The case for traditional vs cloud ERP: what is the business case for transitioning to the cloud?
Many organisations are being challenged by the development of agile approaches to project delivery and an increasingly dynamic business environment dominated by quick turnaround digital challenges, often struggling to justify the business case for implementing traditional Enterprise Resource Planning (ERP) solutions.
By ‘traditional’, we infer an ERP that is purchased, developed with bespoke configuration, installed on local hardware and supported by an on-site IT team.
The traditional ERP remains a very powerful business enablement system but the business case does have several shortcomings, not least of which is that these projects are slow in terms of speed to implement due to the complexity.
Traditional ERPs are also costly as the full system must often be implemented and supported even if only a limited amount of the system functionality will be used initially.
Cloud-based models such as Software-as-a-Service (SaaS), however, have the potential to deliver the benefits of a traditional ERP without the downsides. Integration, ownership costs, performance and accessibility, upgrade paths and speed to deploy are just some of the issues an organisation must address when deciding how to implement an ERP that is most suitable for their business.
In this article, we’ll analyse the various considerations that should be undertaken when evaluating the implementation of traditional, on-site ERP vs a cloud-based ERP.
Integration – Can We Quickly Integrate Other Systems with Our ERP?
Integration is a vital consideration for a chosen ERP solution, particularly given the speed with which organisations need to react to new technology platforms to interact with customers and that much of that interaction happens in the digital space.
Potentially, cloud-based systems have an advantage here. Whilst it may seem counter-intuitive, the right cloud-based providers will already be fielding queries from multiple customers about how to integrate many different systems and tools that meet changing business needs.
Cloud-based ERP providers know that they need to provide enhanced services, so they could already be doing your R&D for you.
Cost of Ownership – What is Your Investment?
Cost of ownership is a significant factor in ERP solutions.
Traditional ERP systems that live onsite require a large, upfront spend to purchase, implement and manage software, hardware and other facilities necessary to run them, including suitably skilled IT staff. Additionally, there is a significant ongoing cost to ensure systems are constantly up and running to meet BAU requirements and future upgrade costs.
With Cloud-based ERP solutions, the value proposition is often better. The upfront implementation costs are generally much lower as it is only a configuration exercise, rather than full deployment. Secondly, the service provider hosts and maintains the IT infrastructure, is responsible for ensuring system availability, data security and future upgrades.
The cloud approach is typically a ‘pay as you go’ subscription model so you are only charged for the functionality and bandwidth you use, which makes the cloud based model potentially more financially attractive.
Reliability – System Performance and Accessibility
Cloud-based service providers can exceed performance and accessibility KPIs as they have greater resources to invest in hardware and bandwidth than individual organisations due to their one-to-many model.
But the key here is if you decide to go for a cloud-based ERP, then you must choose your service provider wisely and ensure they have a very good track record in providing fast and reliable access. SLAs will be a critical consideration.
Future scope – Enhancements and Future Upgrades
The traditional vs cloud-based approach probably cancels themselves out here. The core issue is the amount of configuration (read “customisation”) that you drive into either system. The further you move away from the vanilla-flavoured model the greater the cost in terms of time and money required for future upgrades and enhancements.
Cloud-based ERP solutions probably have a slight advantage here, as typically they will not allow unlimited customisations during implementation. In effect, this approach protects organisations from themselves and limits the complexity of the solution.
Speed to Deploy
Cloud-based ERP solutions usually are much quicker to deploy, as it is more a configuration exercise than a traditional system deployment. There is no need to purchase and install hardware and train staff in the maintenance of the devices and systems. A cloud-based ERP solution simply needs an Internet connection and a set of robust requirements and the service provider can take it from there.
Cloud ERP: A Viable Alternative
Whilst there are other issues when deciding what type of ERP platform suits your organisation the analysis above highlights some of the more prominent considerations that need to be taken into account.
The rise of cloud-based ERP options should be taken for what it is, another possible solution to meeting your organisations ERP requirements, and should always be a consideration to the traditional on-site ERP.
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