Cloud ERP software: Definition, types and benefits
Strategic enterprise resource planning, or ERP, is crucial to your business success.
ERP is about ensuring an organisation’s internal processes — from accounting and human resources to procurement, inventory management and more — run as smoothly and effectively as possible.
Technology, of course, plays an important role in modern ERP processes. As of 2019, the global ERP software market was valued at $39 billion — and is expected to skyrocket to over $86 billion by 2027. What’s more, 53% of companies say getting maximum value from their ERP software will continue to be a top priority for years to come.
Though ERP software has been around for some time now, this recent surge is due in large part to the ongoing shift to a cloud-based service model.
In this article, we’ll be discussing:
What a cloud-based ERP system is
How cloud-based ERP tools operate
How cloud-based ERP services differ from traditional, on-premise solutions
Why migrating to a cloud-based solution is almost certainly your best option
Let’s dive in.
What is cloud ERP software?
Cloud ERP software refers to ERP software that operates “in the cloud,” and that is provided via a service-based business model.
We’ll go into more detail shortly.
For now, here are the key things you need to know about cloud-based ERP software:
Because it operates in the cloud, you can access the software on any modern internet-ready device — without needing to actually install the software.
Your data is stored by the provider on a centralised server — meaning you’ll always have access to the most accurate and up-to-date info whenever you need it.
The “service” part of “software-as-a-service” includes features like server and data maintenance, risk management assistance, and hands-on customer support.
Basically, cloud-based ERP software allows teams to “do ERP” from anywhere, at any time, with maximum efficiency. As we’ll discuss, this is perhaps the key reason many organisations are making the switch to such cloud-based solutions.
What functionality does a cloud-based ERP provide?
We’ve established that cloud-based ERP tools enable teams to “do ERP” more effectively and efficiently.
Let’s now take a look at what “doing ERP” actually entails — and how modern cloud ERP tools help make it happen.
1. Financials and accounting
Cloud ERP software allows teams to get a better handle on their various accounting processes:
Day-to-day general ledger activities are streamlined, simplified, and automated
Quarterly and annual reports are processed and delivered automatically
AI-powered reporting and analytics allow for better financial planning
Cloud ERP software makes it easy to manage employee rosters, schedules, and timesheets.
3. Inventory management
Modern cloud-based ERP solutions offer real-time visibility of inventory levels, stock movement, and other inventory management processes.
Again, AI-powered analytics helps teams further optimise these processes to maximise productivity while minimising cost at the same time.
4. Order management
Cloud ERP software aims to streamline order management on both sides of the equation.
Looking at sales order management, cloud ERP tools help orders get entered, processed, and fulfilled with minimal friction. These tools also help optimise purchase order management processes to make sure that teams always have the materials and equipment they need to operate effectively.
5. Human resource management
Human resources are an essential part of all businesses, large or small.
Cloud ERP tools not only provide a central location to store important employee documents, they also allow HR teams to create complete profiles for each employee on record.
Human resource teams can also automate certain administrative tasks, allowing them to focus on the more intensive processes that require a hands-on approach.
6. Human capital management (HCM)
Human capital management refers to the process of assigning and scheduling employees strategically based on their knowledge, skills, and abilities.
As such, it’s a vital feature for modern cloud ERP providers to include in their solution. With a clear overview of your available human capital resources, you’ll easily be able to put your employees in a position that all but guarantees success — both for the employee and for your business.
7. Project management
Cloud-based ERP tools also give managers a clear overview of progress being made on specific projects.
With such project management tools, your team leads can track productivity — and can also make strategic changes to tasks and assignments to guarantee the success of every initiative you put together.
8. Customer relationship management (CRM)
Cloud ERP tools often offer some level of CRM functionality, whether directly or via app integration.
This allows organisations to gain a holistic and comprehensive view of their customers. In turn, this keeps sales and other teams prepared to engage with said customers to maximum effectiveness at all times.
(Employees can also add to these customer profiles with every subsequent engagement — making for even better experiences in the future.)
Cloud-based ERP solutions aid the procurement process by enabling strategic sourcing and supplier relationship management.
With these functions in place, you’ll be able to extract maximum value from every purchase you make — while simultaneously keeping your costs to a minimum.
10. Supply chain management
Modern cloud ERP providers know a streamlined supply chain is critical — and that keeping things streamlined requires visibility in multiple areas.
By integrating the various aspects of ERP — accounting, procurement, inventory management and so on. Cloud-based solutions give teams the comprehensive overview they need to keep their supply chain running smoothly.
11. Risk management and compliance
Most cloud ERP solutions are designed with data privacy, security, and compliance top-of-mind.
Even the more basic solutions on the market offer guarantees of data safety, with many offering more specific compliance-related features for companies operating in specific industries or jurisdictions.
(See MYOB’s own Security Commitment statement for more on how we protect our users’ data at all times. )
On-premise ERP versus cloud-based ERP solutions
As we mentioned earlier, more and more organisations are moving away from the traditional on-premise ERP tools in favour of cloud-based solutions.
Let’s now take a closer look at the differences between both options to get a better understanding of why this shift is occurring.
Though seemingly not for long, many companies still opt for an on-premise solution to their ERP needs.
On-premise ERP software is installed on specific devices belonging to the company, and operates through the company’s own servers. In other words, it can only be used on these specific devices, and only when these devices are connected to your server.
Speaking of your servers, an on-premise ERP solution requires ongoing tech support in the form of server maintenance and other backend processes. Since you own the servers the software operates on, it’s up to you to keep things moving.
On-premise ERP solutions are highly customisable at purchase, and are usually tailored in unique ways to meet the specific needs of the client. This, to be sure, is one of the main reasons the traditional solution continues to stay relevant in an otherwise cloud-based world.
When purchasing an on-premise ERP, you’ll pay a single licensing fee (based on the number of licenses purchased), along with a potential installation fee. Though you then own the software as-is for eternity, you’ll need to pay in full should you choose to upgrade to a newer version in the future.
On-premise ERP tools are powerful in terms of functionality, but they’re also quite cost-heavy, in terms of both finances and resource consumption. That said, only established companies with the capacity to take on such an investment will want to go this route.
Cloud-based enterprise resource planning software operates strictly on the provider’s servers and can be accessed from any web-ready device by the end-user.
This means your team can access your cloud-based ERP whether they’re in the office, working from home, or out on location. While some providers offer an app, most solutions are accessible directly via web browser.
With cloud-based solutions, the provider takes ownership of backend maintenance processes. From server maintenance to data security and risk mitigation, the provider takes care of it all.
Though cloud-based ERP tools aren’t as customisable as on-premise solutions, cloud providers typically offer multiple tiers of service. This way, individual teams can find the tier that best fits their needs and their budget — and can also scale up or down as needed over time.
As we said before, cloud-based ERP tools are offered on a subscription basis. While there aren’t any major licensing fees at the time of purchase, you’ll be charged a regular subscription fee on a monthly or yearly basis.
All in all, cloud-based ERPs are more versatile and scalable than their on-premise counterparts. For small, growing businesses looking for a flexible and affordable ERP solution, the SaaS model is almost certainly the way to go.
Types of cloud ERP software
Let’s now take a look at the many different types of cloud ERP software available, and what their differences may mean for your company.
Multi-tenant SaaS versus single-tenant SaaS
First, let’s talk about multi- and single-tenant SaaS solutions.
The vast majority of cloud-based ERP tools are classified as multi-tenant SaaS. This means the vendor serves multiple users on a single server infrastructure, delivering the exact same software and service to each client on the server.
(Note that each user’s data can only be accessed by that user — and is kept safe from all others on the server.)
A single-tenant SaaS tool operates on a server dedicated to an individual client. This allows the provider to tailor their software and service to the user as needed. Typically, enterprise-level ERP services use a single-tenant approach.
Public, private, and hybrid ERP
ERP tools can operate publicly, privately, or through a combination of each method.
Essentially, public ERPs are multi-tenant, while private ERPs are single-tenant in nature. As discussed above, public ERPs offer uniform service to different users, while private ERPs offer more dedicated service and resources to individual clients.
Hybrid ERPs, as the name suggests, offer flexible functionality based on context, to be used at the client’s discretion.
For example, a tiered ERP solution may offer private cloud services by executives for administrative purposes on-premise, while enabling read-only access to company data off-premise via public cloud.
Similarly, a hybrid solution allows teams to go public or private based on business function. For example, a team may wish to use a private ERP for tasks involving highly-sensitive customer info as a way to reinforce their data security measures.
Though both public and private ERPs are valuable in their own right, hybrid solutions tend to offer the best of both worlds — and allows teams to stay agile in all areas of enterprise resource planning.
Benefits of cloud ERP systems
Though we’ve hinted at a number of them already, let’s take a closer look at the main benefits of using a cloud-based ERP solution.
Lower upfront costs
With no purchasing, licensure, or installation fees, cloud-based ERP solutions offer a cost-effective way to get started.
Though you will have the ongoing subscription payment, you’ll save money up front — leaving you with more capital on hand to reinvest into your business.
Lower operating and maintenance costs
As we’ve noted, server maintenance, tech support, and other IT-related processes are all covered in the subscription price for most cloud ERP services.
To be sure, this cost is minuscule compared to the ongoing costs associated with doing it all in-house when using an on-premise solution.
Faster implementation speeds
It’s also easier to get up and running with a cloud-based ERP system.
With minimal (if any) hardware and software installation needed, getting started is as simple as logging into your online account. A user-friendly interface, coupled with hands-on service and support, make for productive engagements from the very first use of the tool.
The tiered nature of cloud ERP services means clients can upgrade at any time — that is, whenever their business is ready to scale.
Third-party integrations also add to this scalability, providing additional functionality as needed, at minimal extra cost to the user.
Better application integrations
Speaking of apps and add-ons, they’re simply much easier to integrate into a cloud-based system than a traditional ERP.
In fact, most on-premise ERPs don’t even allow third-party app integrations. SaaS-based ERP tools, on the other hand, are built specifically to integrate into your tech stack in various ways, for various purposes.
While on-premise ERP software can only be accessed on the machines it’s been installed on, cloud solutions can be accessed from anywhere, at any time.
In a world where remote work is becoming increasingly common, your team needs open access to your ERP software — period.
Get real-time visibility across the business
A cloud-based ERP solution allows you to gain a holistic overview of your team’s operations.
Even on just a surface level, this allows you to get a better understanding of how each of these processes ties into and impacts one another. This, in turn, enables you to make informed decisions when improving your workflows over time.
With improved accessibility and visibility comes increased agility: since you’ll always have a real-time, ever-connected overview of your team’s various processes, you’ll always be in position to make improvements to your workflows when necessary.
Modern cloud ERP services typically offer some kind of guarantee in terms of uptimes and the like.
And, though server issues are bound to occur from time to time, multi-tenant ERP services always have dedicated staff on-hand to get things back up and running in no time.
Likewise, cloud-based ERP providers have dedicated security teams on-hand to make sure sensitive data remains safe — and that your operations remain compliant.
This not only saves you time, money, and energy on ongoing maintenance, but also adds an extra layer of safety to your operations should disaster strike.
Faster disaster recovery
Of course, this doesn’t mean you’ll never encounter minor problems or major disasters throughout your company’s lifespan.
Still, most cloud-based ERP solutions come prepared with safeguards and security measures so that you never completely lose your important data — and that you can always retrieve it when you need it.
Automatic upgrades and bug fixes
Cloud-based ERP providers are constantly making improvements to their software, regularly releasing new versions of their tool as they become ready for public use.
SaaS ERP providers are also always on the lookout for bugs and other technical glitches. Once they iron things out, they can immediately release a bug-free version of the software to their users.
Dedicated customer support
The service part of “software-as-a-service” is a huge selling point for cloud-based ERP tools.
Most providers deliver customer support in several ways:
Ultra-responsive customer service
Self-service options for self-driven learning
All this means you’ll be able to use your chosen ERP solution exactly as you’d intended — and will achieve optimal results in doing so.
Cloud ERP challenges
As beneficial as cloud-based ERP tools can be to your business, there are a few things to watch out for in order to keep things moving in the right direction.
1. Migrating from on-premise ERP systems
If your company has already been using a traditional ERP system for some time, migrating to a cloud-based system may prove to be a bit of a challenge.
Firstly, you’ll likely have a ton of data to move over. Not only will this be a time- and resource-consuming process, but you’ll also need to keep data security top-of-mind as you make the switch.
Secondly, you’ll need to reallocate your technological and human capital resources appropriately. For example, though your IT staff will no longer be fully responsible for server maintenance and data security, they may need to focus more on helping other team members get acclimated with your new ERP solution.
2. Handling resistance to change
Teams that have gotten used to using a specific ERP solution may not be so enthusiastic about making the leap to a cloud-based tool.
In such cases, it’s crucial that your employees understand:
What changes are to be made
How these changes will impact their day-to-day operations
What they can do to get the most out of your new ERP system
It all comes down to strategic change management. The more adaptable your team becomes, the easier it will be for your company to stay ahead of the competition.
3. Onboarding and training employees
While modern SaaS ERP solutions aim to be as user-friendly as possible, your team will likely need a little extra assistance as they get up and running with the new tool.
Even if your solution of choice provides in-depth user onboarding and instructional support, you still might want to create additional learning opportunities for your teams. This way, they can get some practical experience with the tool in ways that actually make sense for their purposes, and that enable them to put their best foot forward.
4. Navigating regulatory compliance
As we’ve said, most modern cloud ERP providers bake regulatory compliance safeguards into their tools from the start.
Still, it’s up to you to make certain these security measures align with the needs of your organisation. Moreover, you’ll need to vet your provider of choice to check for service level agreements and guarantees, and that their track record speaks for itself.
Finally, though the provider will handle most issues revolving around data security and such, this isn’t a license to get lax. Rather, your team should always be working to check that your data stays where it belongs — and is never able to fall into the wrong hands.
Take your business to the cloud
Taking your ERP processes to the cloud is one of the best things you can do for your business. It gives you clear oversight and full control over every aspect of your business, from anywhere at any time. This, in turn, allows you to consistently keep things moving in the right direction across the board.
And, because it’s such a burgeoning industry, cloud ERP software will continue to evolve in the years to come. As valuable as they are to your business today, cloud-based ERP tools will become even more important to your operations as time goes on.
MYOB offers a comprehensive cloud-based ERP system for both growing small businesses and established enterprises. With MYOB Advanced Business, you’ll always have the data and info you need to make the right business decision — and the features and functions needed to make it happen.
Ready to get started? Book a free demo with MYOB’s team today.