Square Pegs: Is Cloud ERP Right for Manufacturers?

Paul Bywater

Should your business be looking towards ERP on the cloud or are there limits for manufacturers?

ERP on the cloud

It’s gaining ground, most notably in small and micro businesses, but the majority of organisations retain their ERP systems on-premise.

ERP users operating on-premises ERP in 2012:

• 77% of mid-size users
  
• 59% of small users

(Source: Aberdeen Group)

Choosing an ERP system – the top 4 criteria (and not a cloud in sight):

• Functionality
  
• Ease of use
  
• Total cost of ownership
  
• Ease of customisation without programming

(Source: Aberdeen Group)

ERP on the cloud v ERP on the premises

Functionality

The cloud offers no clear functionality benefits over on-premises solutions. As ‘cloud-only’ SaaS (Software-as-a-Service) ERP systems tend to be broadly generic rather than industry-specific solutions, manufacturers may require customization to achieve sector best practice. Cloud vendors can also require systems to be kept in greater version alignment, so upgrades and functionality changes may be enforced.

• Fewer industry-specific functions.
  
• Potentially less customization and integration scope.
  
• Less control over upgrades and functionality changes.

Ease of use

ERP on the cloud can be more intuitive, as the on-premises versions may offer more functionality via the desktop which requires more training. Some cloud-only ERP vendors may expect training and support to be more ‘self-service’ from online resources.

• Training costs are usually lower for cloud ERP with more ‘self-teaching’ expected.
  
• Deployment times are lower as systems tend to be simpler.

Total cost of ownership

• Compared to a traditional on-premises approach, ERP on the cloud offers cheaper upfront costs and a ‘pay monthly’ rental model is the norm.
  
• Costs can be balanced by higher annual fees over the life of the system or money spent on customization to add sector requirements to industry-generic cloud systems.
  
• Buyers should always compile a 7-year cost comparison to get a true picture.

Ease of customization without programming

The remote nature of ERP on the cloud makes customization harder, though not impossible.

Only 4% of ERP users have made no or only minor changes to their installation.

Wiping away the mist: the truth about cloud v on-premises ERP:

• No two businesses have identical ERP needs.
  
• A wide variety of factors will determine the overall cost.
  
• Functionality remains the main driver of ERP system choice.
  
• Always do a 7 year cost comparison to determine true long-term value.

The ideal ERP solution must first provide the functionality you need now and into the future. Don’t let technology drive your decision.

Download the eGuide now: Why you can’t Excel with spreadsheets: 7 risks of in-house processes for manufacturers

This post first appeared on the Sanderson Manufacturing blog

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