Advantages and Disadvantages of Cloud ERP

This is the second in the series of articles about Cloud ERP. In our first article, we discussed some standard definitions of Cloud ERP and the basic features of Cloud ERP systems. In this article, we will go a step further by discussing the advantages and disadvantages of Cloud ERP in more detail.

Advantages:

• Access to more features: Having applications on the cloud has the advantage of being able to access more standard features. Updates on the cloud are easier compared to upgrading an on-premise ERP system.  Since it is easier to update the application, it ensures that you have access to the latest and greatest features that your software provider has to offer.
• Moving away from legacy systems: According to Gartner^[1], by 2016, heavily customized on -premise ERP implementations will be viewed as “legacy” applications, and by 2018 some 30% of companies surveyed will have moved their ERP applications to the cloud.  The pace of enhancements for Cloud applications will exceed those of larger on-premise applications as the number of companies using on-premise systems shrinks and application development naturally follows the customer dollar
• Faster implementation: Since the infrastructure and the software are on the cloud, the effort is towards moving the data from legacy systems to the cloud-based. From that point on, the updates are faster and customizable as per business processes.

Disadvantages:

• Limited customizations: With every release, the cloud products are becoming more and more configurable.  This means that functionality that used to be considered customizations are now being offered as standard.  However the fact remains that with companies requiring very heavy customizations, especially with some functional suites, on premise ERP applications are still the best option.

• Limited Product Suites:  Most companies offering cloud solutions are focused on particular applications like HCM or Financials.  Very few providers are offering a single suite of products that meet most user requirements.  This means integrating existing on-premise applications with newer cloud products.  This can potentially lead to additional costs, more complex process flows or lost functionality.
• Cost considerations: Though, overall cloud solutions are quite cost effective, there are cost considerations to be looked into when talking about long-term costs for licenses and support.  When considering a move to a cloud application look at the 5 and/or 10 year Cost of Ownership.  The cost advantage of cloud product might not be as great as initially thought.

Ideally, some applications are best left as on-premise systems and wherever possible, you can move the rest onto the cloud. For example, applications such as Revenue Management Cloud Service ^[2] takes data from the Oracle e-Business Suite through pre-built integrations, and provides powerful revenue recognition capabilities not previously available.

Forrester Research ^[3] currently pegs Cloud computing expenditures at more than $40b globally, and growing at over 20% per annum. If not already, businesses should start assessing aspects of their IT processes to see if it makes sense to move them to the cloud and begin taking advantage of the benefits the cloud provides.

Source:

1. Gartner “Predicts 2014: The Rise of the Postmodern ERP and Enterprise Applications World” G00259076 12/5/2013
2. http://blog.appsassociates.com/top-5-considerations-for-oracle-cloud-erp
3. Based on an analysis of Gartner Group, Forrester, IDC, Wall Street Journal, and MarketsandMarkets.com projections and forecasts.