Cloud-based ERP, Tier I Solutions or Neither? Critical Considerations for Upgrading your ERP Platform

Dave Kravitt, CPIM

Eventually, your ERP will need to be replaced. Whether your vendor ceases support or your current software fails to meet your evolving needs, your legacy platform won’t last in our increasingly complex, data-driven business environment – at least not without some changes. 

For most manufacturers, the top two considerations for a replacement are cloud-based ERP platforms and Tier I on-premise solutions. There is a third option, however – augmenting your existing ERP with cloud-based, niche functionality-specific add-ons. Following are a few of the pros, cons and critical considerations of each option. 

Cloud Solutions

Cloud-based ERP has skyrocketed in popularity, and NetSuite, Epicor, EnterpriseIQ and other top providers have captured a great deal of the market over the last several years. Security remains a concern for buyers, but with more dedicated security resources, cloud providers can actually offer greater data protection than manufacturers can provide on their own.  These newer products were also developed during the internet age, so they were developed with web security in mind. The same can’t always be said for Tier 1 ERP, which has roots that predate the Internet. 

Scalability is another major advantage. Cloud-based ERP allows for faster business growth, since allocating more hardware and computing resources in the cloud is easier than upgrading hardware in your own data center. 

As for costs, there are no new server leases, smaller onsite support staffs and no upfront capital investments. Even when implantation costs approach those of Tier I solutions, overall expenses are significantly lower. 

However, cloud providers don’t provide access to their source code, and they don’t allow for customization of core functionality. Still, external data file extensions and third-party, niche functionality integrations are possible. 

Overall, buyers need to ensure a cloud-based ERP has the right functionality to run their businesses. While cloud solutions are maturing, they have a lot of catching up to do to Tier I solutions in terms of functionality. 

Tier I ERP 

Big-box on-premise solutions still hold a vast majority of the ERP market share, with nearly a half of enterprises using SAP and Oracle. Functionality is the main advantage these Tier I Solutions offer, as well as tailoring options to match software operations with business operations. They’re also sold with their source code, making customization possible. Keep in mind, though, that some Tier I solutions are written in proprietary programming languages, which require highly skilled, highly paid consultants to customize. 

SAP, Oracle and other big-name vendors are also moving in new directions that will require companies to make major platform changes to keep current with releases. This forced march to new technologies is a major drawback for firms that don’t want to afford the investment or disruption. 

A Hybrid Approach 

Fortunately, there is a way to realize the best of both worlds: the comprehensive functionality of Tier I on-premise solutions and the affordability of cloud ERP.  If your current ERP is delivering the core functionality you require – and is still supported – this option may be for you.  Instead of adopting new platforms altogether, manufacturers can augment their legacy ERPs with cloud-based applications to obtain specific functionality such as warehouse management, supply chain management, data analysis, social media and mobile. With this hybrid approach, companies can maintain what currently works while expanding into newer and more agile areas that may help them grow. 

Learn More 

To learn more about the benefits and strategies of the hybrid approach, view our webinar,
Hybrid ERP: Finding the Right Set of Solutions for Your Enterprise. PSGi hosts Dave Kravitt and Larry Dube discuss:

  • Top considerations for manufacturing IT
  • Alternative ERP solutions
  • Pros and cons of the solutions
  • How to determine whether a hybrid solution may work for you 
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