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Reasons for Optimism and Caution when Considering a Cloud-based ERP Solution

The principle aim of an enterprise resource planning (ERP) solution is to enable an organization to support their key business functions with a suite of software products. Essentially, an ERP solution can integrate various business functions into one, comprehensive system – allowing for integrated management of processes and seamless sharing of information company-wide.

With the increasing need for security, flexibility and scalability these days, the incorporation of cloud-based ERP solutions is an emerging trend among organizations interested in maximizing their operational and reporting capability but uncertain of the cost and complexity of owning such a system on site.

An on-premise solution requires substantial initial investment. These expenses include acquiring and implementing the hardware and software, database licenses and the cost of hiring external consultants. There is also the additional IT staff that might be needed as well as the recurring cost of hardware maintenance to take into consideration.

Cloud-based ERP solutions, on the other hand, usually require reduced upfront investment as the software is hosted remotely on the vendor’s server and accessed via the Internet. As a result, it typically takes very little time to set up and deploy a cloud-based system.  In addition, there is usually a manageable monthly subscription fee, making it affordable to even small businesses.

A considerable advantage of cloud-based ERP is that the software vendor regularly upgrades it, so customers have the assurance that they are always using the latest version. With the vendor holding the responsibility, there is the security that the data has been backed up and a disaster recovery plan is in place. In addition, robust security measures will likely be in place, from customer login to server protection and data redundancy.

Cloud ERP also allows for real-time data to be retrieved, providing a more accurate representation of where the company currently stands from an operational perspective. Moreover, it offers easier scalability, allowing companies to add or remove additional components and users on demand.

Where caution is warranted if considering a cloud-based ERP solution

While the benefits of cloud-based ERP solutions are many, companies should be cautious when making their selection – especially if rolling out a system intended to support operations in multiple countries. In a recent article in ComputerWeekly.com, Buyers Guide to ERP: Alternatives to SAP and Oracle ERP Suite, Gartner analyst Christian Hesterman warns, “Even [ERP] companies that are strong internationally may not offer the same product in every region.”

As an example, he says, “Lawson S3 is primarily used in the US public education and healthcare sectors, while the N3 product is focused on food, textiles and beverage businesses in the rest of the world.” Hesterman adds that although the product should be good enough in most areas, businesses will need the flexibility to adapt it. The other alternative to having the ability to customize the ERP system is an industry specific product suite.

Some cloud-based ERP solutions offer very limited options when it comes to customization. While this might be suitable for many organizations, companies that need considerable customization will want to be diligent when evaluating solutions, including holding onto an existing on-site ERP solution until a viable cloud-based solution necessitates a transition.

Another area that warrants caution is the limitation in product suite offerings by some ERP solution providers. Many have significant strengths in one particular area, such as financials, Human Capital Management or ordering/customer management. There are very few vendors that offer a single suite of products that can meet most requirements of the user. This could mean having to integrate an on-site application with newer cloud-based solutions or combining several cloud-based solutions to work as a single solution. This can, of course, lead to additional costs or more complex process flows.

Providers to consider when making a cloud-based ERP decision

NetSuite is one of the most deployed cloud ERP solutions and offers a large range of application modules. These include financials and accounting, payroll, order management, purchasing and inventory control. The software integrates seamlessly with other NetSuite software such as CRM, Order Management and Inventory.

Microsoft Dynamics AX has fast become a leader in the ERP mid-market. A core strength of Microsoft Dynamics AX is its tight integration with other Microsoft products, that are familiar to many. For companies that are still skeptical of cloud-based solutions, the on-site option can support private cloud deployments. While Microsoft’s stability suggests Dynamics AX is a practical long-term solution, Gartner notes that they often struggle to deliver high quality deployments to larger clients.

Oracle Financials ERP Cloud is an end-to-end business management solution targeting mid-sized to enterprise-level customers. The suite of applications offered includes financial accounting, business intelligence and material planning. A key feature of Oracle’s accounting is a powerful business intelligence module that identifies trends from enterprise data. Oracle Financials ERP Cloud uses ‘rapid implementation’ technology, which allows for fast data transfer from a current system.

SAP ERP supports business processes in multiple industries, languages and countries. Offering role-based access to critical applications, data, and analytical tools, SAP’s enterprise resource management software has a track record of driving competitiveness and streamlining business processes.

Intacct indicates that it is designed to improve company performance and make finance more productive. Hundreds of leading CPA firms and Value Added Resellers also offer Intacct to their clients. The Intacct cloud-based system includes accounting, cash management, purchasing, vendor management, financial consolidation, revenue recognition, subscription billing, contract management, project accounting, fund accounting, inventory management, and financial reporting applications.

Cloud-based ERP solutions are becoming more ubiquitous and should be strongly considered by organizations that might still be on the fence. They offer flexibility that yields more accurate information management in real-time, supporting faster and better-informed decision making while allowing companies to stay on top of changing market demands. Implementing such a solution can significantly help maximize those things most important to any organization: cash flow and working capital.

Ernie Martin is Founder and Managing Director of Receivable Savvy. He brings over 25 years of experience in financial supply chain management, marketing and communications and draws upon his extensive experience to share knowledge and best practices with AR professionals. His resume also boasts time at several well-known brands and companies such as Tungsten Network, Delta Airlines, CIGNA Healthcare and Georgia Pacific as well as a number of years as an independent consultant.

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