SMEs Have a Lot to Gain from Cloud-Based ERPs

Adopting these solutions offers a range of positive gains - as well as various challenges. Cloud-based erps can rapidly boost the business competitiveness of small and medium organisations by reducing their time to market and internal technology cost and complexity. Not many business applications have led as checkered a road map as enterprise resource planning (ERP) applications. They are an integrated suite of applications, often built around a core business functionality, that an organisation is most competent with.

Since ERPs are built around a core business functionality, size of an organisation and its primary business, are immediate differentiators in its adoption and implementation. What works for a sprawling, diversified, geographically dispersed conglomerate, will not work for a niche, 50-employee assembly shop.

The arrival of cloud computing technologies, where hardware, software and applications are available as a utility-type service, has transformed the dynamics of older, legacy ERPs. The arrival of cloud and public cloud hosting platforms, has prompted Gartner to bring forward the concept of post-modern ERP.

Here the monolithic, on-premises, highly-robust, concept of an ERP is replaced by a core, mission-critical ERP, with loosely coupled ERP modules attached around it.

The core mission-critical ERP may continue to be resident on-premises with maximum data protection and risk compliance built into it. On the other hand, peripheral ERP modules may be hosted in public cloud platforms.

Adopting a cloud-based ERP solution offers a range of positive gains as well as various challenges.

Positive gains

Cloud-based ERPs offer the flexibility of paying licence fees as a subscription-based on usage and requirements rather than a flat fee. Since the application is ready to use with a Web browser, end user organisations do not need to invest in complex and expensive computing systems. Browser-based access extends the usage to a mobile device, increasing the number of users and digitally enabling the organisation.

Upgrades and improvements are automated, taking place in the background, and end-users just keep using the application without any downtime. Hosted applications allow the organisation to scale up and down the number of active users at any point of time.

Ready-to-use functionality means the organisation can go to market in a shorter period of time, reducing the lead time for buildup and testing. All these factors reduce the complexity and cost of usage, allowing the end user organisation to focus on the challenges of its primary business.

Challenges

One of the biggest challenges for cloud-based ERPs is to ensure sufficient protection and compliance around end-user organisation data, which is now resident outside the organisation, as well as, and often outside the country as well. No matter what type of service agreements are in place, the responsibility for the security, integrity and availability of the data hosted in the cloud, remains with the end user organisation to implement, test and validate.

Another challenge is for end-user organisations to accept the lack of permitted application customisation. Cloud-based ERPs follow the approach of one-size-fits-all, and do not permit their in-built best practices and workflow to be modified for each organisation. Synchronisation of data that needs to be resident both in the cloud and on-premises, requires a certified partner to assist in the initial stages. Performance of cloud-based ERPs are exposed to last mile vagaries, even if the primary vendor hosting is on global tier-one data center's. Dependency on cloud-based ERP vendors to manage the application and updates, also reduces the need to invest internally in similar technology skills and thereby systematically builds internal weaknesses.

Best fit

Not all organisations are suited to benefit from cloud-based ERPs. This can be easily visualised by using two X-Y axis and four quadrants. One axis represents increasing complexity of internal business applications, and the other represents increasing number of applications users. The sweet spot for cloud-based ERPs are small to large organisations with limited application complexity.

Typically, large organisations with highly-customised and highly-complex business applications may not find cloud-based ERPs to be suitable for them. Small- and medium-sized organisations, on the other hand, can gain tremendous business competitiveness by selecting the right mix of cloud-based ERP applications.

- Ali Hyder

CEO, Focus Softnet