What is Cloud ERP? How to Choose a Cloud ERP

Categories ERP

An Introduction to Cloud ERP: An in-depth explanation of its types, implementation benefits, and how to choose

Cloud ERP is an ERP product that you can use in a cloud environment. It can be deployed in a shorter time and at a lower cost than on-premises ERP. And there are many benefits, such as no maintenance required and the initial cost can be reduced, so demand is increasing even for small and medium-sized enterprises.

Therefore, in this article, I will explain the different types of cloud ERP, their advantages and disadvantages, and introduce how to choose a product.

Table of Contents:

  • What is Cloud ERP?
  • Types of Cloud ERP
  • Advantages of Implementing Cloud ERP
  • How to Select Cloud ERP
  • Disadvantages of Cloud ERP
  • Implementing Cloud ERP for Centralized Management of Core Business Information

What is Cloud ERP?

ERP stands for "Enterprise Resource Planning" and refers to a line-of-business system. It provides a comprehensive set of functions necessary for operations, such as accounting, human resources, production, sales, and logistics.

On the other hand, cloud computing is a service that is used via the Internet. There are several types of cloud services, including IaaS, PaaS, and SaaS, all of which can be used without the need for in-house infrastructure such as servers. ERP that can be used in a cloud environment is called cloud ERP.

Demand for cloud ERP is increasing every year.

In the past, the mainstream of ERP was the on-premise type, where the company had to set up its servers and software. However, cloud ERP, which emerged with the advancement of communication infrastructure, is now becoming mainstream.

Types of Cloud ERP

There are three main types of cloud ERP. Let's take a look at the characteristics of each.

Private cloud type

A private cloud type is a form of using on-premises ERP already used in-house in a cloud environment.

Specifically, on-premises ERP in-house is implemented and used on data centers such as AWS. The cloud environment to be used is a development environment and infrastructure dedicated to the company provided by IaaS and PaaS suppliers.

It can be said that it is cloud-based in terms of using services on the data center over the Internet. However, otherwise, it is almost the same as the on-premises type. Since you will only be using ERP as a system you own, you can customize it to suit your needs.

Public cloud type

The public cloud type is the form of using the service provided by the vendor over the Internet. It is a SaaS type, and the owner of the system is a vendor. It is a form to rent ERP on a monthly fee or pay-as-you-go system.

The ERP provided is used by multiple companies and cannot be customized freely. However, parameter settings are possible. The advantage is that you can leave system maintenance, data backup, and more to the vendor.

Hybrid cloud type

Hybrid cloud types are a combination of private and public cloud types or on-premises and public cloud types. We aim for optimal system configuration by taking advantage of each advantage.

Private cloud types have the advantage of maintaining high security because they can be fully managed within the company. On the other hand, public cloud types are easy to leave security measures to vendors, but they can be a source of concern when managing important information on the system.

In such cases, a hybrid cloud type that manages sensitive information in a private cloud type and uses the public cloud type for other information management may be effective.

In addition, there is a form of collaboration between the two by adopting the on-premises type at the head office and the public types at the branch office. This form is called two-tier ERP, and it is attracting attention as a way to realize smooth information sharing between the head office and branch offices.

Advantages of implementing cloud ERP

The following are three advantages of implementing cloud ERP.

Reduction of implementation time and cost

With cloud ERP, there is no need to prepare your infrastructure. As a result, the time and initial cost of implementation can be significantly reduced. It is not uncommon for a service to have no initial cost and only require a monthly fee. Since there is no need for a large amount of money, this is a great advantage, especially for small and medium-sized companies and start-up companies.

Another advantage is that the system operation is done by the vendor, so there is less burden on the company implementing the system. 

In addition, you can also handle version upgrades. In addition to reducing labor costs, it will also have the advantage of making greater use of IT resources due to the small amount of management work.

Increased productivity

The features of cloud ERP can help improve productivity. Let's take a look at some of the typical ERP features.

Any time, any place

Cloud ERP can be used from anywhere as long as there is an internet connection. This makes it possible to work remotely or telecommute.

Global support

Many cloud ERPs are equipped with many functions that are effective in expanding business globally, such as multi-language support and support for accounting standards of various countries. Implementation in overseas branches will also go smoothly.

Real-time information sharing and analysis functions

Cloud ERP can be easily integrated with other systems, making it suitable for companies with many group companies where system integration is considered difficult. The ease of integration will be useful for grasping information in real-time and making quick management decisions, as well as reducing the time and effort required for inputting twice and human error.

Improved security

In particular, public-type cloud ERP is often regarded as weak in security because it cannot manage security in-house, and it is via the Internet.

However, in recent years, storing confidential information in an external data center has been highly regarded as a BCP measure. Furthermore, vendors often have data centers with the latest security measures to enhance security so you can use them with peace of mind.

Another attractive feature is that the burden of upgrading is reduced. With on-premise ERP and private cloud ERP, upgrading the software just once used to be a huge burden for companies. However, if left unattended, this can lead to security vulnerabilities.

With public-type cloud ERP, the vendor upgrades the software, so you can always use the latest version.

How to choose a cloud ERP

In general, cloud ERP has the following features.

  • Use of the Internet
  • High flexibility
  • Pay-as-you-go system
  • Shared use by multiple companies
  • Service-based rather than product-based
  • Licenses are subscription-based.
  • System management can be outsourced to vendors
  • Data location cannot be specified.
  • You can entrust data migration when changing vendors.
  • You can entrust updates to them.
  • You can entrust them with software changes.

However, different products have slightly different features. For example, the appeal of a subscription license is that you can cancel it whenever you want, but there may be restrictions such as "no cancellation for at least three months."

When selecting an ERP, consider whether it has the level of features that your company requires for each of the above items. In addition, it is important to clarify what your company needs from ERP and what you want to improve by implementing it.

It will also be easier to select the most suitable product if you identify the problems with your existing operations and consider what functions your company needs.

Disadvantages of Cloud ERP

Cloud ERP has many advantages, but it is necessary to look at the disadvantages as well. The following are some of the points to keep in mind when implementing cloud ERP.

Too many products to choose from

The most common problem in selecting an ERP is that there are so many products that you don't know which one to choose. When implementing a system, it is necessary to clarify what you want the system to do and what functions you need.

In addition, many ERP products are industry-specific, so it is recommended to start by looking for industry-specific products. Industry-specific ERPs will be smoother to implement because they cover the functions required for that industry in advance.

An internet connection is required

Since the system is built on the cloud, cloud ERP cannot be used without an Internet environment. There is also the disadvantage of not being able to access the system if you are offline for some reason. Before implementing a cloud ERP system, you should carefully consider whether it is suitable for your company's business structure and whether it is more suitable for other implementation methods such as on-premise.

Difficult to customize

Since the service is provided as a template to some extent, it is not as customizable as the on-premise type. However, with the recent increase in scalable cloud ERPs, there may be no need for functional development unless it is a special or unique function.

Service is dependent on the company providing the service

Hardware and server management, as well as system updates, are all done by the vendor, so the higher their level of service, the more comfortable you will be with cloud ERP.

However, if not, it may take a long time to recover from problems or delays in installing necessary functions, so compare and consider multiple companies.

Be careful about your data

When you implement cloud ERP, you need to pay more attention to security because your company's data is stored on an external server. The appeal of cloud ERP is that you can access your data anytime and anywhere, but on the other hand, there is always the risk of hacking and unauthorized access, which can be a disadvantage.

This area depends on the security level of the vendor, so you need to think carefully about which service to implement. You will also need to take measures such as adjusting permissions and providing security training to your employees.

Implement a cloud ERP to manage core business information

Cloud ERP is an ERP system that is used via the Internet and is now becoming a mainstream alternative to traditional on-premise ERP. Cloud ERP can be categorized into private, public, and hybrid types, so choose the most suitable one according to your usage environment and requirements.

Advantages of Cloud Services

In addition, implementing cloud ERP will not only reduce implementation time and costs but also provide benefits such as improved productivity. 

Let's compare various cloud ERPs and implement a suitable product.

See also:
Difference between CRM and ERP
SaaS – Benefits of Implementing SaaS
Advantages of Cloud Services
Benefits of Implementing ERP for the Retail Industry
Benefits of Moving to Cloud ERP for SMEs

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