With these benefits that come from cloud ERP software, several critical questions need to be answered regarding security, data ownership, vendor lock-in, customization, integration, and performance.
Cloud computing is the most important software technology advancement in many years. If wielded correctly, the Cloud can expand your control over your business while lowering your software costs. By choosing to modernize your ERP software, your distribution business can become more maneuverable and flexible by gaining access to real-time data and eliminating the drag associated with client software. With these benefits come several critical questions that need to be answered regarding security, data ownership, vendor lock-in, customization, integration, and performance.
Benefits of the Cloud and Web-Based Software
The most critical aspect of achieving positive results with your ERP software involves understanding what you do every day and learning how the Cloud can help you do it better, cheaper, and faster. If tracking inventory is your biggest problem, then make sure the Cloud package you choose can manage inventory. If sloppy fulfillment processes are impacting customer satisfaction, then focus on how the Cloud can help shipping and delivery.
Cloud benefits include:
• Accessibility and Choice of Device. Cloud systems allow mobile employees, customers, vendors, and trusted partners to access critical business information using only a browser. Access is not limited to a single computer – all functions are easily accessible from mobile devices, iPads, and computers running any operating system.
• Real-time Data. The Cloud allows you to get real-time data and reports from anywhere. A fully integrated application suite gathers data from different warehouses, sales orders, web stores, and retail outlets to give you a single, up-to-date view of your business.
• Lower Costs. The Cloud helps reduce installation, maintenance, and support costs because there is no client software to install or maintain. A mid-sized distributor can save over $10,000/year in IT expenses.
• Centralized Control. Cloud systems utilize centralized databases and application servers so all logic and data is managed consistently. Reports deliver consolidated views of your business broken out by warehouse, truck, operations center, or user-defined criteria. Centralized views of inventory simplify transfer and purchasing decisions.
• Outsourced IT Savings. A Cloud solution allows you to outsource IT operations. If you have IT expertise and want to manage the software application yourself, then you can opt for a hosted solution. If you want to outsource all of the operations, then you can purchase your software as a service (SaaS).
• Business Continuity. Cloud providers earn their living by meeting service level agreements (SLAs) that include uptime and availability guarantees.
• Scalability. Cloud systems can rapidly scale up and down to support growing businesses and off-peak seasons. Although ERP systems are typically purchased with yearlong contacts, the ability to pay for what you use is often a benefit of Cloud systems.
If all this sounds great, then read on to explore key questions to ask of a potential Cloud vendor. Exploring these questions will help you maximize benefits and avoid potential Cloud pitfalls.
Top 10 Cloud Questions
1) Does the solution offer a true web-interface? If the Cloud vendor requires you to install VPN software or another client, then the solution isn’t truly web-based and you will miss out on benefits like access from any device, simplified user management, and reduced maintenance costs. If the software vendor is offering you a hosted version of legacy software, then you may benefit from outsourcing, but are not gaining true Cloud advantages.
2) Is there a choice of deployment? Not all Cloud providers give you the option to deploy your solution on-premise, hosted, or as SaaS. Having this choice enables you to maximize your outsourced IT savings. If you have IT staff that can run servers, then you may want to deploy an internal Cloud. If you do not have any IT expertise in-house, then a SaaS solution will be less expensive than hiring or outsourcing by the hour.
3) Can I switch from SaaS to on-premise and back, as my needs change? Your business needs can change quickly. On-premise distributors may experience a fire or a flood and want to move to a SaaS model. Distributors with a SaaS solution may hire a new IT person and want to move operations in-house. Selecting a vendor that offers deployment flexibility will support your long term needs and minimize long term total cost of ownership.
4) How easy is it to integrate with other needed software applications? System integration is a key consideration if you have specialized applications, legacy systems, or best-in-breed applications you want to continue using. There are two main ways to connect. If you need real-time data transfer (a big Cloud benefit), then make sure your vendor offers a comprehensive application programming interface (API). For processes that do not require real-time data transfer, you can minimize costs by importing and exporting files. Many vendors offer tools to help you build customized import and export processes for Excel or CSV formatted data. Batch interfaces can run on a regular schedule and allow you to eliminate dual order entry without the development expense of a real-time interface.
5) Can I customize my application? Multi-tenant Cloud systems (ones where many companies share a single application) can reduce vendor maintenance costs, but may constrain your ability to customize your application and interface with on-premise systems. If customization is possible, verify that you can use common development tools (such as Microsoft Visual Studio) and common programming languages so you are not locked into highly specialized developers that charge a premium rate.
6) Can you involve all of your users, without additional costs and capacity constraints? Plan for growth and involvement. The Cloud allows you to involve all employees, business partners, customers, and vendors in automation processes. If the vendor pricing model restricts your ability to add users, then you will not get the benefit of the network effect – where the value of a product increases as more people use it.
7) What Data Controls and Security is available? A common Cloud concern involves the security of data that is located off-site. The reality is that this data is more secure in a tier 1 datacenter than if it resides in your office, but you need to address all security concerns in the Cloud, just as you would for an on-premise system. Verify physical security, transmissions security, storage security, access security, data security, and application security.
8) If I decide to do something different, how do I get my data? Cloud systems offer fault tolerant operation and failover. But what happens if you want to switch your software and retrieve your data that resides in the Cloud? Are you held hostage or can you get your data in the format that you want without additional fees?
9) What kind of processing performance can I expect with high volume work? Cloud systems allow you to scale rapidly, but sometimes the extra computing power comes with a cost. Verify that the system can handle workloads that correspond to your peak periods without costing more than you expect. If you need to interface with other systems, verify that there are not additional charges for sending data in and out of the Cloud.
10) Will I be able to control when updates/changes to my system are made, when backups take place, and when new functionality is installed on my system? SaaS applications set you free from the burden of applying system patches and updates and thereby reduce your maintenance costs. Some vendors allow you to pick when your system will be updated and others dictate when your updates occur. Select a vendor that gives you flexibility or make sure that you are not impacted if an update occurs in the middle of a physical inventory count or after you just trained new customer service personnel.
About the Author:
Douglas Johnson has 20 years of software experience and currently works at Acumatica (www.acumatica.com) as the VP of Marketing and Business Development.