What do you need to know before evaluating Cloud ERP solutions for your business? In this article we explore the essential knowledge every CFO, CIO & Project Manager should be aware of before embarking on their Cloud ERP selection process.
What is Cloud ERP and what options are available?
Traditionally, ERP systems were installed 'on-premise', that is to say, at one of your own physical locations, necessitating your own hardware, office space and IT staff to get up and running. Over the last 15 years, Cloud ERP solutions have become much more popular which eradicate the need for these prerequisites. Cloud ERP solutions are hosted, maintained and upgraded by your software vendor or partner, removing the administrative burden and up front cost in getting started. With Cloud ERP, you pay your software vendor a subscription fee and in return you can consume enterprise resource functionality in much the same way you consume electricity. This can help CFO's or finance leaders to create a compelling commercial case to change ERP as the upfront investment is much lower. If you need help with ERP budgeting or pricing, speak to our team.
There are several different types of Cloud ERP on the market and before you start your selection process, it's worth knowing what options are available and the impact of selecting one model versus another.
In essence there are two core categories of Cloud ERP - software as a service and infrastructure as a service.
Software-as-a-Service is a pure consumption model way of delivering Cloud ERP solutions. Your ERP vendor provides the end to end service including hosting, regular upgrades and more in a 'multi-tenanted environment'. Without getting too technical, a multi-tenanted environment means your application is housed alongside other customers applications and is maintained accordingly. It's like renting an apartment - you pay a flat maintenance fee and everything is taken care of. On the one hand, this is beneficial as it keeps costs low and processes standardised. On the other hand, you can't tear down the walls of a rented apartment, nor can you radically change the way a SaaS Cloud ERP solution operates. You can move the furniture around though - i.e. configure processes and customise them to some extent. This makes SaaS Cloud ERP solutions a good choice for simple organisations that want to standardise, but a bad choice for those with complex and specific processes that don't want to change.
Infrastructure as a service Cloud ERP solutions give you the same benefits of SaaS ERP solutions, but with the ability to modify and easily customise the code of your ERP solution. Whilst this has it's advantages, keeping your ERP system clean gives you the ability to upgrade it quickly and easily plus reduce professional services fees.
Not sure which is the right option for your business? Then schedule a free call with one of our team.
What are your requirements?
Part of defining which Cloud ERP deployment model is right for your business is also defining your functional requirements. I.e. what do you need your Cloud ERP to be able to do, both now and in the future? It's best to look at this in a phased and line of business approach. From a line of business perspective, we mean you need to understand what functionality each part of your business needs from the Cloud ERP solution. Will the solution cover just finance, or project management, professional services, supply chain, inventory and more? We recommend starting by looking at every area of your business and interviewing your key process owners in those areas. Having the buy in of your key process owners is essential in defining your requirements, choosing the right software and ensuring it's implemented and adopted. Ask them to document the use cases they need from the Cloud ERP solution. During this process you also need to begin to map out where your ERP system will start and end, i.e. where you need to hand off into manual processes or interfaces with other systems.
Once you've completed an initial assessment of your Cloud ERP system requirements, you also need to think about the future. Are there any big changes coming to your business? Will you be expanding into new markets? Will you be adding services based offerings or new products? The last thing you want to do is implement a Cloud ERP solution which meets your short term needs, but then has to be heavily modified or replaced in 1-3 years.
Which solutions meet your needs?
It's your choice when you choose to go out to market, but at ERP Research we recommend performing an initial evaluation of the solutions available as early as possible. There are several reasons for this:
We always recommend shortlisting a minimum of 4 solutions, following in-depth research on the available solutions which best meet your industry needs and requirements. If you'd like free insights into which solutions your industry peers are leveraging, speak to one of our advisors.
Negotiating your Cloud ERP purchase
Another reason to shortlist multiple vendors and solutions is to help you during negotiations. We won't cover the basics of negotiation here, but when negotiating your Cloud ERP software contract, you need to ensure that you're aware of what you're signing up for.
Unlike most simple subscriptions, with Cloud ERP you're choosing to lock up the back office IP of your business with your software vendor and to get to the end product, you'll need to invest months of your time and considerable sums of money. Sounds scary right? What if the vendor decides to discontinue the product? What if they choose to hike the price of the subscription after the first contractual period? If your licensing models increase, will you get the extra users or modules at the same discounted level?
Getting the best deal for your Cloud ERP purchase begins in the early stages of the project, if you'd like to learn some common and expensive negotiating mistakes to avoid, speak to one of our team.