps teams communicate better on processes and streamlining operations for the business as a whole. All businesses typically have their own specialized software that is unique to them, however, having an ERP that is universal and accessible to all employees can be important.

Who Should Switch to a Cloud Based ERP?

Improving one’s business is always important and should be prioritized, however not all processes are correct for all teams. For Cloud Based ERP in general, there are plenty of benefits for just about every business.

An online ERP system is effective for businesses that focus a large part of their revenue on technology. Since the ERP system is online, this provides potential growth and cost-effective solutions for businesses. As long as integrating a Cloud Based ERP helps with cost, efficiency, and is planned accordingly, it can be beneficial for most companies.

Types of Cloud Based ERP

For Cloud Based ERPs, a company can implement a fully online service. By going through a third party, another company will provide applications for a business to utilize. This will provide a business with unique applications that are best for operations.

Another type of Cloud Based ERP is a hybrid, implementing on-premise and cloud based ERP together to get the best of both worlds. This can be useful for businesses that already have an on-premise plan implemented and are looking to move some resources to the cloud depending on their operation and teams. This is also helpful for teams that have enough resources to implement both and still be cost-effective for their company.

What is Cloud Based ERP System

When implementing a cloud based ERP system, it’s important to plan it carefully, as adding it into a business ecosystem isn’t an easy way out of certain business aspects. The return on the investment of a cloud based ERP system can be incredibly beneficial, however, it requires a well thought out game plan with goals in mind.

Having systems accessible via the internet and remotely is one aspect to get used to, however learning all of these applications is another area that needs to be addressed. Bringing teammates onto the idea of cloud based integration can also be something that should be discussed amongst the company. Most importantly, having an organizational change management plan is important to prepare employees for this change in operation.

What is Cloud-Based ERP Software? 

Being a cloud based software accessed on the internet, the service itself is no longer provided by a company’s local servers. Therefore, SaaS (Software as a Service) will be used to gain access.

There are many different cloud-based ERP solutions available to businesses. The most important difference between them all and that is they all cater to different aspects of their systems or applications. Having the best software will not guarantee success to a company.

Although each system has different strengths and weaknesses, it’s important to identify what they are and how they affect a company’s efficiency. Ultimately, setting up this software to serve your business is meant to increase organization and productivity. Depending on the business and its operational structure, different software is required to make the company successful. Researching the best software will lead to a valuable perspective on the integration and importance of a cloud based ERP.

Benefits of Cloud Based ERP

Cloud Based ERP has a multitude of benefits when implemented into a business correctly.

  • Cost-efficient

    Going with a system in the cloud is typically cheaper than creating a local data server because there is not an upfront cost for this service. Payments are made with a subscription method (typically monthly) so it is easier to manage.

  • Reduction in IT support cost/Infrastructure

    In addition to fewer upfront costs to integrate the system, a reduction of IT staff will help save costs as well. The service is managed by a third party vendor, reducing the need for IT staff in that department.

  • Necessary resources only

    When looking into a certain cloud based ERP, it’s important to look at what applications are required for the business. When these are found, it will help with using resources that are needed by the company and not paying for anything that is unnecessary.

  • One platform/Accessibility

    By integrating all services and applications onto one cloud based platform, employees can easily access all services in one area, reducing the need for more programs or software. This can also help create a central database for teams to gain insight into other teams and perform efficiently together.

  • Improving product quality

    Ultimately integrating a system to help with efficiency will lead to an increase in the quality of services and products. This is a strategy that can help a team work together and develop real-time monitoring of their work. This will help manage all systems easier and create growth in their products and services.

  • Automating analytics

    Receiving and understanding data is vital to the success of a business as it gives them insight and perspective on their work. With a cloud based ERP, accessing an application to help with analytics can help all teams understand their responsibilities and work on improving their work. This will lead to efficiency and improve operations within teams and ultimately the business.

  • Creating a mobile work environment

    Being incredibly important in 2020 and beyond, giving employees access to tools remotely is valuable. Having a mobile work system that is accessible anywhere can help connect teams anywhere at any time.

  • 24/7 Access

    In addition to working remotely, having access to this software on the cloud will mean it is not required to be connected to local data servers. Work can be done 24/7 and with teams across the world, providing more opportunities for success.

  • Improving user experiences

    When implementing this service to a company, it will require training sessions to get everyone on board with this new system. Once fully trained, it will be easier to train newer employees and also understand each team’s workflow. This will lead to the creation of more leaders and give everyone an insight into each team’s work.

  • Security

    This benefit can be seen from both sides, however, the biggest benefit of having these systems accessible via the cloud is because they will not be accessed on local data servers. Having both can help store certain information in different places, creating a different sense of security with the possibility of a cyber-attack. Keeping information in the cloud can be safe instead of on local servers.

  • Recovery

    Alongside security, being able to recover data in the cloud at the possibilities of a local attack can be beneficial as well. Viewing cloud based ERP as a backup system can be valuable to a company with lots of sensitive information.

  • Updates

    Streamlining SaaS through a third party vendor, a company will not need to handle any updates to applications or software on their end. This can help check one thing off in a long list of tasks and focus on training for these new updates in order to stay up to date with their service.

Challenges in Cloud Based ERP

Cloud Based ERP has its host of challenges as well.

  • Constant cost

    Although cheaper in the short run, a subscription-based method could prove to be a costly method in the long run. As services are constantly updating, there is a chance of costs increasing as well as maintaining a certain cost throughout a longer period of time.

  • Less control

    Since the software is managed by a third party vendor, if there are issues on their end, that will affect the companies that use them as well. With less control on downtimes, poor updates, and support systems, this can lead to a reduction in efficiency that can ultimately hurt a business without it being their fault.

  • Training sessions

    Training employees on new skills is always a positive and important aspect of a business, however teaching workers a system that was not created locally by a team that knows their needs can sometimes prove to be difficult. It’s important to know which system you are using and bring in experts on that system in order to create an easier environment for employees to learn.

  • Customization options

    Most cloud ERPs can be customized; however, the options tend to be less than when created on a local data server. Since these services are provided by a third party, they will have more control over what options are customizable or not.

  • Compliance Issues

    Some businesses, due to compliance, cannot store or host sensitive information in the cloud, therefore having this is an option isn’t viable for all companies.

  • Employee agreeance

    Having a large IT staff can prove beneficial not only for internal success but also for more positions within a company. Making sure the entire company/all teams agree to a cloud based ERP is important for team morale and employee retention.

How to Choose the Best Cloud Based ERP Software

There are many different Cloud Based ERP Softwares available to businesses. The best part about the variety is that companies have the option to choose companies that will provide them with the best service unique to their business needs. Some provide better security and some provide more applications that can help streamline operational processes.

When conducting research on different ERP solutions, its best to create a priority list to best narrow down the best fit for a business.

( Also Read: 3 ERP Software to Grow Your Business )

Strategic Planning for Cloud ERP Implementation

It’s important to plan for implementing Cloud ERP before execution in order to not waste time and resources. It’s important to weigh the benefits and cons of implementing this system.

It’s important to take a look at different costs for hosting an on-premise software system and having an online ERP system. Some businesses can benefit from a hybrid of both or can benefit from just having one depending on business size and operations.

In order to properly implement an online ERP system into a business or team, it’s important to bring all teams and partners up to speed on this update. Whether it’s new for the company or spread throughout a company, it’s important to be transparent about the process.

Identifying key leaders within teams can help properly implement a Cloud Based ERP system. Key leaders can help train other members of teams in case there is not a training system already in place.

Cloud Based ERP Solutions for Small Business

For many small businesses, going with a cloud based ERP can prove massively beneficial. By streamlining ERP software to a smaller team, this can help give everyone perspective and insight to not just other teams, but the company as a whole.

This will bring together all teams and boost organization, as operations will be available for everyone easily. With teams knowing each other’s workflows and systems, this can help teams collaborate better and improve each other’s efficiency.

Although a cheaper option than a local data server on-premise, the monthly subscription cost of an ERP system can still be too great for a smaller business. There are some free ERP software systems, so smaller businesses should take advantage of those and grow their business before expanding further.

In addition to finding cheaper or free services, it’s important for businesses to do their due diligence by researching these software services. There is not a perfect fit ERP system for all companies, so it’s important to research what is necessary and take into account possible subscription costs. Most ERPs have a free trial, so it’s important to note these and take advantage of them if they are available.

What is On-premise ERP Software?

On-Premise ERP software is essentially a private cloud that is based out of local data servers. With local data servers, the possibilities of a cyber attack are reduced since the source of information and resources is more secure. In addition, on-premise software is typically more customizable since the system is implemented in-house.

On-Premise ERP vs. Cloud Based ERP           

When considering implementing a cloud based ERP, it’s important to note the differences between cloud and on-premise ERP.

When using an on-premise ERP, more modules can be created to help different teams fulfill their responsibilities easily. Having their own services available to be accessed locally helps specific teams work accurately at their positions.

ERP systems that can be accessed locally can also be customized, as ERPs tend to require updates constantly as businesses grow. Since local ERPs tend to serve teams specifically, this can help the systems update easily and provide for their teams’ unique needs.

On-premise ERPs tend to require a large upfront payment while cloud based services are usually a subscription-based payment. Some vendors typically offer a combination of the two methods; however, it’s typically seen that cloud based services require less money upfront.

In addition to larger upfront payments, on-premise ERPs require IT staff and infrastructure, which adds to the total cost of the system. SaaS is accessed in the cloud and by a third party vendor, so businesses themselves won’t need to fund that part of their system.

Security is the main point of difference for both types of service. Local data servers are more secure as it is managed by the company itself and no one else will have access. Cloud ERPs, since they are accessed on the web, are seen as more vulnerable to cyber-attacks as there is less control on the company’s side. Internal systems are also susceptible to attacks, however, that is also based on the IT staff and infrastructure of the company.

Final Thoughts

There are many benefits and challenges when looking into a cloud based ERP. The most important part is finding the right software that best fits the needs of the company. Whether it is local data servers on-premise or using an outside party’s software services, finding the best method for a business will help teams improve performance and bring more revenue to a business.

SaaS businesses are businesses also, so it’s important to pick the right partner in order to create a relationship that will benefit both sides. Both businesses are looking to improve their own services and software, and this can be done together. Once the right partnership is found, efficiency and productivity will increase exponentially.


Miguel Pobre is a freelance content creator based in Portland, OR. He graduated from the University of Oregon with a Bachelor of Arts Degree in Journalism and a minor in Business Administration. Alongside writing, Miguel has a passion for photography and design. Connect with him on LinkedIn.

TechFunnel Contributors | is an ambitious publication dedicated to the evolving landscape of marketing and technology in business and in life. We are dedicated to sharing unbiased information, research, and expert commentary that helps executives and professionals stay on top of the rapidly evolving marketplace, leverage technology for productivity, and add value to their knowledge base.

TechFunnel Contributors | is an ambitious publication dedicated to the evolving landscape of marketing and technology in business and in life. We are dedicate...

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