Cloud ERP Archives

In today’s world of Cloud, consumers want to pay for their software monthly, avoid all IT infrastructure and pay as you go on all services.

After all, a monthly subscription takes care of everything. Well, almost!

When it comes to Enterprise Resource Planning (ERP) there is one remaining barrier to monthly subscriptions – Cloud ERP implementation.

Today, most SME organizations have already moved to a Cloud solution for some or all of their IT infrastructure. We all know and understand why…

The cloud can minimize the one-off capital expenditure (capex) spent on infrastructure, no requirement for on-site hardware, only pay for what you use, access to better security and infrastructure.

On the other hand, ERP has been slower to move customers from on-premise to Cloud, but the journey is now well underway and adoption rates for Cloud ERP / Business Management Solutions are increasing daily.

Addressing ERP implementation costs and moving towards a lower overall cost of ownership

In a Cloud-first world, businesses want to consume and pay as you go. Let’s assume you are paying $200 per user, per month for your Cloud ERP solution (SME solution), if your business requires 20 users then you are paying $4,000 per month for your ERP licenses, infrastructure and support. A great use of operational expenditure (opex).

The barrier to entry is the implementation cost – which for most SME ERP products will be in the region of $40,000 to $100,000 for ERP implementation services. This assumes an average-sized SME looking to implement ERP for Finance, Distribution, BI etc.

These upfront implementation fees can be a hard pill to swallow when you want to push your Cloud fees through an opex, pay-as-you-go, model.

So, how do ERP providers in the SME space address implementation costs and move towards a lower overall cost of ownership? The view from the industry is that templated, pre-configured implementations might be the answer. Let’s explore this in more detail.

Pre-configured templates: the ERP answer to implementation cost

Most vendors and ERP implementation partner organisations are templating ERP implementations for the SME market.

Under this implementation methodology, you usually have three implementation offerings.

Start-up: A basic standard configuration of an ERP solution.

In this configuration, a high percentage of the configuration settings are pre-defined. Best practice is used, and the customer gets minimal input into configuration choices.

As an example, a standard chart of accounts is dropped into the configuration set where standard forms are used. This start-up type implementation model is well suited to companies with standard requirements, in an industry that is easy to automate and where there is no integration or customisation required.

Advantages: quick time to implement, quick return on investment, low-risk implementation, low cost, get the advantages of a basic ERP solution without the internal resource requirements.
Disadvantages: any non-standard configurations will cost you extra, you are assuming that the standard configuration will fit your business – what if it doesn’t?

Mid-range: A basic setup with additional, non-standard configuration options.

Using this implementation template methodology the ERP implementation partner implements a templated, best practice solution but allows for some non-standard configuration options. In this model, additional standard options can be added to the configuration for a fixed fee. An example of this might be e-commerce integration. Using this implementation methodology an e-commerce integration suite can be added as a standard offering – added to the implementation pack. This implementation model has the advantage of offering a relatively quick time to implement with some (limited) flexibility associated with the final configuration.

Comprehensive: The “fits perfectly / like a glove” model of implementation.

Using this implementation structure is associated with the more traditional ERP implementation model. Scope the requirements and configure the ERP solution to those requirements.

The disadvantages include things like cost, time to implement and risk. Advantages include the fact that you, the customer, get exactly the functionality that you are looking for and the associated benefits.

Your choice of a fully templated ERP solution vs. a highly configured option will depend on multiple factors:

Budget
Requirements
Industry
Previous experience implementing ERP
Internal “muscle” to implement ERP

The good news for companies implementing ERP is that the timelines to implement and the costs associated with implementation are definitely being reduced as vendors and implementation partners move to the Cloud and look to use technology to provide simpler, less risky implementation methodologies.

Conclusion

In today’s world of Cloud, businesses want to pay for their software monthly, avoid all IT infrastructure and pay as you go on all services. When it comes to ERP there is one remaining barrier to monthly subscriptions – Cloud ERP implementation.

The use of pre-configured, template cloud-based ERP implementations is offering more choice and real advantages through quicker Return on Investment.

As is often the case with ERP implementations there is no right or wrong answer to the question of which structure to use. The good news is that as a customer you have a choice.

Are you evaluating possible ERP options for your business? Call 1300 045 046 or email [email protected] to speak to one of our consultants.

Cloud ERP vs On-Premise ERP, which is the better option for my business?

As we have learned from many years of implementing such solutions, there is no single right or wrong answer to the Cloud vs On-Premise debate for Enterprise Resource Planning systems.

We have implemented Cloud, Hosted, Private Cloud and On-Premise solutions since 2005 and we want to help organisations better understand the pros and cons of each solution. Much has been written about the benefits of Cloud vs On-Premise and we want to give our own view with particular focus on ERP systems.

This blog has been written to help educate organisations on some of the questions to ask that might help you with your Cloud ERP vs On-Premise ERP systems dilemma.

Why Cloud is becoming the new normal

There has been very strong acceptance of Cloud-based solutions for CRM (Customer Relationship Management), Office automation (Microsoft Office 365) and mobility tools.

The acceptance of ERP solutions in the cloud has been a little slower. Why?

Because potential cloud-based Enterprise Resource Planning adopters have been concerned about data, privacy and security.

There was a mindset that said, “I don’t want my debtors’ book exposed to the internet/cloud.” Most of that anxiety has gone away over the past few years as businesses have increased their uptake of cloud-based ERP solutions.

Companies have realised that their cloud deployment is no more or less exposed to the outside world than an on-premise solution (with remote connectivity).

As a result of these changes, most companies evaluating ERP solutions will be considering cloud and on-premise as a deployment option.

The question that we are often asked is “Which is the best option for my business? Cloud ERP or on-premise ERP?”.

The Cloud ERP vs On-Premise ERP decision comes down to this

Before deciding which is the correct option for your business ask yourself these questions:

Cash flow – Am I more comfortable with an upfront investment or monthly payments? Not having to outlay large sums of money upfront for software, hardware and infrastructure helps ease some cash flow pains. One cautionary note – paying for cloud software and services is an ongoing commitment – monthly or annually for the lifetime of the software. This is an important aspect to consider when evaluating the target ERP Return on investment for your business.

Internet – Like it or not any Cloud-based solution that you use will require fast, reliable internet. If you can’t get a fast, reliable internet connection then an On-premise solution is for you.

Geography – Remote offices can sometimes struggle for a decent internet connection. Multiple geographies and different office locations do however lend themselves to a cloud deployment. One of the major advantages of Cloud ERP is that you can add new users, offices and sites with ease. Tell your Cloud provider you need additional users and you are immediately up and running – no server, infrastructure or hardware configuration required.

Infrastructure – An On-Premise solution requires hardware, routers, backup solutions and infrastructure. With a Cloud-based ERP solution, the infrastructure is taken care of and is constantly updated.

Tax – The treatment for tax purposes of an upfront software purchase (asset) is usually quite different to the tax treatment of monthly “operating cost” invoices for the Cloud. Consult your external accountants or tax advisors for more information in this regard.

Capex vs Opex – As detailed in the tax section above. As a business, you will need to decide whether the Capex (asset purchase model) or the Opex (monthly pay-as-you-go) is better suited to your business. Factors like cash flow, depreciation deductions, balance sheet review, and investor perception should all be considered.

Functional requirements – Yes, even your functional requirements should be part of the Cloud ERP vs On-Premise ERP debate. Cloud lends itself to faster, easier deployment of ERP solutions. If you have extensive integration and development requirements your business might be better suited to an On-Premise ERP deployment. At the very least, if you have complex functional requirements and you are planning a true Cloud deployment of ERP, ask your ERP vendor or reseller how upgrades will work to ensure continuity of service during a generic Cloud upgrade across a highly customized solution. I am not suggesting that Cloud-based ERP solutions can’t be customized – quite the opposite. True Cloud solutions tend to use the latest technology across operating systems, databases and mobility. As a result, Cloud-based ERP solutions tend to be easily customizable. The challenge is when you have extensive development and integration (see note below).

Development and integration – The nature and scope of your development and integration work should be considered. A true Cloud solution lends itself to a standard ERP implementation (the less development and integration required the better). Standardisation and repeatability are key for a true Cloud solution. The more standard the solution, the easier the rollout and the less disruptive the standard solution updates and upgrades.

Users – The number of users and the pace at which you add (or deduct) users should be considered. Cloud solutions lend themselves to the ability to easily and quickly add or deduct users from the solution – the true “pay as you go” model.

3rd party solutions – If you want to add 3^rd party solutions to your Cloud deployment of ERP solutions you will need to ensure that these 3^rd party solutions are available in the Cloud and are compatible with your Cloud deployment of your chosen ERP solution.

ERP Upgrades – In a true Cloud environment the ERP Cloud provider takes care of all upgrades. The Cloud provider does a staged or full upgrade to all systems at a certain time.

Conclusion

After having implemented ERP solutions for many years we have learned that the On-Premise ERP vs Cloud ERP decision comes down to an understanding of your specific business requirements and propensity to adopt two distinct technology adoption models.

On one side you have your monthly ongoing “pay as you go” model, the Cloud ERP option. Here, the reduced upfront cost and included ERP maintenance are the main advantages.

On the opposite side, you have your On-Premise ERP deployment. In this instance, the ERP software and infrastructure reside at your office location and you own all the related setup and ongoing maintenance tasks.

In conclusion, our key advise for choosing between Cloud ERP vs On-Premise ERP is to ask lots of questions, get the right answers and then decide which options are best for your business.

Have we missed anything? Let us know in the comments below!