What is a cloud based ERP?
The cloud is a term already quite famous, but not all software vendors and service providers use it the same way. We've talked several times as an ERP in the cloud and I think it is time to define in more detail what exactly we mean.
Here is our definition of an ERP in the cloud, which is shared by analysts and leading cloud service companies worldwide.
Enterprise resource planning (ERP for its acronym), are management information systems that provide functionality to govern and monitor a business. Typically they include financial data, inventory, personnel, sales, etc. A critical aspect of an ERP is the ability to manage all information flows centrally, providing only one truth to company executives.
A cloud based ERP system, or an ERP system based on Software as a Service (SaaS) is a built software and maintained by a vendor of software on their own server providing its services through the internet. Customers usually sign a monthly or annual service.
5 important aspects of a cloud based ERP
These are five critical points to consider when evaluating offers of a cloud based ERP:
1. Multi rent
A primary goal of a software vendor in the cloud is to maximize the beneficial effects of economies of scale, so a cloud ERP must be multi rent. This ensures that all clients are using the same version of the system; optimizing investments, training, upgrades and technical support. The provider of a cloud ERP can invest more money to add functionality. The customer benefits from lower costs and consistency of the software.
Some "vendors of software in the cloud" basically what they do is customize for each client a server with its own version of the software. Technically what they are doing is selling traditional software with hosting service. They cannot benefit from economies of scale, as they must maintain a server for each client and not all clients use the same version. In this case, the customer pays a lot more and get less.
2. Automatic updates and customizations
Upgrades to ERP cloud systems should be automatic without or with very little downtime. Nor should they require any work by the customer. Any updates must be 100% compatible with the new version, eliminating the tedious task of rewriting customizations and complementary software.
3. Sellers Feasibility
The "cloud access" has allowed many companies to enter new markets. The buyer of a cloud based ERP should consider outside the technical requirements, the future viability of the seller. The fact that a company producing ERP in the cloud is acquired by another company selling traditional software involves uncertainty in the course of service.
If a provider of cloud ERP has received a few rounds of funding to develop their business, this does not mean they can continue to provide support service and system upgrades in 3, 4 or 5 years. An investment in an ERP should be seen as long-term !
4. Proven track record
The service of a cloud provider should be focused on several industries, large and small, with clients who can attest services for several years. It should also ensure at least 99% availability in its service. Another important sign of a good service provider in the cloud are the certifications. Some major US are SSAE 16 ( SOC 1) , PCI -DSS and the US - EU Safe Harbor framework. The latter is of great importance for ERP vendors in the cloud located in the US, since it implies they meet privacy requirements imposed by the European Union , which are the strictest in the world.
5. Frequent backups and disaster recovery capabilities
A few years ago, amid the disaster caused by Hurricane Sandy in New York, I was reading a report on a software company providing cloud services located in the city of New York. Almost the entire city was without electricity for several days, but they continue to provide their service with only minutes of downtime accumulated on that year of service. All employees were busy looking for fuel and fueling backup generators, carrying them up the stairs to the rooftop of skyscrapers.
This story may be a bit dramatic, but indicates the importance of the availability of the service for many companies. When looking for a provider of ERP in the cloud, look for companies with redundancies, at least 2 servers centers in different locations, several Internet connections, alternative energy power systems, etc. Also inquire about the ability of data recovery after a disaster, which implies a backup plan.