Why Move to Cloud ERP? 12 Reasons & Benefits
Businesses often rely on enterprise resource planning (ERP) systems to consolidate and organize information across the organization. Historically, companies installed ERP software on local servers and other infrastructure they owned, now commonly referred to as on-premises.
While these on-premises solutions helped businesses run smarter and led to major benefits, there are some areas where they fall short, most notably when it comes to cost, agility, and maintenance. Cloud-based ERP systems resolve many of the issues that come with on-premises solutions and offer a number of advantages over their on-site counterparts.
But what, exactly, is cloud-based ERP, and why would an organization want to move this crucial business system to the cloud — often with the help of a NetSuite Implementation Partner?
What Is Cloud ERP?
Generally speaking, ERP systems, such as NetSuite ERP, integrate operations across finance, inventory and order management, supply chain management, human resources and more, leading to business process improvements for 95% of the businesses that use them.
Unlike on-premises systems, however, cloud-based ERP software runs on cloud vendor servers accessed over the internet. There are multiple versions of cloud ERP. Some cloud vendors merely manage the same on-premises software in their own data center and deliver it to customers via the internet, known as hosting. Another more popular model is Software-as-a-Service (SaaS). SaaS operates with a multi-tenant architecture, meaning all customers are running on the same version of the software, separated at the database level. This creates economies of scale because the vendor only has to maintain one code base, and all customizations and integrations—especially when supported by a NetSuite Implementation Partner—carry forward automatically with each upgrade. Upgrades also require little effort on the part of customers and are more frequent in the SaaS model.
Why Move From On-Prem to the Cloud?
On-premises systems require customers to maintain the servers and other hardware within their own data center. These on-site systems often require a significant investment of hardware, ERP software, space and personnel to implement and keep them running. Upgrades are also problematic because many businesses heavily customize the software to their unique needs.
When the vendor releases enhancements in the form of an upgrade, customizations and integrations need to be tested and users may need to be retrained, which can result in significant disruptions to the business—sometimes as much as a new implementation. As a result, many businesses forgo upgrades and find themselves stuck on older versions of the software, sometimes known as "version lock."
Generally, cloud ERP solutions offer a more efficient approach, letting companies take advantage of tremendous computing power. Shifting from on-premises to NetSuite ERP software typically offers lower upfront costs, faster implementation and reduced physical and staff resource usage. When supported by a trusted NetSuite Implementation Partner, the transition becomes even smoother and more strategic. Companies can become more agile with cloud-based systems because they are highly adaptable and scalable. It also allows leaders to focus on running their business and finding ways to grow, since it offloads all work related to bug fixes, patches and upgrades to the vendor
12 Reasons to Move to Cloud ERP
There are many reasons why a company might move from on-premises to cloud ERP, but here are some of the biggest ones:
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Make the Case to Move to the Cloud
Despite these benefits, many decision-makers may still question the need to move to a cloud ERP platform
Making the business case for cloud ERP starts with recognizing what this type of system can do for the company, such as cutting costs, increasing revenue, optimizing resources and processes, or solving specific issues.
After identifying these items, decision-makers need to establish the value that addresses the organization's issues. This value can be in the form of tangible quantitative benefits (e.g., revenue increases or cost savings) or indirect qualitative benefits (e.g., increased productivity). A NetSuite Implementation Partner can be instrumental in helping businesses articulate this value and align their ERP strategy with long-term growth objectives.
How do the subscription fees of a cloud ERP solution compare to the existing on-premises system's upfront licensing costs?
How much will a cloud-based ERP expected to save in terms of maintenance and support, hardware, data center, staff, and other IT costs?
How will each business unit benefit?
How will it make operations such as inventory management, revenue recognition, analytics, and organization-wide forecasting smoother and more straightforward?
Another critical aspect to consider is that many on-premises ERP providers are making the shift to cloud ERP themselves. In many cases, vendors are deprioritizing the development and support of customers' legacy on-premises systems, making it difficult to maintain and upgrade the software and infrastructure. Even when businesses choose to move to a cloud ERP system, the upgrade is basically a new implementation all over again. This makes it wise to shop around and engage with an experienced NetSuite Implementation Partner to ensure costs, functionalities, and operational needs are fully met—rather than sticking with the same provider simply out of familiarity.
In addition to the common benefits of cloud ERP mentioned above, the expected return on investment (ROI) from implementing a robust solution like NetSuite ERP is often critical to decision-makers. The ERP ROI formula is:
ROI =Â ERP financial benefits/Total cost of ownership
It's calculated by dividing the expected amount that the ERP system has contributed to the bottom line by the total cost of ownership of the system and then multiplying the resulting figure by 100 to get a percentage. For these purposes, the financial benefits include direct benefits such as increased sales and indirect benefits such as cost savings. The TOC includes implementation, subscription fees, personnel, training, and maintenance. So, for example, a cloud ERP system, such as NetSuite ERP, that has a total expected benefit of $100,000 and a total cost of implementation of $75,000 sees an ROI of 133%.
The return on investment is of particular interest to CFOs and other financial decision-makers who want to minimize capital expenditures while reducing operating costs. The most prominent ERP solution champions are often the finance and accounting staff — a survey of 255 companies found that 89% of respondents identified accounting as the most critical ERP function.
A significant driver of this sentiment from CFOs is the desire to control the unplanned costs of running an on-premises ERP system, such as servers going down, network switches breaking, hardware failure, data loss, etc. In short, each component of an on-premises system represents a possible unexpected expenditure. Cloud ERP technology, especially when implemented with the help of a trusted NetSuite Implementation Partner, eliminates most of those moving parts and mitigates many unplanned spends by significantly reducing capital expenditures on hardware and software, implementation, and IT staff. The subscription model also provides more predictable costs.
Essentially, making the business case to move to cloud ERP, such as NetSuite ERP, means developing a narrative for change and supporting that narrative with concrete figures.
Success Stories in the Cloud
For many businesses, shifting from on-premises to cloud ERP has been a rewarding move. These businesses typically cite the speed at which cloud ERP can be implemented, the substantial cost savings, and how NetSuite ERP supports growth. Engaging a knowledgeable NetSuite Implementation Partner often plays a pivotal role in ensuring a smooth transition and maximizing ROI.
Companies that choose a cloud ERP solution can benefit from its faster and simpler implementation. It allows companies to hit the ground running with scalable functionality that enables quick adjustments and can support new initiatives. Partnering with a knowledgeable NetSuite Implementation Partner can further streamline deployment and reduce risk.
For example, after separating from its former parent company Intuit, Quicken needed to make a quick switch from Intuit's ERP system to NetSuite ERP as a condition of its reorganization. NetSuite's cloud-based ERP system made the migration easy and minimized issues during a tumultuous time.
Likewise, cloud-based ERP enabled office supply distributor Sourcing Partner to replace its inventory and logistics technology to meet the rapidly increasing demand of an expanded customer base and new product lines. Sourcing Partner implemented NetSuite in just 95 days — just in time for the busiest season of the year.
Cloud ERP can offer significant cost savings, both in its functionality and TCO. Distributor Right Way Medical, for example, needed to replace its mix of five systems — including QuickBooks and Excel — with a holistic, cloud-based ERP. The company now runs on just NetSuite, plus its proprietary fixed-asset tool. NetSuite does the work of two to three employees and cuts days off the company’s billing process, saving time and costs.
In the same vein, the world's largest carpet manufacturer, Shaw Industries, adopted NetSuite to run subsidiaries in China — where it launched a 210,000-square-foot plant with 250 workers — and other countries as part of a two-tier ERP approach. Shaw finished this ambitious undertaking ahead of schedule and at a fraction of the cost of on-premises systems.
Move to the Cloud with NetSuite
Selecting the right cloud ERP software provider and NetSuite Implementation Partner can ensure that the shift from on-premises to cloud ERP is successful. With more than 27,000 customers, NetSuite ERP has helped many businesses move to the cloud and realize the advantages of this deployment model. NetSuite's unified ERP software platform allows businesses to get a complete view of their organization in one place and drive operational improvements across finance, supply chain management, human resources, and customer management.
The result is more efficient businesses that can often reduce costs and increase profitability, as the previous section illustrates.
Cloud ERP, especially when implemented with the guidance of an experienced NetSuite Implementation Partner, unifies siloed business departments and allows organizations to solve challenges, improve processes, and meet objectives. Ultimately, cloud ERP has four main benefits:
It provides businesses with the agility to meet rapidly evolving market demands.
It facilitates greater productivity, revenue, and growth at a minimal cost.
It allows businesses to expand and reduce technology infrastructure and applications as needed.
It encourages development by increasing the feasibility and capacity for new products and services.
All of these benefits make NetSuite ERP a worthy investment for many different companies across a variety of industries. Over time, more of them will realize the advantages of managing their business in the cloud and make the move, especially when supported by the right NetSuite Implementation Partner.
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