Enterprise resource planning (ERP) systems based in the cloud can provide your organization with many benefits but beware of the challenges of ERP they bring.
ERP or enterprise resource planning systems aim to integrate all functional units of the enterprise in a cooperative way and may include suppliers and customers in this integration process. ERP implementation seeks to integrate the complete range of a business’s processes and functions for a holistic view of the business from a single information and IT architecture.
While there are different types of ERP systems, thanks to the introduction of the cloud, many organizations are implementing a cloud-based enterprise resource planning system to help them achieve their goals and become more successful. How, though, can a cloud-based ERP system benefit your organization and how might it present challenges?
Benefits and Challenges of a Cloud-Based ERP System
Cloud-based ERP solutions are provided via the software-as-a-service or SaaS model and are accessed over the internet eliminating the need to install any new software. Let’s take a look at a few benefits and challenges a cloud-based enterprise resource planning system can offer your organization.
Benefits of ERP:
Lower Upfront & Operating Costs
Since cloud-based ERP systems are separated from the enterprise location that uses them, there is no need to pay for building the computing environment since the environment is accessed over the internet. Cloud-based ERP service providers are also responsible for operating and providing the cloud services that isolate the operation processes from the enterprise and the operation costs leading to organizations saving money.
Cloud-based ERP systems are easily scalable making it easy for organizations to scale up or scale down depending on their needs. Having the ability to only use resources that are needed is a great way for your organization to save money.
Updates and Upgrades
Traditional ERP systems not based in the cloud take much longer to update or upgrade. With a cloud-based solution though, your ERP system will be continually updated and upgrades can be implemented much faster than a traditional system.
Cloud-based ERP systems have well-defined policies and plans for backup, restore, recovery, and many other disaster recovery functions ensuring that your data is never lost or completely out of reach.
Challenges of ERP:
Security & Performance Risks
The high availability over the cloud for cloud services causes the security risks to increase as well and handling security issues for a cloud-based ERP system is a challenging and complex process. Also, since cloud-based ERP service providers are geographically separated from their clients, network failures and connection problems are reflected directly in the cloud-based ERP performance.
Since there are not enough regulations in place to handle compliance difficulties, complying with data, energy, and environmental standards are difficult with a cloud-based ERP system.
While upfront and operational costs are lower with a cloud-based enterprise resource planning system, there could still be hidden costs in the contract including transition costs, monitoring costs, and coordination costs.
One of the biggest challenges with a cloud-based ERP system is with the organization itself. For example, top management may have difficulty implementing the new technology and cross-functional communication could drastically suffer.
Before you decide to implement a cloud-based ERP system in your organization, it’s essential to conduct plenty of research and properly communicate the changes with your team. There are also many cloud-based ERP service providers so it’s best to choose a provider that will completely meet the needs of your organization and communicate all expected costs upfront. While cloud-based ERP systems provide many challenges, these challenges of ERP can easily be solved with proper communication and learning sessions form your cloud service provider.