Cloud Based ERP Has Come of Age

The ERP marketplace has continued to evolve in recent years with particular emphasis on cloud based ERP solutions. The ERP vendors continue to consolidate with significant merger activity at the top end of the market, such as Infor’s acquisition of Lawson in 2011. We have also seen smaller Software as a Service (SaaS) providers continue to take market share from larger ERP vendors. SaaS providers such as Salesforce, NetSuite and Plex Online are growing exponentially, offering cloud based solutions for specific areas like CRM, Finance and Supply Chain.

Early adopters of cloud based solutions have caused The Cloud to gain significant credibility as a reliable and flexible solution to some ERP/CRM requirements. Larger organisations are now taking notice of the cost savings that can be achieved and are moving some of their business-critical functionality onto The Cloud. In 2012 and 2013 we've seen this trend continue, with the larger ERP vendors responding to this new demand for cloud based service provision by forming strategic alliances with cloud technology services organisations such as Amazon, Dell, EMC, IBM, VMware and others.

For the larger organisations there are some perceived barriers which are holding back full scale adoption of cloud based solutions. It is still relatively early days for The Cloud and there is a lot to learn. There are concerns about data security and privacy which will take time to overcome. Also, from a functionality perspective, standard cloud based solutions may not meet all the functional requirements of larger, more complex organisations. Managing modifications and upgrades in a multi-tenant environment create constraints which larger organisations find it more difficult to work within.

As cloud based service provision is evolving, most organisations find that they need a combination of on-premise systems and cloud based systems in order to meet their full functional requirements. This can cause complexity where the on-premise and cloud based systems need to be interfaced. Also, multiple cloud based solutions from different providers, on different platforms further complicates this situation.

Finally, IT managers in large organisations have a vested interest in retaining the on-premise model for as long as possible. After all, moving in large scale to cloud based solutions reduces the need for large internal IT departments and this is a threat to role and status of key IT decision makers.

Despite these barriers, the benefits of cloud based solutions cannot be ignored. The economies of scale achieved by cloud based service provision enable the cost of providing the services to be significantly reduced. Organisations, large and small no longer need to retain a wide range of expertise in-house. This reduces the overall IT cost of ownership even further.

Best practice is shared and developed by the cloud providers, driven by their many diverse user organisations. This drives innovation in business process development which is accelerating year by year.

For SMEs and start-up companies a huge level of functionality can be acquired at a low cost and paid for on a monthly subscription basis. The services can be scaled up or down as the organisation grows or contracts.

These significant benefits will ensure that cloud based ERP provision will continue to grow and could well over take the on-premise model as the preferred method of providing ERP solutions in the near future.

This Blog was written by Frank Crewe, Principal Consultant at Lumenia. If you would like further information on Cloud Based ERP please send an e-mail to Frank Crewe.