Cloud Versus On-Premise ERPs — Not Just Two Sides of the Same Coin

by Shekhar Somaiya, CPA, MBA, PMP, CSM, Equus Strategy, LLC | August 17, 2021

In delivering organizational visibility and mission critical data on a single platform while supporting collaboration across remote workforces, enterprise resource planning (ERP) platforms help companies make quick decisions in today’s unpredictable business environment. By putting finance and accounting, customer service, procurement, inventory, supply chain management, warehouse management and order fulfillment on a single platform, ERPs unify core business operations, improve internal controls and enhance visibility into organizational performance, when compared to entry-level accounting software, spreadsheets and other point solutions. Thus, ERPs are a must for a growing business.

But although many companies may have shifted to ERPs from their more rudimentary accounting software, few have harnessed the power of cloud ERP systems. Organizations using on-premise ERP systems are paying higher annual software maintenance costs and in-house IT salaries than competitors using cloud ERP solutions — and most don’t even have access to the latest features and functionalities.

Additionally, on-premise ERPs suffer from sluggish system performance and a lack of effective collaboration tools, which leads to an overall decline in productivity. Lack of integrated solutions and difficulty penetrating departmental data silos make it harder to know what is happening in the business when companies need visibility more. Combined with added demands on IT and demand for remote access to a variety of systems, the network capacity of these organizations is strained, and new security concerns are introduced.

Cloud ERP overcomes these issues by allowing remote users to access the functionality and data anywhere with an internet connection. A cloud ERP system can help transform companies into resilient organizations that can weather any storm. Here are some reasons why cloud ERP works:

  • Enables remote workforce management and collaboration. Accounting (such as closing the books) is collaborative work. Using basic accounting software or an outdated ERP system and its standard approach isn’t feasible with the entire accounting team working from home. Using cloud ERP, the accounting team can review the data, make changes and close the books remotely without having to be in the same physical location.
  • Helps comply with accounting standards and regulatory requirements. Complying with changing rules and regulations has pushed many organizations to reconsider processes typically handled with spreadsheets. Cloud ERPs receive regular feature and capability updates that are automatically passed on to users.
  • Gives all organizational departments a unified and accurate picture of the business. It provides accurate, real-time data that helps teams collaborate more effectively, leading to better-informed decisions, increased revenue and happier customers.
  • Drives quick reaction times. As opposed to IT or finance teams gathering and producing reports pulling data from disparate systems, which are often outdated by the time leadership sees them, Cloud ERPs feature role-based dashboards that give employees immediate access to the data they need to do their jobs and the ability to drill down for further analysis.
  • Reduces operational risk. Cloud ERPs help limit these risks by embedding approval workflows into procurement, accounts payable and other financial processes, as well as by controlling access to system features and data based on user roles and individual permissions.
  • Tracks unit economics, customer and project profitability. Due to the visibility gaps impacting margins that exist in on-premise ERP systems, regularly evaluating revenue and cost on a per-unit basis becomes difficult unlike in cloud ERP.
  • Helps companies scale and adapt. As businesses expand and add new services or products, they quickly outgrow their basic accounting solutions. With growing needs for scalability, visibility and adaptability, the need for a more robust ERP grows exponentially.

Even with all these benefits and more, some businesses running on-premise ERPs are reluctant to undertake upgrades because of disruptions caused by broken integrations and customizations being overwritten. There are clearly many measured benefits to taking such action, and, overall, the benefits outweigh the short-term costs.

 


Shekhar C. Somaiya

Shekhar C. Somaiya

Shekhar Somaiya, CPA, MBA, PMP, CSM, is the managing director at Equus Strategy, LLC, a full-service business, technology and project management advisory firm. He is a member of the NJCPA Emerging Technologies Interest Group and can be reached at shekhar@equusstrategy.com.

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