Why SMEs Should Move To Cloud ERP System Versus Traditional ERP?

Last Updated on May 31st, 2020 by Jitendra Chaturvedi

Why SMEs Should Move To Cloud ERP System Versus Traditional ERP?
Why SMEs Should Move To Cloud ERP System Versus Traditional ERP?

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Why SMEs Should Move To Cloud ERP System Versus Traditional ERP?

Why SMEs Should Move To Cloud ERP System Versus Traditional ERP? ERP systems are essential for the smooth functioning of any business. They provide a solid backbone, automate trivial tasks, maintain good relations with vendors, and allow making transactions with ease. But it’s important to make a fair distinction between different kinds of ERP that flood the market. They can be broadly divided into two categories-

  1. Traditional ERP System

  2. and Cloud ERP System

Traditional ERPs are legacy systems that need to be set in the workplace. On the other hand cloud ERPs work through digital mode. As cost incurred in putting up digital systems is far less than setting legacy systems, it’s easier for small and medium businesses to go with the former.

This is one of the many reasons why cloud systems are gaining momentum? The article throws light on why traditional ERPs have come of age and why you should think of moving to Cloud systems?

1. Cloud ERP Systems Are Easy To Deploy

As mentioned in the introductory paragraph, there are two types of ERP systems – Traditional ERPs and Cloud ERPs. Traditional ERPs can further be divided into two subcategories – On-Premise and hosted. On-Premise traditional systems require companies to purchase the equipment and software license, and deploy the product in their own data centers. They must also have an in-house team of software experts who shall handle ERP systems to glean business-critical data.

Hosted traditional ERP systems are different from On-Premise ones. They rely on external service providers who take care of everything – from equipment to software licenses to a team of experts, etc. All they charge is a weekly/monthly/yearly subscription fee for their services.

On the other hand, cloud-based ERP software is similar to a hosted traditional ERP system because it’s provided by a third party. It uses a SaaS (Software as a system) model to deliver services using the web.

2. Cloud Systems Lower Down The Cost

Traditional ERPs require a lot of upfront investment – such as expensive equipment, costly licenses, and a sizable team of experts to handle it. While it may be affordable for conglomerates, it certainly is not for SMEs.

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On the other hand, cloud-based ERPs don’t require any kind of heavy investment. Third-party service providers often work on a contractual basis. They have a team of experts at their place who handle all your ERP functions, update the system regularly, and repair when systems go down.

3. Cloud Systems Are More Secure Than You Think

When it comes to security, traditional ERP software holds a higher position than cloud ERP systems. This is because in the latter case, the data is handled by third-party vendors. So if there is a data breach, it’s highly likely that it may spread like a wildfire and burst the competitive edge of the company.

Conversely, in traditional ERP systems, the software is handled and troubleshot by internal teams. This means that if there is any technical glitch, the beans don’t spill out. Moreover, data recovery is a sensitive process and is often more expensive than the worth of the data itself.

But times have changed. Today, cloud solutions are buffing up their security levels and are providing a promising ERP solution that is not only secure but also lightning fast. This has caused companies to explore hybrid solutions where some functions are carried out by traditional ERPs and others are hosted by cloud systems.

4. Cloud Systems Are Picking Up Speed

Traditional ERP systems – On-premises followed by hosted – hold a higher rank when it comes to speed. On the other hand, cloud systems experience network latency. This is because the cloud company handles an array of clients owing to which its network speed gets distributed among them.

Cloud service providers noticed this problem and are gradually developing data centers loaded with the latest generation of super-fast computing hardware. This will provide a lag-free experience to customers and increase computing speed.

5. Cloud Systems Are Ready To Service A New Kind Of Economy

A few large companies have been consolidated by traditional ERPs. But the same isn’t valid for new players in the industry. Industry leaders say that traditional ERPs have been the cause of slow innovation for incumbents. Moreover, they often indicate that the world has moved from a product-focused economy to a service-based one and traditional ERPs are not compatible with it. The new subscription-based economy can only be handled by cloud systems as they are robust, update on a real-time basis, and can be re-modified according to the customer’s needs.

6. Hybrid Systems Show The Way Forward

One thing that we should agree on is that both kinds of ERPs – traditional and cloud – have different advantages and disadvantages. On one hand traditional ERPs provide greater security and less network latency. While Cloud ERPs are easy to deploy, economical, and are ready to serve new economic conditions.

This indicates that a combination of traditional and Cloud ERP Systems are the way forward. The service-centric functions such as digital media, professional services, and business services will be handled by cloud systems. Whereas sensitive functions – such as manufacturing, finance, HR, etc. – will be handled by traditional ERPs. According to Gartner, hybrid infrastructure management will be adopted by 90 Percent of organizations by 2020.

The ERP space is undergoing serious disruption. Its pace will only increase in the coming times. Businesses of all kinds – small, medium, and large – will have to constantly monitor their requirements and search for the best system that serves their needs. They shouldn’t hesitate to contact experts in the field to gauge the importance of an ERP system and understand how it can solve their challenges and produce the desired outcome.

— This article is written by Nishant Joshi who likes to read and write on technologies that form the bedrock of modern-day and age like machine learning, data science, AI, and robotics.

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