What is Cloud ERP and How Does It Work? 

Cloud-based ERP is an alternative to on-premise ERP, which requires expensive hardware and maintenance. Instead, they are accessed via a web browser or mobile app. This eliminates the need to invest in IT infrastructure or maintenance. Also, you can access cloud systems from anywhere, making it perfect for distributed workforces like those in manufacturing and construction. 

Cloud ERPs are typically subscription-based services, with businesses paying a monthly fee to use the software. But what exactly is cloud-based ERP software, and how does it work? Let’s understand it.

What Are Cloud-based ERP Systems?

Cloud-based ERP systems are a type of SaaS (software as a service) that allows companies to access their applications via the internet. Since Cloud ERP is stored on the cloud and not your company’s server, they are cost-effective and let you access your data anytime. This also reduces the time required to implement the ERP, saving time and money for your company.

One of the biggest advantages of using a cloud-based ERP over traditional software is that there is no need for an IT department or server hardware. This means less training time and fewer resources spent on maintenance and security upgrades.

Furthermore, when you choose https://firstbit.ae, the best ERP software in Dubai, you can effortlessly comply with UAE laws and regulations. FirstBIT ERP system is FTA-accredited software that allows you to automate tedious processes related to HR & payroll, VAT calculation in compliance with UAE VAT law, and more. 

Another advantage of cloud ERP solutions is that they offer real-time data to everyone across your company. So, for example, when your sales rep updates a new order, the manufacturing team can see it and start working on them immediately (without back-and-forth emails).

How Does Cloud-based ERP Software Work?

Cloud-based ERP systems work using cloud computing technology. It doesn’t require hardware or software installations. Instead, it uses your internet connection and web browser. Unlike on-premise ERP implementations, cloud-based ERP vendors help you implement and customize your ERP software.

Understanding the following ERP components is critical to comprehend how cloud ERP works.

  • Cloud-based ERP: Enterprise resource planning software hosted on vendor’s servers and offered as a service.
  • Deployment strategy: Cloud-based ERP solutions are implemented more quickly. Integrating third-party tools you use in your company is also easier.
  • Licensing: You will pay a monthly or annual subscription fee to use the software.
  • Security and maintenance: Since the ERP is hosted on your vendor’s server, they are responsible for maintaining the system and upgrading its security.

All you have to do is log in to your system and use the underlying data to streamline your operations and grow your business. As it doesn’t require a considerable upfront investment, it is affordable even for entrepreneurs starting a new business to use feature-rich ERP systems. Besides, most cloud ERP vendors provide a mobile app so you can stay atop everything in the company from your phone.

Key features of cloud-based ERP solutions include sales histories, financial data, human resources management, general ledger, supply chain status, and more. These features empower you to tie all your business processes together virtually.

Depending on your business requirements, you can choose and customize the modules vital to you. This will help you keep your team focused on the metrics that matter the most.

What are the Benefits of Cloud-based ERP Solutions?

Cloud ERP helps reduce the total cost of ownership and offers better scalability, flexibility, and security. You can implement cloud solutions much faster than their on-premise counterparts. Plus, the ease of access and regular updates offer you the best value for money. Let’s dig deeper into these benefits.  

1- Lower Costs

Cloud providers charge only for what you use, so no upfront costs or capital investments are required. Instead, monthly or annual payments are made based on the modules you choose or how many users access the system at any given time. This makes it ideal for startups and small businesses that don’t have access to large amounts of capital but still need powerful enterprise applications like accounting software. You can also negotiate with the vendor to offer a better price, as it can help further reduce the subscription fees.

2- Implementation Speed

On-premise ERP implementation is time-consuming and could take more than six months, leading to significant business downtime. However, a company can quickly set up the system faster than on-premises software. It could take as less as two months to implement the cloud ERP (based on the level of customization you need). You also don’t need to hire ERP consultants or third-party experts to implement the system, as the vendor helps you throughout the process. This not only speeds up the implementation but also saves money.

3- Flexibility and Scalability

A cloud-based ERP solution allows you to grow at your own pace without being tied down by expensive software licenses or infrastructure. You can add more users at nominal costs, and if your company expands or contracts in size or scope, it’s easy to scale back down again. This makes it easy for businesses to use an ERP system without making a significant financial commitment upfront. You can add new modules and customize the ERP further to meet your unique needs.

4- Ease of Access

One of the most important benefits of cloud-based ERP solutions is the ease with which you can access your data anywhere at any time. This means you don’t need to carry a laptop or install software on multiple devices to get the necessary information. Instead, you simply log in to a website and use your desktop, tablet, or smartphone to access real-time data. And even though you use different devices to access the ERP, your cloud vendor will ensure your data is secure.

5- Security and Backup

Cloud-based ERP solutions are secure because they use advanced security protocols to protect against hackers and other cyber threats. As a result, it’s much more difficult for cybercriminals to penetrate through cloud security protocols like encryption keys and two-factor authentication processes. Besides, most cloud vendors offer disaster protection, so you don’t lose your data even during natural disasters. But since the measures each vendor implements vary, it is vital to ask them before you make a decision.

6- Regular Updates

Cloud-based ERP solutions are always up to date with new features and functionality because the vendor is constantly working on them. As a result, your business won’t need to invest in expensive upgrades or pay IT professionals to manage updates on your behalf — a huge benefit for small companies with limited budgets!

Another advantage of these updates is that they’re rolled to all users simultaneously. This means unlike in traditional systems in which IT administrators update each system one by one, all your employees will be able to use the latest software version instantly.

7- Customizations and Agility

It is easy to customize the cloud ERP to fit your needs as your business grows and evolves. While you can also customize on-premise ERP solutions, reimplementing them to future versions can be challenging (and expensive). As you invest in new business tools, you can integrate them with your cloud ERP effortlessly via APIs. However, in the case of an on-premises system, you will need your in-house IT team to develop integrations.

Furthermore, you can add new modules to your system to accommodate your growing needs without downtime or additional hardware. This level of agility helps your business remain proactive and adapt to changing consumers’ expectations faster.

8- Compliance

Complying with local and global laws can be challenging. You need experts monitoring compliance and professionals to monitor how they change over time. But with cloud systems, you don’t have to worry about compliance. Instead, they have in-built features to help you comply with laws applicable to your industry.

For instance, they help you store data in compliance with HIPAA and GDPR. Some systems even allow you to generate IFRS-compliant financial reports. Thus, you must look for cloud-based ERP software that empowers you to comply with your industry and country’s local laws.

Cloud ERP Challenges

  • Migrating from legacy systems: If you have been using on-premises ERP or other solutions, the migration could be challenging and require significant time. Before implementing the software, you’ll also need to clean your data (eliminate duplication and outdated information).
  • Resistance to change: If your business is just starting with digital transformation, employees might not know what and where to start, making them resistant to change. However, by educating them on the benefits of cloud ERP and training them, you can give them a sense of control over their work environment.
  • Management buy-in: Most large companies have internal restrictions around hosting customer data in the cloud. This could make it difficult to get management buy-in for migrating to cloud ERP solutions. However, if that’s the case, you can choose hosted ERP, where the system is hosted on a third-party server (not the vendor’s).
  • Access and Permissions: Although your ERP vendor will take care of security and maintenance, you will still need in-house IT personnel. They will designate and manage proper access and permissions to safeguard critical business data.

Final Thoughts

Cloud ERP is the future as it drastically reduces the time, effort, and cost of setting up an ERP system from scratch. It also allows you to always have access to your data and eliminates the need to maintain a server. In addition, you can scale the system and add more modules to adapt to changing business needs with no downtime. However, getting management buy-in before investing in cloud ERP is essential to ensure your efforts pay off in the long run.

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Steve has vast experience in writing about Saudi rules, regulations, guides, and procedures.