What is a Cloud ERP System?
A growing retail business often needs to update its technology to keep up with its operations. One of the biggest technology investments you’ll ever make is in a cloud ERP (Enterprise resource planning) system. This technology often becomes the lifeblood of your business. This is where you manage your finances, order processing, product information, reports, and more. It is a technology that retailers and wholesalers have used for many years to manage different aspects of their business.
Like other technology systems, ERPs are also moving towards cloud services, making them more affordable and flexible. This article will define what an ERP is, the benefits of cloud-based ERP systems, and will list the best ERP systems today. We hope this helps you decide if you are ERP ready and how to evaluate the best one for your business.
What is an ERP?
If you are not currently using an ERP, let’s start by understanding what these systems are capable of.
Enterprise resource planning (ERP) software manages the financial aspect of your business, as well as other important areas such as inventory, customers, suppliers, project management, etc. that help run our business. This software has been around since the 1990s and automates most administrative functions. The main advantage is that an ERP is a single place to manage your entire business. Modular software allows users to integrate different applications so that they can choose the functions that their business needs.
Retailers and wholesalers use an ERP system as a “base system” to run their business. It’s the one place you can manage payroll, human resources, create and manage the items you sell, determine customer-specific prices, manage inventory availability, select, pack, and ship items, and more.
Why is cloud ERP so important to fast-growing companies?
There are three main reasons why cloud ERP is particularly critical for fast-growing midsize businesses.
Agility is especially important for midsize companies with growth potential. These companies are typically industry specialists, working in a small set of related industry sectors, such as metal fabrication in aerospace shops or the distribution of services to restaurants. They maintain close relationships with customers and suppliers. To grow quickly, they must seize opportunities: add new locations, introduce new products and services, make acquisitions, or respond to competitive failures.
An old system that is not flexible and easily scalable will limit growth because it cannot deliver the information needed to make decisions quickly enough. If a company relies on independent reporting systems, many of which are based on Excel spreadsheets, it is difficult for departments to share information and work together to achieve common and urgent goals.
Cash flow visibility
In midsize companies, top management tends to be very cost-conscious. Unlike large companies that manage quarterly budgets, the lifeblood of midsize companies is cash flow, and improving profit margins is often a top priority. Building reserves on the balance sheet, and driving growth, requires close monitoring of working capital, operating expenses, and investments.
While all midsize businesses have some type of accounting or ERP system, many of these systems do not immediately provide vital information on cash flow and profitability. They often do not meet current business needs or do not integrate with other systems. Additionally, these legacy systems are generally not enhanced with new features, not even maintained and supported, by vendors that have focused on the cloud.
Ease of Application Integration
Midsize companies have generally been quick to adopt point solutions for specific operational needs, such as call center software or field service systems, but slow to change their core ERP. However, the addition of these “bolt-on” solutions has added considerable cost and complexity, as these tools do not easily connect to the ERP system. Today, modern cloud ERP is changing all of that, prompting more and more growing companies to reevaluate their choice of ERP. Increasingly, businesses are choosing the ease of integration, scalability, and agility that cloud ERP offers.
Why Use a Cloud ERP?
Today, ERP vendors are deploying software in the cloud rather than onpremises. In the past, merchants bought ERP systems on premises and installed them locally on their company’s hardware and servers. With local software, it is your responsibility to customize, maintain, and manage the software yourself. These projects are usually very expensive in initial costs and in maintenance over time. This often meant that only corporate merchants were willing to invest to handle complex or custom business requirements.
However, the rise of cloud-based ERP systems is giving SMB-level merchants access to this important business management software, opening up new processes and tools that were previously unavailable. Cloud-based software allows merchants to access their ERP systems through any web browser. ERP vendors provide their ERP software as a service (SaaS), which means you don’t have to maintain the software on your own servers. Instead, the ERP provider gives you access to the servers that it owns and maintains.
That is why cloud-based ERP systems have many advantages such as:
Total cost of ownership
Cloud ERPs typically have a lower total cost of ownership than on-premises options. Because you license the software, you can avoid high upfront costs to purchase the software and hardware required to run your ERP instance. For cloud-based systems, you only need internet access to work on your ERP system. In the long term, there is also no need to form and maintain an IT team responsible for the software.
Instead, merchants pay a monthly fee to constantly use and access the software. Most merchants also work with an ERP consultant or service provider to help them set up and maintain their system over time.
Merchants can reduce their costs over time by increasing and decreasing server space, based on demand. For example, you can increase server space for the holidays and then reduce it when you no longer need it. This allows you to pay for only the services you require.
For most growing businesses, the appeal of cloud-based software is that you don’t have to be an expert on it. Personally, you don’t need an IT team to maintain the software infrastructure and constantly monitor performance issues that need to be addressed.
Instead, the ERP provider or its implementer is responsible for monitoring your data. For a growing business, this can make a big difference in costs, resources, and peace of mind.
Unlike on-premises sites, merchants can access a cloud-based ERP system anywhere, anytime, as long as there is an internet connection. This allows your ERP to be wherever it is. You can take orders, check inventory, and more while in the field or in the warehouse.
Another notable advantage of cloud-based ERP systems is how quickly they can perform software updates or bug fixes. These are usually done frequently and automatically, without affecting your business.
On-site updates may require a complete shutdown of your systems or a redeployment of the software. They can be so complicated that operators choose not to upgrade and risk performance problems with outdated software.
Although an ERP manages many different aspects of your business, it does not manage everything. In addition to an ERP, merchants can use an e-commerce platform, in-store point of sale system, 3PL, CRM, or PIM to manage compliance. Just as you want your modules to be integrated into your ERP, you will also want these systems to be integrated into your ERP.
ERP integration with your other business systems enables the automatic transfer of important data between them. Otherwise, you will be forced to manually enter data from one system to another, such as taking orders online and entering them into your ERP for order processing.
Cloud-based systems with strong APIs (application program interfaces) are often easier and more predictable integration projects. You are more likely to find an integration provider like nChannel that offers pre-defined and configurable solutions for popular cloud-based e-commerce, ERP, POS, and 3PL systems.
While it is possible to integrate software on premises, projects tend to be longer and more expensive to accommodate customizations. In most cases, your systems will need to be linked directly to each other, which can create problems later on. Learn more about the different systems integration approaches.
Top Cloud ERP Systems
Many small and medium-sized companies and businesses are turning to cloud-based ERP systems. The challenge now is to evaluate and choose the best option for your business in a busy area. Be prepared to do your due diligence and investigation. Implementing an ERP is an investment and you want to make the best decision the first time.
When evaluating different cloud-based ERPs, consider the following:
What do you have the budget for? How much are you willing to spend to get the ROI?
What are your deployment options? Will you need to work with a third party? How long do projects take?
Who can you call in the event of a power outage? When can you call them?
What are your essential and interesting skills?
How will this ERP evolve with your business over time? Are you going to outperform software quickly?
How easy to use for your employees? Is the workspace intuitive?
To start your research, here are some popular cloud-based ERP systems that are currently being used by retailers and wholesalers:
- Oracle NetSuite – When you think of cloud-based ERP systems, this name comes first. NetSuite is known for its wide range of functions and modules.
- Acumatica – Known for its navigation and flexible pricing model (non-user-based pricing).
- Microsoft Dynamics 365 – Microsoft’s new cloud-based ERP that tightly integrates with other Microsoft cloud applications.
- Jonar’s ParagonERP – A new cloud-based ERP with a sleek user interface and robust feature set.
- Odoo – An Open Source ERP and CRM to Manage Many Different Parts of Your Business
- Brightpearl – A stronger order management system that can be adapted to growing SMEs.
Have a preferred cloud-based ERP or experience with any of the above? Let us know in the comments below!