Cloud-based software has become increasingly popular over the past few years. Companies have found that when they move their critical applications to the cloud, infrastructure capital expenditures are reduced and their IT staff can focus on high-value activities.
Cloudwashing
While the cloud revolution has affected many categories of enterprise software, including email, file sharing, CRM, and human resources, ERP systems have lagged behind. Traditional on-premise ERP (Enterprise Resource Planning) vendors have been slow to move their software to the cloud because they want to preserve their old revenue models and large investments in legacy systems. The rise of cloud computing has created pressure on the market which has led these providers to offer ERP (Enterprise Resource Planning) software inherited from the past, hosted on their own servers, under the “cloud” label. This is what we call “cloud washing”.
In addition to offering hosted legacy ERP software, vendors often add cloud-based point solutions, modifications, and workarounds to their on-premises software, providing an attractive alternative to replacing the entire legacy system. , and they call it “Cloud ERP”. Others are content to add a few cloud applications to their existing ERP or have tried to build cloud applications that don’t offer the same business benefits as a true cloud ERP.
Therefore, many manufacturing companies are still using legacy systems. Companies like erp.express that have purchased a cloud-washed ERP find that these systems are no better than their legacy systems.
What is real ERP (Enterprise Resource Planning) in the Cloud?
The US National Institute of Standards and Technology (NIST) defines cloud computing as:
- Pooling of resources. The system should pool computing resources to serve multiple customers using a multi-tenant model. Multitenancy can be provided at the infrastructure layer (IaaS) or application layer (SaaS). Typically, the customer does not know the exact physical location of computing resources.
- Free service on demand. The system must allow the customer to self-provision computing resources. This allows customers to directly provision many features and functions of their system without having to go through the vendor’s support organization.
- Rapid elasticity. The system must be able to quickly scale computing resources up or down as needed to meet sudden changes in customer demand. The system can respond instantly to sudden spikes in transaction volume without the customer needing to request additional resources in advance.
- Broad network access. The system must be available on a network using standard protocols that support use by a variety of end-user devices. The system is accessible anywhere, anytime, by any authorized user with any authorized device.
- Service measured. The system should automatically monitor, optimize and report to the customer the use of IT resources. The customer can always know how much system resources it consumes and what the associated charges will be. A metered service involves usage-based pricing.
Comparison between Hosted ERP and ERP (Enterprise Resource Planning) in the Cloud
While many ERP vendors refer to their products as “cloud”, how do you tell the difference between hosted ERP and cloud ERP? Start by comparing the key features and benefits of each type of system.
Comparison of the main features of ERP (Enterprise Resource Planning) systems
After conducting a detailed study of the characteristics of ERP systems as defined by NIST, Frank Scavo, President of Computer Economics, compared Hosted ERP and Cloud ERP:
Features ERP hosted in the Cloud ERP (Enterprise Resource Planning):
- Resource pooling Fully
- Worse: deploy dedicated resources for each customer.
- Better: run each client’s ERP instance on a virtual server or AWS/Azure.
- But do not allow a high level of pooling of resources to be achieved.
- Self-service on demand Generally, yes.
- Ask the supplier/partner to configure the system.
- Request new features/changes via a change request.
- Rapid elasticity Generally, but with some limitations.
- Customers should plan for expected changes in computing resources.
- Usually requires a change order.
- Broad network access Yes.
- If the technologies are old, this may limit the choice of end-user devices.
- Worst case may require desktop virtualization (e.g. Microsoft Remote Desktop, Citrix).
- Service measured Most are not exposed.
- Generally at a fixed price for the duration of the contract, it is not a “metered service”.
- Customers cannot increase or decrease the price based on actual consumption.
As you can see, cloud-based ERP (Enterprise Resource Planning) has clear advantages over hosted ERP when comparing key features.
Comparison of the main advantages of ERP (Enterprise Resource Planning) systems
What are the advantages for your company? Computer Economics asked ERP buyers to rank the most important benefits of ERP systems:
- Reduced infrastructure
- Quick implementation
- Flexibility/Agility
- Scalability
- Availability/disaster recovery
- Ease of upgrade
- Reduced costs
- Subscription price
- Reduction of IT staff
- Improved security
When it comes to real benefits, Cloud ERP (Enterprise Resource Planning) offers much more than hosted ERP:
| Benefit | Cloud-ERP | Hosted-ERP |
| 1. Reduced IT Infrastructure | Yes | Yes |
| 2. Rapid Implementation | Yes | For initial installation only |
| 3. Flexibility/Agility | Yes | No |
| 4. Scalability | Yes | No |
| 5.Availability/Disaster | Yes | Yes |
| 6.Ease of Upgrades | Yes | Not to same extent |
| 7. Lower Cost | Yes | No |
| 8. Subscription Pricing | Yes | Yes |
| 9. Reduced IT Staff | Yes | Somewhat |
| lO. Improved Security | Yes | Yes |
More article: Why security cameras are important?
Why is it important to know the difference?
The importance of knowing the difference between cloud ERP systems and hosted ERP systems becomes apparent when you begin to evaluate ERP systems. Your decision must take into account real considerations, including:
- Functionality – Traditional, on-premises ERP systems offer many features, having had decades to develop them for each industry. While hosted ERP offers the functionality of traditional ERP, Cloud ERP is now used in many industries and many Cloud ERP providers have already caught up.
- Ease of Upgrade – This is one area where cloud ERP (Enterprise Resource Planning) has a clear advantage over hosted ERP. Ask vendors how to upgrade and install maintenance releases. With Cloud ERP, the answer may well be “nothing,” as the software vendor handles upgrades automatically. Hosted ERP systems do not automatically receive new features, updates, or capabilities. You must schedule upgrades and test them, just as you would with on-premises ERP systems.
- Customization and integration – Many cloud ERP vendors leverage the multi-tenant capabilities of their cloud platform to allow customers to easily add applications that integrate out of the box and add their own specific business logic. With a hosted ERP system, complex customizations and integration with existing systems or third-party services require directly modifying vendor source code or programming integration logic. Source code changes make it difficult to upgrade to new versions of the ERP system. Be aware, however, that hosted ERP vendors may not provide this type of support without charging for it.
- Compliance Requirements – Highly regulated industries, such as medical device manufacturing, are subject to compliance requirements that are not present in other environments. If you work in one of these industries, compare the compliance and quality support of hosted and cloud ERP systems.
Total cost of ownership
For executives, the decision to go with a cloud or hosted ERP often comes down to total cost of ownership. Always estimate your total costs over several years, including all costs such as upgrade, labor, and support staff, especially for hosted ERPs. Ask sellers if their choice of system will actually reduce the need for internal IT staff. Cloud ERP vendors benefit from economies of scale, giving them a structural cost advantage over hosted ERP vendors.
In summary
Just because an ERP vendor calls their product “cloud” doesn’t mean it is. Beware of hosted ERP systems that masquerade as true cloud solutions; often these are simply legacy ERP systems hosted on vendor servers and lack the benefits of a true cloud ERP solution. Do your homework and look for signs that the cloud ERP solution being sold to you hasn’t just been washed in the cloud.
