Gartner is projecting continuing worldwide public Cloud revenue growth. This is consistent with the movement of software applications from on-premises deployments to the Cloud which is continuing and accelerating. We all see this with applications like Office365 and Google Workspace. And this is true even with complex enterprise applications like Cloud-based ERP software. Vantage Market Research is projecting that the global market for Cloud ERP solutions will grow from $18.5 Billion in 2021 to $47.8 Billion in 2028, a compound annual growth rate of 17.1% over that period.
What is Driving This Trend to Cloud-Based ERP Software?
As more and more applications are delivered natively in the Cloud, this has become mainstream and has led to more enterprises and SMBs accepting it. Remote access for employees and supply chain breakdowns resulting from the Coronavirus pandemic have added further reasons to move to Cloud-based ERP software. Also, according to Vantage, businesses across the globe are coming under increasing pressure from rising costs – and are reengineering business processes to emphasize efficiency and reduce operating costs. This is facilitated by having a centralized Cloud-based ERP solution that can be accessed by all employees and allows businesses to manage accounting, purchasing and supply chain management, order management, and sales and marketing.
There are many benefits both financial and operational that Cloud-based ERP software delivers. Below we explore some of the key benefits.
Lower Upfront Costs
In general, Cloud-based ERP software avoids big upfront expenditures, on servers, network infrastructure, and other hardware. This is a significant benefit for all businesses but is particularly advantageous for SMBs that face tighter cash constraints than do larger enterprises. Smaller companies can redeploy what would have been upfront costs with on-premises solutions into growing their businesses.
Better Operating Cost Control and Lower Operational Costs
Because Cloud-based ERP software is delivered primarily through a SaaS (software-as-a-service) subscription model, users get better control of operating costs and are protected against big unknown expenditures. Also, Cloud-based ERP software is usually the primary application on which small companies run their whole business. As a result, many SMBs that move to Cloud-based ERP software find that it is a small step from there to move entirely to the Cloud for all their applications. Being able to do this unlocks big savings on ongoing operating costs; almost all network expenditures, hardware and IT personnel costs can be significantly reduced. And routine IT work to manage hardware, do upgrades and maintain backups can be eliminated.
Greater Scaling Flexibility
Cloud-based ERP software is much more scalable than on-premise solutions. All businesses but particularly, SMBs are able to respond much more quickly to upturns or downturns in the environment with Cloud-based ERP software. Since 2020, this has been put to the test in a real rather than theoretical sense as US businesses navigated from a pre-pandemic world-leading economic boom to a stagflationary economic environment post-pandemic. Scaling up or down on Cloud-based ERP software is obviously much easier than buying or disposing of new servers or network infrastructure but it is also much quicker and can be done at lower thresholds. For example, a small business with a 20-user Cloud ERP solution can very easily add another user to respond to changed conditions but would likely not add any on-premise server and network infrastructure until it was ready to add say another 10-users.
Easier Quicker Updates
On-premises software typically delivers upgrades every 6 - 12 months or so and requires a company to purchase a new upgrade, then undertake a major exercise to deploy the upgrade, followed by significant testing before the upgrade is released. All this requires dedicated IT resources and a lot of time. Also, there are unavoidable risks of upgrades not deploying properly and/or multiple software versions. In contrast, Cloud-based ERP software is upgraded every few days or so to deliver new functionality and fixes. Nothing needs to be done by the user. This means that Cloud ERP solutions users get access to newer updated software and functionality much more quickly. This has a measurable improvement in employee productivity.
Better Security and Disaster Recovery
With all of the Ransomware and other security-related threats today, security is a critical consideration. Cloud-based ERP software that runs in a public cloud platform such as AWS is many times more secure than an on-premises system that uses any Internet-based applications such as email. The proof of this is that even the Pentagon is moving its most secure data to the Cloud. Public cloud providers like AWS have state-of-the-art threat detection, intrusion prevention, and intrusion remediation systems that are far more sophisticated than on-premises systems. They also have better backup and disaster recovery systems that rely on redundancy and physical location in multiple geographies.
Improved Internal Collaboration
As a result of the Coronavirus pandemic, most companies now have remote employees that work from home. This has created the perhaps surprising result that there is no loss of employee productivity, and some studies show that employee productivity and collaboration have actually gone up. Cloud-based ERP software allows all users to access the software at any time, from anywhere, using any device over an Internet connection. Different branches and different functional areas can collaborate easily and share data that is available to all users. Cloud ERP solutions make this possible by providing centralized data sources for all the different functions from accounting to purchasing to order management to inventory management across these businesses.
Better Data Insights
Cloud-based ERP software provides better data analytics services. Often Cloud ERP solutions link directly to a Cloud-based BI solution. Using a BI tool, users can slice and dice their data and uncover insights that allow them to uncover business opportunities and refine and optimize business processes. Also linking via APIs to other Cloud-based applications is easier.
If you are still using on-premise software for your distribution business, contact us to demo Accolent ERP. Accolent ERP is Cloud-based ERP software specifically for distributors and light manufacturing.