Considerations For A Cloud ERP

by Vispi Munshi Founder, ERP India

ERP India brings together potential ERP Solution buyers with relevant ERP vendors. Solutions include Enterprise Resource Planning, Customer Relationship Management, Human Resource Management, Warehouse Management and Payroll Software.


Cloud Computing is opening up new possibilities in different areas. It is nothing but an extension of Information Technology enabled services. Software as a Service (SaaS) is providing low initial cost options for small organizations. Even medium and large organizations can experiment with specific business processes that are suitable for use over the net. But you must think aloud before going in for Cloud based ERP.


Before we look into the pros and cons of going in for a cloud ERP, let us first understand what exactly a cloud ERP is. You might be using Gmail or hotmail or yahoo for email. Do you use any software on your computer when accessing the email, except for the web browser. Some people do use software like Outlook etc to download emails to their computers. But when you are only using the web browser to access your email and everything happens on the email providers’ computer (server), you are actually using the email service on the cloud. You can substitute the word internet for cloud. All your emails (data) reside in the cloud. That is on the servers of the service providers (gmail, hotmail etc).

Similarly there are ERP service providers who provide the ERP software as a service on the cloud (internet). All you have to do is to login into the service provider website using your web browser. All the data of your transactions will reside in the server of the service provider. This is what we mean by cloud ERP. It is also known as SaaS (Software as a service).

Now let’s look into some advantages of using a cloud type ERP. First, you neither have to manage the ERP software or manage the database server of the ERP. It is the headache of the cloud ERP service provider. By managing, we mean things like installation, up gradation, applying patches etc. For a regular ERP you may need to hire an administrator for such activities. Managing the ERP database can be more challenging than the ERP software. Large installations require database administrators (DBA) to perform highly specialized database tasks.

Another advantage of cloud ERP is access from anywhere in the world, where internet is available. Even a non cloud ERP can be accessed using the net, but specialized web access needs to be enabled for the software which can pose a security threat to your computing infrastructure if not configured properly.

But probably the biggest advantage is the low initial cost. Cloud ERP vendors are pushing the pay-per-use model aggressively. Hence you do not need to have a large financial commitment upfront for a cloud ERP. You can experiment with a cloud ERP and see if it fits your needs. Normally such options are not available with non cloud solutions.

Now coming to the issues or cons; first, since you do not have to maintain the software, you lose control over it. You will become dependent on the service provider when you wish to upgrade. Also the service provider will be resistant if you want customization. They prefer that all their clients use the same software version. So they may charge you heavily for any customization.

Another issue with Saas software is that when you do not have internet access, you cannot work on it. Also if your internet connection is slow, the performance may be unbearable.

The question of data security is also raised. However the real issue is data ownership and not security. Most probably the cloud service provider will have better security systems in place compared to your network security setup. However there can be a case wherein if there is a dispute, the service provider may not provide access to your own data. Make sure you have a proper clause in your contract to get access to your data in a standard format under all circumstances. You should also have access to regular backups of the data. Migrating to a different ERP is as tough as a divorce, whether it is cloud or not. Data migration issues may have you wondering if getting an ERP was a good idea in first place.