Not so long ago, only the very large companies could afford to set up ERP systems. The reasons were simple – costs were high, risks were even higher and some implementations even resulted in abject failure and bankruptcy. The benefits were also correspondingly high and any company with a successful ERP would be operating at a different plane altogether. Small and medium businesses simply could not think of these solutions.
The situation is very different now. 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, nearly 34% of all software will be utilized over the cloud and this growth would continue for some time to come. Research shows that although ERP in the cloud was just 2% of the cloud computing market in 2010 – 2011, this is a field that has begun to evolve and its market share would increase to 21% by 2015. Therefore ERP moving to the cloud is not an unexpected phenomenon.
Battling an uncertain economy
In an uncertain economy, companies have much to gain by embracing the efficiencies and process visibility that ERP can bring. With ERP in the cloud, companies are able to lower the cost of ownership and if ever the company wants to move to on premise hosted systems, the cloud SaaS vendor provides assistance with the migration process.
There used to be a feeling that on-premise ERP systems were more capable and . offered greater functionality. This is no longer true. Most cloud ERPs are able to tailor their offerings to handle any specific requirements. Security has ceased to be a stumbling block and availability of systems is at par or 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 the ones that deal with what the company considers its key capabilities – are maintained in-house or in a private cloud. Such an approach is more readily accepted by conservative Boards. They would rather try the less critical modules first and if the experience is good, then they would move more critical modules online 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 to set up the 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 the cloud remain and are not being discussed here due to paucity of space, there are some areas to watch out for as well.
Control over data – It is important to be careful about how your data is being stored in the ERP database. It is worth checking how easy it would be to switch from Vendor A to B at some time in the 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, etc. must be there, but it is equally important to ensure clauses like modifications to meet your specific needs, assistance during migration to in-house infrastructure or to another vendor and so on.
Managing the process – Simply because another agency is manning the data center does not mean that you can afford to sit back and relax. A certain amount of core competence in ERP management is still essential. There is training to be done all the time to make new entrants aware of the ERP and how it is to be used and work is to be done to identify areas of improvements and upgrades. These upgrades and improvements have to be an ongoing process and make your ERP grow and become more effective.
In the final analysis – An ERP solution in the cloud is a great leveler and 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.
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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.