Once burned, twice shy: That’s the experience many companies have had with on-premise ERP. We’ve all heard the horror stories of years-long implementations, budget overruns, and dubious benefits upon go-live. Who can blame a CFO for being reluctant to go through it all over again — even if the ERP that’s currently in place is cumbersome to customize, update, and maintain?

Debbie Schultz

Debbie Schultz

The good news is that given the evolution of technology and emergence of a secure cloud, moving to a new ERP solution doesn’t have to be the high-risk proposition it once was. Perhaps that’s why the market for SaaS ERP software today is growing, according to statistics from Forrester Research — and the market for on-premise ERP software is not.

Five Key Benefits to Cloud-Based ERP

If you’ve been reluctant to replace your current ERP system, consider the compelling benefits of moving to a cloud-based ERP offering:

  1. Cost-effectiveness (typically at least 30% less expensive than on-premise)
  2. Limited IT resources needed for implementation or support; software always current and supported by the vendor
  3. Faster time to deployment, faster time to value, and less risk
  4. Scalable on both features and users; costs aligned with company’s growth; good integration with other cloud-based products
  5. Better security and operations than companies can otherwise afford (monitoring and meeting the SLA requirements for response time, continuous backups, redundancy, SSAE 16, PCI certifications, etc.)

And if you’re still concerned about the risks of investing in a new ERP system, keep in mind the risks of not moving on from your old ERP:

  • Need for specialized knowledge resources in-house or on call
  • Decreasing and/or more expensive support from the software vendor as old systems approach end-of-life
  • Risk of catastrophic data loss due to hardware or software failures
  • Increased costs — or worse, an inability to customize for evolving business needs, which can result in more manual processes

Offerings from a Range of Industry Leaders

As demand has grown, cloud-based ERP offerings have evolved, adding functionality, partners, and industry specializations. At Bridgepoint Consulting, we’ve seen a number of companies emerge as industry leaders, including:

SAP SAP is the market leader in on-premise ERP. Its SaaS offerings include Business One Cloud for smaller organizations and Business ByDesign (ByD) for midsize companies. To appeal to larger organizations, SAP Cloud for Financials adds more functionality to the ByD finance component.

Oracle The second-largest on-premise ERP vendor is Oracle, which currently offers SaaS applications for financials, project portfolio management, procurement, HR, forecasting, BI, and CRM to mid- and enterprise-level companies. Manufacturing and revenue recognition modules are on the 2016 roadmap.

NetSuite — The largest SaaS ERP vendor, NetSuite, provides integrated accounting/ERP, CRM, and eCommerce; OpenAir professional services automation (PSA); Human Capital Management (formerly TribeHR); SuiteCloud development platform (PaaS); and six industry-specific versions.

Workday — SaaS vendor Workday focuses on large enterprises and has had significant success with its HR application suite. Its newer ERP product, Workday Financial Management, includes financial management, procurement, and projects and is designed for services organizations.

Microsoft Dynamics AX — One of the SaaS products purchased by Microsoft, AX is the focus of the company’s future ERP development. It offers core modules for financials, customer relationship management, human resources management, supply chain management, and project management, as well as various manufacturing support modules, to enterprise-level manufacturing, distribution, and real estate companies.

Intacct — Founded in 1999, Intacct helped pioneer SaaS-based ERP for small- and mid-market companies. Its offerings include accounting, contract management, revenue recognition, inventory, purchasing, vendor management, financial consolidation, and financial reporting.

FinancialForce.com — Based on the Force.com application development platform from Salesforce, FinancialForce includes SaaS ERP, billing, supply chain, media, and PSA applications, allowing the company to serve customers from small markets to enterprise level (including Hewlett-Packard).

Proven Effective in Addressing Business Challenges

In our experience implementing ERP applications at Bridgepoint Consulting, we’ve seen a clear shift from clients primarily wanting on-premise implementations to increasingly preferring — or even insisting on — a cloud-based solution. In many instances, a cloud-based approach provides a proven way to address the challenges posed by a variety of business triggers.

Michael Johnson

Michael Johnson

For example, COBB Tuning, an engineering company that provides high-end tuning services to the automotive industry, was juggling multiple discrete software solutions to manage its business. As the company grew, this approach led to excessive management complexity and extensive manual effort. COBB selected NetSuite as its new ERP solution, chose Magento to improve the online customer buying experience, and integrated both with the company’s existing Salesforce instance — making it possible to manage all major business processes within or through NetSuite.

As a result of this shift, the company has been able to adopt more standardized procedures, resulting in more efficient operations and a single source of information for everything: order management, manufacturing, accounting, catalog, and more.

A development we’ve been particularly excited to see in SaaS ERP implementations is the explosion of actionable data for executives. The ease of integration through application programming interfaces (APIs) using universal technology standards, and the growth of embedded BI tools in these cloud offerings, enable executives to view combined accounting, sales, and operational information in a single glance. CEOs and CFOs can see trends as they occur, react to improvements or declines in market share, and even proactively change course based on forecast analytics.

The fact is, you don’t have to stick with the on-premise ERP that’s exacting such a high cost from your organization. If it’s time for a change, chances are there’s a better fit out there in the cloud that won’t inflict the pain of so many legacy implementations. And the benefits realized can greatly impact your organization’s ability to grow, to diversify and to adapt rapidly to constantly changing threats and opportunities. We hope the information provided here will help you find the right match for your business.

Debbie Schultz is a manager at Bridgepoint Consulting specializing in finance, accounting, and IT.  She can be reached at dschultz@bridgepointconsulting.com. Michael Johnson is a principal at the firm and leads its technology consulting practice. He can be reached at mjohnson@bridgepointconsulting.com.

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7 responses to “The Case for Cloud-Based ERP”

  1. And if your internet service is pathy, good luck. Oh, and if you require a dedicated pipe to the web, you’ve now got a new expensive recurring cost you didn’t have before.

    Faster deployment, no way. Just because the software lives on someone else’s server doesn’t have anything to do with the time it will take to implement it for your operations. Not sure why someone would say the exact same software is more scalable in one environment than another with regard to features and users, unless of course the cloud vs. non-cloud offerings actually differ in functionality, but that certainly doesn’t have to be the case.

    Fewer catastrophic loss risks – probably. Data security – possibly; although if I were intent on hacking into some business’ data, I’d target a cloud provider for more bang for my effort.

    Having done a number of these as a corporate CPA and controller, I have my doubts about a number of the author’s assertions.

    • The Cloud offers several advantages with economy of scale. Take security for instance, the smaller to company, the less they have to invest in security measures. Cloud based providers will invest more heavily here. As for recurring cost of the data pipe, how about the capital investment in servers, ongoing maintenance, depreciation, etc… as well, as the staff required to maintain your own servers and network. Furthermore, as Internet speeds increasing, the speed issue is less and less of a problem and Cloud computing continues to mature and improve.

    • Internet bandwidth is very competitive both domestic and abroad. Shared use across departments or functions and virtualization of networks, routes and firewall/VPNs… has diminished bandwidth as a weighted decision factor.

      Faster deployment, “way”. Picture this, you are coming off of doing 5 (or 50) deployments. It is time to roll out another one. Your technology stack is certified from the network cards through the database, business, application and presentation layers. The deployment, maintenance and recovery model, a rolling triangle, geographically distributed across Chicago, Atlanta and Phoenix have run like clockwork for 5 or more years. The Saas side topology and federation/SAML services are all latest versions and burnt-in related to end-points, roles and privilege waiting for another client to assign the team to. The signature show stopper bottlenecks of the specific ERP vendor are very familiar in the deployed stack. Provisioning and high confidence scale are maintenance tasks conducted as they have been many times with the all of the traps worked out.

      Catastrophic loss and data security are purely dependent upon the quality of your Saas provider. If the model is sound and validated then it will likely be much better than the patchwork of systems, utilities and data stores within the client company. Set customer expectations that significant participation is required for any successful launch. A good implementation with all of the advertised benefits of Saas is possible.

      My two cents after apx. two dozen fortune 100 Saas deployments

    • Brett et al,

      SaaS or any Cloud based services do not need to require more discipline, but it is important that anyone considering any Cloud solution should understand that many of the systems management discipline cannot be abrogated. However, the Cloud does not automatically increase risk, and can reduce risk in comparison to non-Cloud solutions. The IRM (Institute of Risk Management) produced guidance on cyber threats, in which a chapter compares the risk and control environments in Cloud vs “In-House” environment. These are some differences, but in many cases Cloud based solutions do reduce risk (and cost).

      https://www.theirm.org/knowledge-and-resources/thought-leadership/cyber-risk/

  2. Thank you for this insightful post. I agree there are many benefits that come with moving to the cloud. It is important for any company to have immediate economic benefits as well as improving innovation and scalability. There are many companies who are choosing cloud based options because they get a lot more for what they are paying for. This offers increased mobility and security to your ERP applications, whether it be on a private, public, or hybrid cloud system. Velocity Technology Solutions helps companies move their ERP to any type of cloud the customer prefers along with expertise of managing the application. Here is a great resource for those of you who are considering the migration to the cloud.

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