The Cloud Levels the Field Between Big and Small Businesses
Not so long ago, only very large companies could set up ERP systems. Costs were high, risks were even higher and some implementations resulted in failure and bankruptcy. That said, benefits were also correspondingly high, and any company with a successful ERP could operate at a different plane altogether. Small and medium businesses simply could not use these solutions.
The situation is very different now, though. ERP delivered as a service – essentially a subset of SaaS – has changed the game and leveled the field. SaaS by itself is seeing growth rates of 25.5% and will hit revenues of $40 billion by 2014. At the same time, nearly 34% of all software will be utilized over the cloud and this growth is expected to continue in the near future. Research shows that although ERP in the cloud was just 2% of the cloud computing market in 2010-11, this field has begun to evolve and its market share will increase to 21% by 2015.
Battling an uncertain economy
In an uncertain economy, companies have much to gain by embracing the efficiency and process visibility that ERP can bring. With ERP, companies can lower ownership costs and move to on-premise hosted systems with the cloud SaaS vendor providing migration assistance.
On-premise ERP systems used to be seen as more capable with higher functionality. This is no longer true. Most cloud ERPs can tailor offerings to handle any specific requirements. Security has ceased to be a stumbling block and availability of systems is often even higher than that of in-premise systems.
Going Hybrid helps
Many businesses have experimented with hybrid ERPs. This means that some part of the ERP system works in the public cloud and others – perhaps dealing with key company capabilities – are maintained in-house or in a private cloud. Such an approach is more readily accepted by conservative Boards who would rather try less critical modules first and move more critical modules as they get more confident.
Research quoted above also showed that nearly 79% of respondents were looking to reduce their TCO of ERP. 54% of the small and medium businesses polled also wanted to avoid procuring new servers, hardware and software in setting up ERP. Other advantages are –
- - Benefits of economies of scale – since the SaaS vendor is sharing his costs over a large number of users
- - Virtualization – Virtual infrastructure like servers, storage and bring greater economy of scale to the SaaS vendor. This allows existing systems to be utilized better.
While all other ‘traditional’ advantages of cloud remain, there are some areas to watch out for.
Control over data – Be careful about how your data is stored in the ERP database. It is worth checking how easy it would be to switch from Vendor A to B in future. You do not want your data to be stored in a proprietary format that can only be read through the vendor’s own application.
Managing your Service Level Agreement – Your SLA must clearly spell out the vendor’s responsibilities. The standard parameters of availability must be there, alongside clauses like modifications to meet specific need and assisted migration to in-house infrastructure, or to another vendor.
Managing the process – Although another agency is manning the data center, a certain amount of core competence in ERP management is still essential. There is constant training to be done to make new entrants aware of the ERP and how it is to be used. Upgrades and improvements have to be an ongoing process to make your ERP grow and become more effective.
In the final analysis – An ERP solution in the cloud gives small and medium industries the resources they need to compete with multinationals in niche areas. With the benefits of ERP and the agility that comes with being small, these businesses can grow and prosper.
One factor to look out for on top of this is how your cloud hosting provider helps you secure your business. For instance, GMO Cloud ensures that its security is well in place. Visit the Security page and see how security is set-up in various levels of the business.
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About the Guest Author:
Sanjay Srivastava has been active in computing infrastructure and has participated in major projects on cloud computing, networking, VoIP and in creation of applications running over distributed databases. Due to a military background, his focus has always been on stability and availability of infrastructure. Sanjay was the Director of Information Technology in a major enterprise and managed the transition from legacy software to fully networked operations using private cloud infrastructure. He now writes extensively on cloud computing and networking and is about to move to his farm in Central India where he plans to use cloud computing and modern technology to improve the lives of rural folk in India.
