Cloud ERP Solutions are available for users on a subscription basis. Typically the subscriptions are offered on a pay-to-use every month. Initially, at the time of subscription, the ERP providers enter into a contract with user companies for an upfront agreement to use the software for a predetermined period- say 36 months, thereupon the subscriptions are renewed for 12 months at the beginning of the year.
The majority of cloud ERP solutions are offered as Software as a Service (SaaS) model on two platforms currently. One is Salesforce and the other is on Amazon Web Services. Besides, some of the cloud ERP solutions are offered by the developers using their cloud environments hosted in their data centers. It is worthwhile to understand the challenges of adopting cloud ERP solutions knowing fully well that the benefits outweigh the challenges. This topic is of much significance as ERP solutions are designed to meet manufacturers’ challenges in terms of providing solutions on digitized manufacturing process management, Internet of Things (IoT), 3D printing and smart machines.
According to a 2018 Gartner survey, manufacturers are going to improve the usage of manufacturing metrics eg costs, responsiveness and flexibility. To accomplish this near real-time decision making, the supply chain leaders need information that can be generated from ERP solutions and this is possible only through modern SaaS-based ERP solutions that provide access to data and information.
Another Gartner survey on the percentage of organizations making a significant investment in public cloud indicates
a) cloud adoption is increasing across organizations of all types with the Manufacturing sector leading the others like Banking, Education, Retail, Healthcare, and Utilities
b)Global buyers of cloud applications cite cost, innovation, and agility as reasons for adoption.
It can be inferred from above-cited references that cloud-based ERP application usage is bound to increase and it is appropriate here to discuss the top few challenges to understand how to mitigate them to maximize the investment on the cloud ERP solutions.
1) Data Security after adopting Cloud ERP Solutions
By far this is the biggest challenge faced by organizations adopting to implement cloud ERP solutions. How secure is my data which is competitively sensitive and prone for hacking thereby compromising the data confidentiality? Associated with this challenge is the risk of server crash, disaster management policies of the application vendors.
The above challenge can be mitigated by assurance on the application vendor’s data security policies and contractual agreements incorporating data breach and disaster recovery service level agreements. Platform providers (Amazon, Salesforce) also do provide robust data security mechanisms to assure users of this challenge.
2) Cost of subscriptions is higher than the cost of maintaining on-premises application after adopting Cloud ERP Solutions
Pay per use for SaaS-based applications like supply chain management (SCM), financial applications, PLM and other digital manufacturing solutions need a monthly recurring payment to be paid to vendors throughout the usage of these applications. Whereas on-premise solutions need a one-time license to pay out and recurring maintenance costs by way of utilizing the staff at user organizations.
Even though recurring monthly subscription costs seem higher compared to acquiring perpetual licenses and associated costs of maintaining the servers, the total cost of ownership over an extended period outweighs the costs. You can leverage on the platform providers (Amazon, Salesforce) expertise to power your applications with the latest technology to enable business intelligence, business analytics and data warehousing functions, whereas in the case of legacy on-premise applications you have to shoulder the burden of maintaining outdated legacy IT resources which are costly and difficult to obtain the skills.
3) Data remains with the vendors even after discontinuing the subscriptions after adopting Cloud ERP Solutions
If the subscriptions are discontinued after the usage for a while, the data remains in the possession of the cloud ERP solution provider. This may be against the policy of some user companies. Associated with this topic are the concerns related to the need to add more business functionality to the ERP applications, personalizations of screens to suit user needs in a multi-tenant environment, integrations with third-party software applications.
Organizations are increasingly advised by their management, consultants to adopt the “Standard Unless” principle to mitigate this challenge. This means adopting the best of breed practices as available in out of the box functions and features of ERP solutions to avoid the cumbersome maintenance of bespoke software applications which are difficult to upgrade as the application vendors release new enhancements and/or bug fix solutions.
In summary, the adoption of cloud ERP solutions is bound to gain momentum as users increasingly become knowledgeable on the benefits. As discussed, the top 3 challenges for adopting Cloud ERP Solutions’ are possible to be mitigated as the benefits far outweigh the concerns. We at CoServe Solutions ensure that your cloud ERP solutions get adopted swiftly even though encountering all the challenges it takes while implementing it in your organization.