ERP News

Making the Cloud Decision in ERP

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There are a lot of advantages to ERP in the cloud, but there are a lot of caveats too. If you’re considering moving to the cloud you need to look carefully at all your options in making a decision.

First off, you have to consider that you’re not “moving to the cloud”, you’re contracting with a specific vendor for a specific package of services. “Moving to the cloud” may sound great in theory, but the devil is in the details and some of those details can be truly devilish.  In making the decision you have to look at exactly who you’re dealing with and what you’re buying. Perhaps even more than with on-premises ERP you have to look carefully at what you’re getting.

 

Will the cloud save you money? It can, but again, the specifics are what matter. One thing is certain, the payment models for cloud ERP are very different from on-premises software and you have to look at the details over the life of the system to say for sure.

 

Cloud ERP is usually priced on a monthly model with the money coming from your operating expense rather than your capital expense account. You don’t have to pay nearly as much up front for your ERP system, although over the life of the system it may (or may not) cost more. That in itself can make a difference in the cost of services to your company, but other changes are more important.

 

Maintenance, for example, may be covered wholly or in part by the monthly fee. Vendors vary in how they charge for this and it is important to see how your candidates handle maintenance costs.

 

Upgrades are another area that can vary. Some companies include upgrade costs as part of the regular service but more of them charge for upgrades separately.

 

One of the problems with upgrades is that the SaaS vendor upgrades on its schedule, not yours. This may not be the most convenient time for you to spend the extra money.

 

The other thing is that you don’t get to decide if you need the upgrade or not. The software is upgraded on the vendor’s schedule whether you feel you need the new features or not.

 

A SaaS ERP system can also limit you on the amount of customization and configuration you can do. Most of the time with a cloud system you are, in effect, signing on to use someone else’s software and you’re limited by what they will let you do.

 

This isn’t always true. Some vendors in effect assign you your own virtual machine, complete with the ability to customize it to your heart’s content. Again, you need to check carefully on the specific vendor if this is likely to be an issue for you.

 

The real question here is how much you are going to be able to do things your way and how much you are going to have to do it your vendor’s way. If you are bound and determined to do everything your way you’re going to have to shop more carefully for your ERP system.

 

Note that doing things the vendor’s way isn’t necessarily a bad thing. SaaS offerings usually codify best practices in the industry and it is quite possible that your way of doing things is less effective. However again, this is a decision you’re going to have to make.

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