What is Cloud Enterprise Resource Planning (ERP) and How Does it Work?

Cloud ERP, also known as enterprise resource planning, is software delivered over the internet. This means it’s hosted by a vendor and accessed by users via the internet, rather than being installed on a company’s servers. 

For modern businesses, a cloud ERP system offers many benefits. One benefit is its cost effectiveness, eliminating the need to hire IT staff and purchase additional hardware or software. The vendor handles all maintenance updates and security, reducing IT burden on the organization. 

Cloud ERP software is a streamlined solution allowing businesses to effortlessly collaborate using a single source of data across a range of business operational functions such as inventory, order, supply chain management and more. 

What is cloud ERP software?

Ultimately, cloud ERP is a cloud-based system and plays a fundamental role in enterprise resource planning. Cloud ERP comes with three core features. Firstly, it fully automates a business process, removing redundancies while improving accuracy and productivity. Automatically carrying out tasks such as billing, vendor payments, expense management, asset management, and joint venture accounting.

Next is scalability, allowing businesses to quickly and easily adjust resources without investing in hardware upfront. Plus, it caters to businesses of varying sizes with different levels of scalability and budget. Finally, cloud ERP smoothly integrates with other software allowing businesses to streamline resources.

How does cloud ERP work?

The cloud ERP model

The cloud ERP solution uses a cloud-based deployment model, where cloud services such as data-storage and business information, are provided by vendors over the internet. 

Integration with business operations

Cloud ERP systems integrate a range of business operations including, time data access, streamlined workflows, and improved decision making. 

In accounting, cloud ERP automates transactions, delivers real-time financial insights, and improves data exchange between departments. It also helps reduce manual errors and increases visibility across operations, which strengthens the role of ERP in accounting as a core component of financial management and reporting.

The world of finance can experience plenty of benefits too. By streamlining processes, improving data accuracy, and giving companies more control of their finances, companies can make more informed decisions. 

Another processing area cloud ERP integrates is inventory management. It provides companies with a platform to boost collaboration between departments, ensuring all stakeholders have access to crucial information. That means improved coordination and efficiency. For businesses looking to better manage stock levels and streamline logistics, inventory management tools integrated within ERP systems are a valuable asset.

Components of cloud ERP software

Key modules

• Accounting and finance: Cloud ERP systems can handle a range of financial and accounting processes. It has the ability to track accounts payable and accounts receivable, as well as general ledgers, to give you a clear overview of your current financial picture. On top of that, it creates and stores payment receipts, balances, and other crucial documents. 
• Supply chain management: A supply chain management module can track how goods and supplies are moved throughout the supply chain. From suppliers and sub-suppliers or manufacturers to distributors and or consumers, it gives companies the power to efficiently schedule demand and supply, and production across your business. This reduces costs and disruptions.
• Human resources (HR): Human resource management module stores personal records of all employees, including time off, performance reviews, job descriptions, and contact information. Plus, it replaces any duplicated data and increases accuracy. 

Security features

Cloud ERP solutions use advanced security protocols to protect business data from cyber threats, compliance risks, and unauthorized access. It’s equipped with data encryption, meaning users can share data with complete security. Cloud ERP software can also detect suspicious behaviour and track user activity while meeting strict data protection regulations.

Cloud ERP concepts

• Deployment strategy: There are a range of deployment strategies for cloud ERP systems. The most common are Big Bang, Rolling, and Canary, and Blue/Green Deployment. 
• Cloud-based ERP: This is an internet-based solution for businesses to manage operations in real-time and on remote servers that are accessed via a web browser.
• On-premises ERP: On-premises ERP is a traditional software that’s installed and hosted on a business’s own servers. That means businesses are responsible for managing their software updates, security, and hardware.
• Hosted ERP: Hosted ERP is an on-premises ERP solution that’s hosted off-site by a third party provider. 
• End-to-end security: Cloud ERP systems use comprehensive security measures to protect a business’s data, ensuring confidentiality and compliance with industry regulations, like GDPR. 
• Subscription licensing: Subscription licensing is a pricing model where businesses pay a monthly or annual fee to access and use the cloud ERP software.

Types of cloud ERP software

• Multi-tenant SaaS: A multi-tenant SaaS is a cloud ERP solution where a single instance of the software serves multiple organizations. Each business uses the same software version while ensuring data is secure. 
• Single-tenant SaaS: This is a dedicated cloud ERP solution where the software is used by a single organization. This provides companies with greater control, security, and more customization. 
• Public cloud: Public cloud is a cloud ERP system hosted by a third-party provider and shared with multiple businesses. Typically, it’s more cost effective and is ideal for small to mid-sized companies. 
• Private cloud: Private cloud is a cloud ERP software dedicated to a single organization, providing greater security, control, and customization. 
• Hybrid ERP: This is a combination of cloud-based and on-premise ERP systems, providing a balance of flexibility and data control.

Benefits of cloud ERP software

Cost efficiency

Unlike traditional on-premises systems that require hardware and IT staff for maintenance, a cloud ERP solution is entirely remote. As a result, businesses can save money on IT infrastructure costs while still gaining access to enterprise-level tools. Solutions like QuickBooks Online Advanced provide built-in scalability and automation, helping growing companies manage operations efficiently as they expand.

Scalability

Thanks to its flexibility and scalability, cloud ERP systems are perfect for growing businesses. As a business evolves, cloud ERP software evolves with it, seamlessly adapting without the need for system overhauls. What’s more, companies can even add new features or models to suit their needs as they expand. 

Accessibility and mobility

Cloud ERP systems give employees the freedom to access real-time business data anytime, anywhere. All they need is a stable Wi-Fi connection. This is ideal for remote teams or businesses with offices in multiple locations. It can also be accessed using any device too, whether that’s a laptop, tablet, or smartphone. 

Cloud ERP limitations and challenges

Potential risks

While cloud ERP systems come with plenty of benefits, it also has limitations and challenges to overcome. Cloud ERP software is entirely internet-based, meaning there’s a strong dependency on strong Wi-Fi connection. There are also data security concerns. Storing sensitive data on third-party servers could put businesses at risk of cyber threats and data breaches. 

Overcoming challenges

To overcome these challenges it’s crucial for businesses to choose a reliable cloud ERP vendor that adheres to strict security protocols, regular software updates, and dependable customer support. Be sure to look for vendors with plenty of experience and positive reviews on Trustpilot.

Cloud ERP vs on-premise ERP

The importance of cloud ERP for mid-size companies

Cloud ERP is essential for mid-sized companies looking to expand. It enables businesses to make data-driven decisions, offering real-time access to data and reporting tools. On top of that, cloud ERP is useful for cost control, removing the need for on-premise hardware and space for an IT team.