As a business grows, the need for efficient tools becomes more and more important. You can start off with the basics and try to wear many different hats in the startup phase, but as your client list expands and as you start doing more projects, you’ll need some extra help so you can focus on the core processes.
One such option is the ERP system, which helps manage day-to-day activities. Traditionally, these systems were kept on company servers, but these days, there’s a growing trend of switching the on-premise systems onto the Cloud. In fact, 76% of businesses (according to a Blue Link survey) have moved or have started to move on-premise ERP to the Cloud.
By switching to cloud-based systems, the questions that are inevitably on everyone’s minds are – Is it worth it? How much will that cost? Can I expect to save money? Is it worth it? Is it safe?
Well, we’ll look over all of this and give you a clear picture of how a cloud-based ERP can impact the financial and operational aspects of your business.
What Is a Cloud-Based ERP System?
ERP systems are very useful, very powerful tools that help businesses manage and integrate their core processes, like inventory, sales, finance, and human resources, all in one central system.
Traditionally, ERP systems were installed directly on the hardware within the company’s premises, but this type of setup is very expensive because you need the IT infrastructure and staff to maintain it.
Then you have a cloud-based ERP, which does everything a traditional one would, but it’s hosted on the provider’s servers, and you access it through the Internet. This opens up a world of flexibility because you can access it from anywhere, as long as you’re connected to the Internet.
According to statistics, 39% of businesses stated that their main motivation for moving to the Cloud was to take advantage of better business processes, followed by scalability and ROI.
Cost of Cloud-Based ERP vs On-premise ERP
Before you decide to switch to a cloud-based ERP, you need to know how its cost compares to an on-premise one.
Initial Setup Costs and Investment Comparison
You’ll pay a hefty sum for an on-premise ERP because you’ll have to buy hardware, server infrastructure, and software licenses; plus on top of all of that, you’ll need to hire staff to maintain all of it.
On the other hand, cloud-based ERPs like NetSuite generally have a subscription model, which means significantly reduced upfront costs.
Instead of paying a lot of money at once straight away, you’ll pay a recurring fee that covers the use of software and, usually, updates and new features.
Ongoing Expenses
This refers to maintenance, upgrades, and support costs. If you have an on-premise ERP, it will cost a decent amount of money because you need in-house IT staff. Also, things tend to break; and you’ll be the one paying the repair bill.
Cloud-based ERPs offload a lot of this work to the service provider, so your subscription fee (usually) covers maintenance, automatic upgrades, and support which, over time, offers significant savings. If this isn’t covered by the basic subscription, these types of businesses usually offer these services in higher-tier subscription models.
If you’re looking for a subscription model that is tailored to your business, then you can rely on companies like GetGSI, who will ensure your system runs smoothly.
Hidden Costs and Potential Financial Risks
Another category where you’ll find big differences.
An on-premise system is riskier because you can have issues like hardware failures, obsolescence, unexpected upgrades, replacements, outdated technology, etc. All of this will make the price of having an ERP system skyrocket.
Cloud-based systems aren’t this problematic because your provider is the one managing the hardware and making sure the software is up to date.
There is also the issue of data breaches. While both on-site and cloud-based ERP systems can be targeted, the cloud-based ERP systems will have their own cybersecurity department with the sole goal of keeping the data safe. This is because the data is what keeps their business alive; it is only logical for them to invest heavily in data security.
If you have an on-premise ERP system, then it is up to you (in-house) to cover cybersecurity, and that will be presented as an additional expense (staff, software, hardware, training, technology, etc.).
Keep in mind, though, data migration can be tricky and integrating new systems with the existing software could mean some hidden costs for a cloud-based ERP.
Operational Impacts of Switching to Cloud-Based ERP
The shift to a cloud-based ERP will have a lot of impact on how your business operates and it will influence everything from daily workflows to how your team interacts with technology.
One of the biggest changes is the streamlining of business processes. Cloud ERPs offer more efficient, automated workflows that can allow both you and your employees to work remotely.
However, your employees will need some time to adjust to this, so make sure to train them properly so they can make full use of what the system is capable of without disrupting the day-to-day operations.
Another area where cloud ERPs excel is their ability to integrate with other digital tools and systems your business might use. This will allow you to have a more unified platform where information flows easily across all apps, which results in more accurate data and faster decision-making.
Conclusion
To answer the question of whether or not switching to a cloud-based ERP is worth it – an absolute yes! It also is the future, as 96% of surveyed companies believe that most of their data will be cloud-based in the next 5 years. So, why not do it now?
There’s less upfront cost, you don’t need to pay IT staff to maintain the ERP system, and there’s no risk of hardware malfunction because, well… You don’t have it; your provider takes care of it. And even if there are server-side issues, the provider will have backups in place (just in case). They’ll also keep your system updated.
With a cloud-based ERP, you’re more flexible because you don’t necessarily need to work from an office every day, and that laptop lifestyle people have been praising might not be too far out of reach after all.
