What are the differences between ERP and Cloud ERP?
What is ERP?
On the internet “ERPWhen you search for ,” very little of the information that comes up can be understandable, and you may be a little confused. Every website seems to have its own definition of ERP, and one ERP implementation can be very different from the next. But these differences underscore the flexibility that can make ERP such a powerful business tool.
To gain a deeper understanding of how ERP solutions can transform your business, it helps to have a better understanding of what ERP actually is and how it works.
ERP Integrates Processes Across Business Functions
ERP is an acronym for Enterprise Resource Planning, but even the full name doesn’t shed much light on what ERP is or does. To do this, you need to take a step back and consider all of the various processes that go into running a business, including inventory and order management, accounting, human resources, customer relationship management (CRM), and beyond. At its most basic level, ERP software integrates these various functions into a single system to streamline processes and information across the entire organization.
The central feature of all ERP systems is a shared database that supports a multitude of functions used by different business units. In short, this means that employees in different areas – for example, sales and accounting – can rely on the same information for their specific needs.
ERP Synchronizes Reporting and Automation
ERP software also offers a degree of synchronized reporting and automation. Instead of forcing employees to maintain separate databases and spreadsheets that must be manually combined to produce reports, some ERP solutions allow staff to pull reports from a single system. For example, with sales orders automatically flowing into the financial system without any manual rekeying, the order management department can process orders more quickly and accurately, and the finance department can close the books faster.
Brief History of ERP
The term ERP was coined by Gartner in 1990, but its roots date back to the 1960s. At that time, the concept was applied to inventory management and control in the manufacturing industry. Software engineers created programs to track inventory, reconcile balances, and report on status. In the 1970s, this evolved into Material Requirements Planning (MRP) systems for scheduling manufacturing processes.
In the 1980s, MRP grew to encompass more manufacturing processes and many people referred to it as MRP-II or Manufacturing Resource Planning. Finally, by the 90s, ERP systems had moved beyond inventory control and other tactical processes involved, to other back-office functions such as accounting and human resources, setting the stage for ERP to become known.
ERP Today
Today, ERP has expanded to include “front office” functions such as workforce automation (BI), sales force automation (SFA), marketing automation, and e-commerce. Companies across a wide spectrum, from wholesale distribution to e-commerce, are using ERP solutions.
Moreover, despite the “e” in ERP standing for “enterprise,” high-growth and mid-sized companies are now rapidly adopting ERP systems. Software as a Service (SaaS) solutions, also referred to as “cloud computing,” have also helped fuel this growth. Cloud-based solutions not only make ERP software more affordable, they also make it easier to implement and manage these systems. Perhaps even more importantly, cloud ERP provides real-time reporting and BI, making them valuable to executives and even employees who want visibility into the business.
As a result, companies of all sizes and across a wide range of industries are moving to cloud ERP systems. In fact, Forrester predicted that SaaS-based ERP adoption would grow 21 percent annually through 2015. When you stop to consider the benefits of ERP, it’s easy to see why it has become so popular and why its use will continue to grow so quickly.
What is Cloud ERP?
Cloud-based computing (also called Software as a Service or SaaS) provides users with access to software applications running on shared computing resources (such as power, memory, and disk storage) over the Internet. These computing resources are kept in remote data centers dedicated to hosting various applications across various platforms.
Cloud ERP is Software as a Service that allows users to access Enterprise Resource Planning (ERP) software over the Internet. Cloud ERP generally has much lower upfront costs because computing resources are leased by the month and held on premises rather than purchased. Cloud ERP gives companies access to mission-critical applications from anywhere, at any time.
The main difference between the two is where the system is located, but there are other important differences as well. Here we list some of the important features and benefits of Cloud ERP.
The cloud is particularly valuable to small and medium-sized businesses (SMBs) because it provides access to fully functional applications at an affordable price without a significant upfront expense for hardware and software. By using the right cloud provider, a company can quickly scale their business productivity software as the business grows or a new company is added.
Cloud ERP has been proven to reduce costs in many ways because:
- Avoids upfront costs for entire computing infrastructure such as hardware and data servers
- Reduces IT support services as IT support is provided by the data center.
- Avoids upfront payment for application software licenses with a monthly fee
- This minimizes the cost of maintaining and supporting these applications because the cloud vendor handles updates and upgrades.
The key benefits of Cloud ERP go beyond cost savings and include:
- Pay only for necessary computing resources
- With fixed monthly rates, companies can use their cash on other business ventures.
- Leverage Cloud ERP applications faster as no hardware and software installation is required on server and user devices
- Ability to adjust the amount of cloud service as a company's compute or storage requirements fluctuate
- Data is backed up and has a disaster recovery plan
- Attacks on the company server are prevented because data is stored in the cloud, not locally.
- Accessing the system from anywhere makes it easier for a company to expand geographically as it is available everywhere and there is no need to implement hardware and software in remote locations.
No matter what type of business you’re in, implementing an ERP solution is a critical project that must be taken seriously. From concerns about cost and return on investment to practical considerations about who will manage the process in your company, ERP implementation efforts require the commitment of a project team and the ability of business leaders to ensure success.
There’s no getting around the fact that ERP deployment is a big undertaking, but it doesn’t have to be painful. With proper planning and implementation, implementing an ERP system should be a smooth process and quickly improve efficiency in your business. Here are some critical ERP implementation best practices to consider when choosing and deploying a solution.
Choose the Best ERP Software for Your Business
Given the range of functions that ERP covers, it should come as no surprise that there are a large number of ERP implementations. You could choose to build your own custom ERP and program it from the bottom up, but the cost and complexity of tackling such a massive project can make a do-it-yourself approach a poor one.
Or you can purchase on-premises ERP software and install it on your company’s computers and servers. But before you invest in an on-premises ERP solution, consider this fact: Two-thirds of midsize businesses are running older versions of ERP software. Why? Organizations often find the pain of reimplementing incremental versions to be too great—especially since each upgrade means the business risks losing critical customizations and integrations. Keeping ERP technology up-to-date is key to maximizing its potential, so it’s important to choose a system deployment option that’s easy to update and will retain custom features.
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