Cloud ERP is a type of enterprise resource planning (
) software that runs on a provider's cloud computing platform, rather than on premises in an enterprise's own data center.
ERP is a modular software system designed to integrate an organization's business processes, such as accounting, HR, inventory management and purchasing, into a unified system. Before the popularization of modern cloud computing in the late 1990s, ERP systems ran inside the owner's facility, or "on premises." The cloud ERP era began in 1998 with the debut of the first ERP system to be delivered over the internet, Net Ledger, later renamed Net Suite.
Types of cloud ERP software
Cloud ERP vendors often apply the cloud label to software that has few of the positive qualities associated with the cloud, especially multi-tenant SaaS' economies of scale, frequent and fast updates that carry the latest technology, and web-based UIs that offer ease of use and access on mobile devices. Some deployment models simply shift the location of the underlying IT infrastructure without changing the program code of the on-premises ERP software. Calling such hosted ERP "cloud" may at times be misleading, but vendors are increasingly offering such services to customers who remain cautious about entirely new SaaS ERP products but want some of the benefits of cloud infrastructure.
Benefits of cloud ERP software
Cloud ERP can be easier and cheaper to maintain than on-premises ERP, since the cloud ERP provider handles maintenance of hardware and software. Cloud-based ERP also comes with availability, backup and disaster recovery guarantees that reduce interruptions to the software. It can also have a lower total cost of ownership, especially if per-user subscription costs stay under on-premises license fees as the user base grows.
The cheap, easy connectivity of the internet makes it possible to extend the ERP system to outside suppliers, partners and customers. This enables a whole new level of collaboration in critical processes like sales forecasting, supply chain management and talent acquisition.
Like other cloud-based service models, cloud ERP lets enterprises pay only for the resources used while providing the flexibility to add or subtract cloud resources as needs fluctuate.
The cloud also allows delivery of new technologies faster than on-premises ERP in updates that usually occur every quarter. Cloud ERP vendors have been the most adept at improving the ERP user experience . It is easier to deliver new UX technologies, such as tiled GUIs, voice user interfaces and Smartphone access via SaaS than through on-premises ERP, where update cycles are measured in years.
Challenges with cloud ERP
Cloud ERP provides many benefits, but it also creates some management challenges. Administrators lose some control when the software moves off site. While limited customization is possible by changing the software configuration and settings and adding extensions, on-premises ERP is much more customizable. Cloud ERP, especially SaaS, often requires substantial training and change management to get employees accustomed to new workflows and business processes.