How Cloud based ERP companies change the game

For my tech briefing I want to talk about the role of the cloud when it comes to Enterprise Resource Planning or ERP software and the impact it has on it. Enterprise Resource Planning software is a software that is fully encompassing of business needs and operations. ERP systems have been around since the 1980’s and is key in today’s business operations of all medium to large size companies. An ERP system covers all the processes that are important to operating a business such as; inventory, accounting, customer relationship management, financials, marketing, human resources, and all the other functions you can think of. Before ERP systems existed all of these departments in a business had their information, data, and software separated and only in the one department the information was pertinent to alone. This made operations difficult because the need to transfer data from one department to another, accidental duplications of data, missed data between departments, and so much more. These legacy systems that used to be in place were effective but much slower, simpler, and more susceptible to human error than the ERP systems of today. ERP systems are able to take all of the business processes, software, and data and integrate it into one central area for the entire business to use. This means that when someone in one department for example edits a customer order in inventory, the accounting department automatically has that update for their records about revenues and COGS. ERP systems are able to drastically improve the operations and minimize wasted time and effort in a business without actually changing the external operations.

If ERP systems seem like they would be extremely complex pieces of software that would be difficult to implement, they are. ERP systems can take anywhere from 8 months to a couple years to implement for a company, depending on the size and scope of the project, and that is only if everything goes well and without hiccups. ERP systems are massive investments for organizations that can cost millions, tens of millions, and even hundreds of millions of dollars (for the largest organizations in the world). This means that ERP system implementations are not something to be undertaken lightly because failure could mean massive losses for a company and even the possibility of total company failure. ERP systems require new hardware, new software, a company to build, test, and implement the software, consultants, and much more for the initial project.

With all of these costs, risks, and intangible downfalls for a system that many of its benefits are intangible on paper it seems like there is opportunity for a better way to do these projects. The opportunity was filled with the creation of SaaS companies who implemented ERP software systems utilizing the cloud. These SaaS, or Software as a Service, companies deliver the ability for a company to have an ERP system by licensing the software and services on a subscription basis. SaaS applications allow a company to bypass many of the headaches and pitfalls that a traditional ERP implementation would bring. SaaS subscriptions allow a company to not have to install the software, maintain the software, worry about the performance of the software, or deal with the ERP security issues. With a SaaS implementation all of the physical capital, upfront, and maintenance fees you would incur are turned to zero when compared to traditional implementation. There are downsides to utilizing a SaaS ERP provider however. These downsides include; loss of control over the system, loss of ability to customize the software, having company security in another companies hands, recurring fees, no ownership on hardware for depreciation, and much more. Depending on the length of using a SaaS provider, it could cost more in the long run to implement over the cloud instead of dealing with the upfront costs of traditional implementation. Regardless of what a company decides to do the cloud implementation of ERP systems gives many more avenues to the company and for many companies that cannot afford traditional implementations, an entry into the world of ERP systems.

Sources:
SaaS vs. Traditional ERP: Five Key Differentiators. (2016, August 01). Retrieved from https://www.panorama-consulting.com/saas-vs-traditional-erp-five-key-differentiators/