Cloud ERP

What is cloud ERP? Three Different Strategies for a More Flexible Application

Dave Kravitt, CPIM

Most businesses recognize the incredible flexibility of cloud-based applications, but there are multiple paths to realizing this value without diving into the deep end with a full Software-as-a-Service model.

In this article, we cover the pros and cons of some important strategic alternatives for bringing business-critical ERP applications to the cloud.

What is cloud ERP?

In short, cloud-based ERP refers to software that is hosted in an external data center and delivered to end-user sites via an internet connection. Today’s technology allows cloud-based software to offer a smooth, minimal latency experience (in many cases even faster than that practically achievable using on-premise hardware). Furthermore, falling costs have brought expenses for cloud-based solutions closer and closer to parity with on-premise systems.

While not all cloud ERP implementations are created equal (we explain some key differences in the next section) all of them should deliver valuable business benefits, most importantly:

  1. The ability to get out of the software management business. With a cloud solution, the organization no longer needs to worry about patching, upgrades, and other ongoing administrative chores.
  2. Reduced demands on on-premise infrastructure. ERP software is one of, if not the most, demanding applications run by many organizations. Shifting this workload to the cloud can dramatically reduce the requirements for on-premise infrastructure (and the accompanying data center and networking costs).
  3. Cloud-based software is always up to date. For organizations with ERP software that are struggling to fulfill its core business functions, access to the latest versions and features may be instrumental for building an industry standard, best practice implementation.
  4. Physical security and operational resilience. The tier-one data centers used to host enterprise-scale cloud solutions employ a team with broad and deep skillsets, redundant utilities, backup, DR, and physical protection features that are far beyond the cost-effective scope of any individual business’s on-premise data center protections.
  5. Simplified protection against cyber threats. Cybersecurity risks are evolving at a faster rate than ever before, and moving to a cloud-based solution can dramatically reduce the complexity (and risk) of trying to keep up using in-house resources.

The table below demonstrates the potential cost savings associated with a hosted solution. While not concrete numbers, these figures are rooted in our deep real-world experience and provide illustrative examples. 

Updated On Prem vs. Hosted Costs
Collectively, these benefits illustrate why the cloud can play a powerful role in supporting a standard ERP implementation while providing much greater peace of mind. However, it is important to recognize that there are different ways to leverage the flexibility of the cloud to achieve these fundamental benefits.

Should you still be running ERP using on-premise hardware? We review six key questions to ask in our article here.

Three Different Approaches to Cloud ERP

Every organization’s cloud strategy should ultimately be rooted in an analysis of the concrete benefits that the cloud actually delivers. 

For some organizations, moving to a full software-as-a-service approach is the most straightforward path to the benefits of the cloud.

In our experience, however, many organizations continue to earn exceptional returns from their legacy ERP software, and the cost and disruption of migrating to a new SaaS solution simply aren’t worth it. These organizations, however, still have options for tapping into the streamlined management and peace of mind associated with cloud-based applications.

Approach One: Software-as-a-Service (SaaS)

SaaS refers to an approach where software vendors host their application on their own infrastructure and license it to the user, typically via a subscription agreement. Generally, this software is a wholesale replacement for the organization’s existing application.

While SaaS offers a fast path to the latest possible software and outstanding scalability, the organization will be forced to deal with all the risks and disruptions that come with migrating to new ERP software. Customization options may be limited, and many organizations can risk losing carefully modified features in legacy systems that effectively embed decades of organizational knowledge that is tough to replicate.

Approach Two: Platform-as-a-Service (PaaS)

PaaS refers to an approach where a business’s existing ERP software is migrated to a vendor’s data center. This approach can be ideal if an organization’s ERP software continues to drive excellent value, but the business would like to enjoy the flexibility only the cloud can provide.

With the right mix of service and support capabilities, a well-conceived PaaS solution can offer the same peace of mind as a SaaS solution while allowing the business to choose continuity over disruption. The business can forget about the risks and costs that come with physical infrastructure, stability, OS upgrades, and more, while an effective third-party support provider can help maintain unique, modified features.

We take a deeper look at the benefits of going remote via a Platform-as-a-Service model in our blog here.

Approach Three: Hybrid ERP

Hybrid refers to an approach where existing ERP software remains on-premise and is integrated with cloud point solutions to meet specific business needs. When a business has made an investment in on-premise hardware that is continuing to drive strong ROI but could benefit from added capabilities, a hybrid strategy offers a particularly flexible path forward.

For organizations that need to maintain centralized IT governance and physical control of core infrastructure, a hybrid ERP can make it dramatically easier to address new business needs with new functionality.

Is the future of cloud ERP hybrid? We take a deeper look in our webinar here. 

Assessing the Best Path Forward for Your ERP

From “headless” ERP implementations, to “two-tier” ERPs, to fully hosting your ERP software in the cloud, PSGi can help assess the best option to help your organization enhance the ERP features that matter most while achieving long-term peace of mind. With PSGi’s long history of ERP expertise now integrated with ProCern Technology Solutions’ multifaceted capabilities — including private cloud, disaster recovery, and cybersecurity — we can deliver all the services and support needed to give your hosted ERP solution the streamlined feel of a SaaS product, all without the cost and disruption of a potentially unnecessary migration.

If you need help identifying the right strategy to address your business’s long-term needs, our team is here to help.