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Embracing Cloud ERP, a funambulism for IT Leaders?

You would not want to wear your heart on your sleeves in business, would you? So think twice and wise before putting one up in the cloud. The Enterprise Resource Planning applications or simply an ERP is the heart and the brain of company’s overall IT landscape. It is an application that integrates all the business functions of the enterprise. ERP can be defined as a single unified application that caters to the needs of all the departments of a company for its day to day functioning.

The IT costs in the last few years especially the CAPEX are significantly reduced, thanks to the advent of cloud computing. The Cloud ERP is one big integrated Software as a Service (SaaS) model that aims at providing an enterprise wide synergy on demand. ERP applications delivered through the cloud model offers strategic benefits especially to the small and mid-size businesses. The most lucrative factor of deploying Cloud ERP over the traditional on premise ERP systems is the low TCO (total cost of ownership). The cloud ERPs’ are purchased based on a subscription model like a utility service. You pay only for the amount of the computing resources (software, hosting, support etc) your business needs over a given period of time. Thus, reducing the CAPEX to a great extent, unlike the traditional solutions which are purchased outright. On the OPEX front as well cloud ERP’s prove to be beneficial. The Cloud Service Providers (CSP) / vendors provide the necessary backups, system monitoring and user support. They are also responsible for maintaining both the hardware and software including all patches, upgrades, fixes and refreshes. This very much reduces and free up IT department’s resources for the other activities that cannot be outsourced. As per a research from Strategy&, a pwc group company the total cost of ownership of a cloud based ERP offering over a period of 10 years, can be 50 to 60 percent less than that of the traditional on-premise ERP.

The other most important benefit of cloud ERP and as I mentioned earlier a strategic one is the considerably less time required to deploy the solution. As an old adage goes, time is money and thus the time saved is the money earned. The ERP implementations usually take months, rather years but on the other hand cloud ERP solutions are more likely to be plug and play. The cloud ERPs’ are also easily and readily configurable in order to meet the business requirements.

The cloud ERP though have its own set of limitations. The cloud ERP offers limited range of configuration options. They may not be able to handle the highly tailored business processes or the complex application architectures involving integrations across the legacy IT systems, packaged applications and/or the customized software. The other critical factor that might discourage the IT manager’s decision to deploy the cloud ERP is the data risk associated with the overall cloud computing model. Data is one of the most important as well as the most vulnerable IT asset from the security standpoint. In order to ensure the unperturbed and secured IT system, the IT Managers must have the utmost control and management over the firms IT assets, especially applications, infrastructure and data. The cloud ERP might take away that much required IT control over the business critical applications and data, thus imposing the IT security threats and challenges on the IT manager.

The IT leaders will therefore have to strike a perfect balance between the value for the business earned from a cloud ERP and the IT security. The never abating pressure from the business to deliver a high value without compromising on the security of the business critical applications and data will be a challenge that IT leaders will have to accept embarking on their cloud ERP deployments.

My Proposed ERP Decisional Matrix

Lastly, this is my Proposed ERP decisional Matrix that could prove to be a “quick and dirty” decisional aid for the IT leaders. It can help in understanding the four business and IT systems characteristics and their corresponding degree of criticality, complexity and the size in order to make the right decisions regarding whether to go for an on-premise ERP solution or a cloud ERP solution.

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