Moving an enterprise resource planning (ERP) system to the cloud offers numerous costs-saving benefits over implementing and keeping an on-premises installation. Although many businesses struggle to understand how the benefits of a cloud-based system directly apply to their situation, with a little investigation, most companies find that aside from the ease of implementing a cloud-based solution and the stream of offerings from cloud-based vendors, cloud-based ERP systems have never been as attractive as they are today. In fact, many businesses discover that that the ease of use and scalability of a cloud-based ERP system outpaces what they can have with an on-premises system, which means that businesses can get up and running quickly with minimal, sometimes zero upfront costs; lower total cost of ownership; and reduced maintenance costs. If the cloud-based solution doesn’t work for some reason, the risks of investing in a cloud-based solution are far less than the risks of implementing a full-scale on-premises system.
Businesses that run an on-premises ERP system or are shopping around for one often find that they need to purchase an entire ERP software package, even if they don’t need or intend to use all the features in that package. The result is that the business wastes substantial capital on software that will simply be taking up space on a hard drive instead of being used to maximize value for the company. In contrast, cloud-based ERP systems can be scaled and even segmented so that businesses pay only for the components they require and use. Because cloud-based ERP systems scale with use, when the business does need a new component for or addition to its ERP system, that feature will be there when needed. Paying only for what’s needed is often the greatest advantage when it comes to saving on software costs when installing or upgrading to a cloud-based ERP system.
Lower Initial and Ongoing Costs
Many businesses find that cloud-based ERP systems have much smaller upfront costs simply because cloud ERP vendors tend to price ERP as a Service monthly or annually. Therefore, in many cases, there’s zero upfront costs to purchasing cloud-based ERP software, unlike the license fees companies must pay when using an on-premises solution. In addition to the hefty upfront software costs for on-premises solutions, businesses find that cloud-based solutions reduce the amount they pay for software maintenance, because the subscription for ERP as a Service doesn’t usually require a separate maintenance or software contract to keep the ERP system running with the latest fixes and enhancements. In addition, businesses enjoy indirect software savings, such as needing fewer IT personnel to manage a cloud-based solution over the labor force necessary to run and maintain the hardware and software common to on-premises solutions.