Cloud ERP: What is it and how does it work?

Cloud ERP is an enterprise resource planning (ERP) system that runs on a vendor's cloud platform rather than a local network, allowing companies to access it over the Internet. It integrates and automates essential financial and operational business functions and provides a single source of data, including inventory management, ordering and supply chain, procurement, production, purchasing, distribution and fulfillment support. Companies access the software over the Internet, requiring only a connection and a browser.

What is cloud ERP software?

Because it is hosted by the ERP vendor and delivered as a service to companies, cloud ERP or online ERP software provides the same or better functionality as on-premise systems without most of the drawbacks, such as licensing fees.

This means sales teams can get real-time inventory information and finance teams can keep a close eye on cash flow and respond quickly to audits or other requests for performance data.

How does Cloud ERP or Online ERP work?

Cloud ERP systems work with a combination of technologies connected through high-speed Internet networks. Cloud ERP is always online and the ERP vendor performs included updates. Your team only needs to log in and use the ERP system and underlying data. This can reduce operational costs than older ERP systems hosted on company-owned servers.

Cloud ERPs are often accessible to users via mobile devices or desktop computers. They include many tools or modules for the business area that deliver efficient business operations, focusing on a positive customer experience and profitable business outcomes.

Cloud-based ERPs offer virtually unlimited scalability, allowing your team to access all the information they need wherever they do their work, from sales meetings with customers to remote workplaces and your home office. The ability to securely log in from anywhere, where more and more employees are working from home or other remote locations.

Key features include access to customer information, sales histories, financial data, human resource management tools, live operational metrics, reporting on each module, supply chain status and more. In addition, a cloud ERP can connect virtually any computer system your company needs.

Depending on your business needs, you can choose from different deployment models with modules and configurations optimized for your type of business. This allows your team to focus on the right metrics and workflows to achieve your business goals.

Components of cloud ERP software

Any cloud-based ERP software provides basic financial and accounting functions. The type of modules or applications a company wishes to implement depends on its industry and specific business needs. Online ERP modules available include:
  • Commercial Management
  • Customer Relationship Management (CRM)
  • Inventory management
  • Order management
  • Production planning
  • Supply Chain Management
  • Project management
  • Material requirements planning (MRP)
Cloud ERP Concepts

It is important to understand some basic concepts related to cloud ERP as we delve deeper into the topic:

Deployment strategy - ERP software can be deployed on on-premises or privately hosted servers or purchased in an "as a service" model. Cloud ERP capabilities can generally be implemented more quickly, but in both cases, companies must allow time for planning, data migration, customization and configuration, and employee training.

Cloud-based ERP: enterprise resource planning software hosted off-site, on the ERP vendor's servers and delivered as a service that can be accessed through a web browser. Or also known as Cloud ERP and Online ERP.

On-premises ERP: enterprise resource planning software installed locally on a company's computers and servers and managed by internal or contracted IT staff. The software and supporting infrastructure are operated, stored and maintained in-house.

Hosted ERP: A hosting company or provider manages the implementation of the ERP software and its supporting infrastructure. Hosted deployment models are often used when companies want to outsource IT. While this model offers some benefits of the cloud, it is not a true "as a service" model.

End-to-end security: a secure, encrypted connection between a cloud-based ERP provider and its customers.

Subscription-based licensing: the company pays a fixed subscription fee for use of the software at specified intervals (annually or semi-annually). This fee generally covers all software maintenance and upgrades and can be charged per user or company.

Types of cloud ERP software

Multi-tenant SaaS: a single version of the ERP software and associated infrastructure serves multiple companies. However, although each company uses the same software and is hosted on the same servers, one company's data remains inaccessible to others. Therefore, a true cloud ERP system is usually a multi-tenant SaaS.

Single-tenant SaaS: a single ERP software and associated infrastructure version serve only one company. In other words, a company's data is hosted on private servers running a single instance of the software. Some cloud ERP providers allow customers to choose whether to run a private or shared instance.

Public cloud: Multiple companies share cloud computing services owned by the service provider. However, each company's data and applications are inaccessible to the others. Examples of public clouds include Amazon Web Services, Google Cloud, Microsoft Azure and Oracle Cloud.

Private Cloud: A service that is not shared with other organizations.

Hybrid ERP: As the name implies, a hybrid ERP approach combines on-premises software with a private or public cloud for processing, storage and data services.

Frequently Asked Questions about Cloud ERP

Why is cloud ERP better?

Cloud ERP systems are superior to on-premises ERP systems for several reasons. First, cloud ERP systems can be accessed from anywhere and require the same corporate resources for maintenance and upgrades. Cloud ERP solutions can offer cost savings and better long-term performance. Finally, cloud ERP systems are the most secure and efficient solution for your team to access critical business data and systems to do their best work.

What is the difference between ERP and cloud computing?

A cloud ERP uses many of the same digital resources as cloud computing. However, cloud computing focuses primarily on handling large calculations, while cloud ERP systems give you a range of applications for your business.

How many companies are using cloud ERP?

A recent survey found that 21% of companies use cloud ERP systems or about one in five. Fifteen percent of companies using SaaS host the on-premises system or on-premises ERP, while the vast majority prefer cloud-based services.