ERP stands for Enterprise Resource Planning. In Cloud ERP, the software is installed on the server provided by the vendor. The vendor is responsible for installing, maintaining, upgrading and securing the application and Customer’s data. The customer user accesses the ERP application through the internet. The distinguishing feature of Cloud ERP is the ‘Thin Client’, meaning no software is required to be installed on the user machine to access the ERP system.
Cloud ERP is relatively new. The first pure-play Cloud ERP was “NetLedger,” since renamed as Netsuite, which came into existence in 1998. However, the broader acceptance of Cloud ERP is a relatively recent phenomenon of the current decade.
We can categorize Cloud Based ERP into 3 groups, as shown in the diagram below.
In Cloud deployment, the ERP is fully deployed on Cloud. The Cloud vendor handles software maintenance, software upgrades and data security. Customer may have a lean IT Team.
In Single-tenancy, the organization’s data is available on a private server with a unique software instance. This could be a private instance or a shared instance. Private Cloud is a Single Tenant by nature. In Multi-tenancy, multiple customers can share the same version of the application and the associated infrastructure.
SaaS stands for Software as a Service. This is what we traditionally know as Cloud Based ERP. One disadvantage of SaaS is that application/process customizations are not allowed. Customers have to modify their processes to meet the requirements of Cloud Based ERP.
The future belongs to Saas ERP. As per a study done by Markets and Markets, the global Cloud-Based ERP Market is expected to grow from USD 43 Billion in 2020 to USD 101 Billion in 2025 at a CAGR of 17.4%. As per the study, the significant factors driving the growth are growing demand among enterprises to improve operational efficiency and streamline business processes, the impact of COVID19 and increasing adoption of Cloud based solutions.
Based on the deployment options ERP can be grouped as Cloud, On-premise, or Hybrid deployments.
In Cloud deployment, the ERP is fully deployed on Cloud. The Cloud vendor handles software maintenance, software upgrades and data security. Customer may have a lean IT Team.
In On-premise deployment, the Customer owns the infrastructure and is responsible for issue resolutions, infrastructure, application upgrades and data security. The Customer will have a larger team (than Cloud) to handle ERP. Large businesses with extensive customizations opt for this approach.
A Hybrid deployment solution is a mix of the above two approaches. The Customer may have the core applications in one ERP (SAP HANA for example) in the On-premise instance and then will have a few satellite applications (could be from different vendors, Oracle HCM for example) that “talks to” the core application. This helps the Customer get a feel of Cloud deployment and gradually phase out of On-premise and transition to Cloud.
| No | Parameter | Cloud ERP | On-Premise |
| 1 | Infrastructure costs | No | Yes |
| 2 | Operational costs | Low | High |
| 3 | Database maintenance | Cloud Vendor | Customer |
| 4 | Application maintenance | Cloud Vendor | Customer |
| 5 | Process Stability | Medium | High |
| 6 | Customization | Zero | Possibly high |
| 7 | Integration with other applications | Standardized | Non-standardized |
| 8 | Upgrade frequency | High | Low |
| 9 | Availability and Reliability | Very High | High to Medium |
| 10 | Support Team Size | Lean Team | Large Team |
• Does your ERP Software meet your Business Needs?
• Does your ERP solution aligns with company goals?
• Will ERP Software Integrate/compatible with existing systems?
• Have partner Network/Availability?
• What type of training/support options offered by the ERP Solution provider?
• Have references and recommendations from customers?
• Does your ERP provider invest in tomorrow’s technology?