What is Cloud ERP Software? Here's What You Need to Know.
A guide to understanding cloud-based ERP software.
The cloud shift that occurred over the past two years due to the pandemic shows no signs of easing. In fact, according to Gartner Inc, in 2025, 51% of IT spending will have shifted from traditional solutions to public cloud computing. They also predict that almost two-thirds (65.9%) of expenditures for application software will be directed toward cloud technologies in 2025, up from 57.7% in 2022.
If you are still operating on an on-premises solution, it might be time to evaluate cloud-based ERP software and start considering a cloud migration for your organization. This post will provide you with an in-depth overview of cloud-based ERP software and put you on the right path toward assessing, implementing, and managing the right cloud-based ERP solution for your company. Let’s dive in.
What is Cloud ERP Software?
Traditional Enterprise Resource Planning (ERP) software is implemented on-premises or within the company’s own data servers. A cloud-based ERP system, or cloud ERP for short, refers to an ERP software that operates on a provider’s cloud platform instead, allowing organizations to access the system via the internet. Cloud-based ERP puts the management and maintenance burden on the provider, enabling companies to shift their focus on business outcomes rather than technology management.
A cloud ERP system integrates and automates major operational business functions and provides shared data source access. Such systems meet the requirement of companies to have an ERP system that’s available at all their business units spread across the world and delivers an up-to-date view of data.
How Does Cloud ERP Software Work?
Cloud ERP software works with several advanced technologies connected via high-speed internet networks. The ERP vendor manages application and security updates so users can easily log in and access the system. Cloud ERP solutions offer the same functionality and features as on-premises ERP software, with many business applications to streamline business efficiency, productivity, profitability, and advancement. These cloud-based solutions offer organizations a greater ability to scale and make it easy for teams to access necessary information by providing a single source of truth.
In addition, cloud ERP solutions are always available and accessible, anywhere and anytime. In most cases, employees can use cloud ERP solutions on connected local devices, like mobile devices, laptops, and desktop computers, which can provide accurate data and insights in real-time to help make informed decisions. With the increase in remote working, cloud ERP enables quick and smooth access to business data, human resources, sales, financials, forecasting and planning, production workflows, customer support, and other critical business information.
Typically, monthly or yearly subscription plans are available, depending on the number of users. Vendors also allow users to try out the functionality of cloud ERP software by offering a free trial. As per the business requirements, organizations can select one option from a range of deployment models with modules and settings suiting the company type. That can keep your team concentrated on the right metrics and processes to meet the company’s objectives.
There are many benefits of cloud ERP over the traditional on-premises software that we cover in-depth in our previous post, “6 Benefits of Moving to a Cloud ERP Solution.”
Here’s a quick rundown below of the benefits you need to be aware of.
Cloud ERP solutions have easier, less disruptive upgrades as the responsibility falls on the vendor. Minor upgrades occur automatically while significant updates are announced and include a sandbox-training environment. Rest assured, your business will always keep up to date with the newest technology.
Cloud ERP solutions have a lower ownership cost than on-premises ERP software. You save money because you no longer need to run or maintain infrastructure to support your software in-house. Subscription-based pricing models also mean you have lower upfront investment costs in comparison.
Cloud ERP solutions offer robust security to protect data and prevent breaches and cyberattacks. This is because you share the responsibility with the vendor, who typically delivers enterprise-grade security and compliance, which usually goes beyond what a company can provide in-house.
Cloud ERP solutions reduce your dependency on the IT department compared to an on-premises solution as they are no longer stuck with hardware upkeep, product support, or handling ERP maintenance. They can be redeployed to more revenue-generating activities.
Cloud ERP solutions, in general, offer more accessibility, collaboration, and agility as the ability to share and integrate data across your organization or multiple businesses is improved.
Keep in mind that not all cloud software is equal. Here are some different types of cloud ERP and terminology you should know about. We cover this topic in detail, along with the pros and cons of each type, in our previous post: "Understanding the Different Types of Cloud ERP."
The public cloud is a type of cloud ERP software where a third-party service provider manages the on-demand computing services and IT infrastructure. Despite its name, all the company data inside an ERP solution in a public cloud is available only to those the company grants access. Also, public cloud systems can be regarded as more reliable if a vendor provides exceptional security while deploying networks of data servers that protect against possible disasters.
Sometimes also called internal cloud, a private cloud is a type of ERP software that runs on cloud infrastructure hosted by an ERP vendor or a third-party provider. Like the public cloud, the private cloud offers better scalability and operational flexibility. But its implementation and maintenance are more costly. The difference between these two types is that private cloud is done through proprietary architecture, i.e., the service cannot be shared with any other organization.
As the name suggests, hybrid cloud ERP combines different types of cloud solutions under one fully integrated system. It integrates on-premises solutions with public or private cloud computing, storage, and services. The concept behind this model is to increase the capability of offering consistency through automation and smooth management. It is a great choice for organizations that save sensitive user data and need to pay more attention to security. Choosing a hybrid ERP solution enables business owners to have their main software on-premises while using public or private servers and databases.
In general, ERP cloud systems deploy a multi-tenant SaaS. A multi-tenant model means multiple organizations utilize a single version of the ERP and its associated infrastructure. However, though various organizations use the same software hosted on the same servers, each company’s data is inaccessible to others. This type of cloud ERP software is usually the simplest, easiest, and least expensive to deploy.
The single-tenant SaaS ERP software differs from the multi-tenant version as it serves only a single organization and allows every customer to have its slice of the solution running on the cloud provider’s platform. This model involves only one company that uses a single system and its infrastructure. It is costlier than the multi-tenant SaaS system since there are no economies from sharing the software. Some companies prefer single-tenant SaaS over other options for security reasons or the legal requirements of the countries where they work.
Cloud ERP Concepts and Terminology to Know
There are many terms and concepts related to cloud ERP software, but here are 11 worth understanding now, before you plan to invest in cloud ERP for your business:
On-premises ERP – On-premises ERP refers to ERP software installed locally on the company’s servers and computers and managed by internal or hired IT personnel. The application and its supporting infrastructure are managed, stored, and maintained internally.
Hosted ERP – With this system, the hosting provider manages the deployment of the ERP solution and its infrastructure. These deployment models are usually utilized when businesses want to outsource IT operations.
SaaS ERP – SaaS (Software as a Service) ERP is an ERP software delivered and handled in the cloud. With SaaS ERP, your tools are hosted in the cloud instead of local machines, and the provider is responsible for ongoing updates, organization, and maintenance of the tools and technology.
End-to-end security - this refers to a secure and encrypted connection between the cloud-based ERP vendor and its customers when they manage and access business and customer information in the cloud.
IoT – IoT is an abbreviation of Internet of Things, which refers to systems and tools interconnected via an online network. With IoT systems in place, machines and devices can communicate with each other and work together to streamline performance with zero to little human intervention.
Deployment strategy – It refers to the choices a business gets when it comes to implementing and managing ERP software. Deployment strategies include managed hosting, SaaS single or multi-tenant, or on-premises.
Mobility solutions - These are the systems, tools, and information businesses can securely access using mobile devices, such as smartphones, tablets, etc.
Infrastructure costs – This refers to the amount of money a company spends on on-premises technology to keep systems, tools, and information up-to-date and functional.
Subscription licensing – It means a company pays a fixed subscription-free at specific time intervals (monthly or yearly) to use the software. That fee includes all software upgrades and maintenance charges and might be charged per use or company.
Shared infrastructure – This refers to a system providing users access to provider tools in a shared network environment. The scale of shared infrastructure allows companies to access updated tools at a reasonable cost.
Disaster recovery – In the event of significant disruption, disaster recovery involves tools, policies, and procedures provided and managed by the ERP vendor to recover the company’s systems and data.
Bottom line - if your business is still not on the cloud, you could be missing out. Cloud ERP software is the future of business technology. Cloud ERP is a proven solution used today by companies across the globe. As companies continue to scale their operations, cloud-based ERP solutions will serve as that dependable system with which businesses can boost efficiencies, save costs, increase accessibility, and drive overall advancement.
More Cloud ERP Resources
We have an extensive library of articles and resources around cloud ERP to help answer your questions and offer more insight. We’ve rounded up the top posts for you below:
Understanding Cloud ERP vs. On-Premises
Cloud ERP Benefits For Businesses
Cloud ERP Considerations
A Cloud ERP Partner You Can Count On
If you are ready to get started with cloud transformation, get in touch with the team at Kwixand Solutions. We guide businesses across Canada and the US on their digital transformation journey and are with you every step of the way. We believe in providing lasting value and ensure that the solutions and strategies we design for your specific business set you up for long-term success and help you achieve your goals. To learn how we can help you, book a free consultation to speak to a specialist today.