Cloud-based ERP: finally time for back office as a service?

1Executive Summary

Cloud computing is transforming the delivery of IT through the largest organizations. Many have adopted cloud-based Software as a Service (SaaS) for front-office applications such as sales, marketing, and customer service. But adoption for back-office enterprise resource planning (ERP), the most fundamental enterprise application, has lagged significantly — particularly among large manufacturers.

Startup firms have been delivering cloud-based ERP to small manufacturers for a number of years, and as their products have matured they have been implemented in larger firms, though still primarily at the divisional level. In response, the leading suppliers of ERP to large manufacturers have been forced to place cloud technology at the center of their ERP product road maps, and they have scurried to accelerate their path to full cloud offerings.

This report reviews the dynamics and considerations for cloud ERP implementations through the lens of three customers who are using cloud-based systems. The customers and their solutions are Astrum Solar (Rootstock Software), Ecuador OverSeas Healthcare (Acumatica), and Weber Metals (Plex Systems). The report will guide manufacturers and service providers, which are considering cloud ERP implementations, as well vendors of enterprise applications and supporting technologies for firms of all sizes.

Among the findings:

  • The same manufacturing demands and complexity that made early cloud implementations seem problematic are now making the cloud inevitable.
  • Many of the greatest cloud advantages are realized when provided as SaaS, although for various operational and regulatory reasons not all organizations will opt for SaaS delivery. Still, a majority of firms will adopt the underlying cloud technology, and the pace of that adoption is accelerating.
  • ERP has been the last major application to be moved to the cloud, particularly for large manufacturers. But the technology is maturing rapidly and will be used to support even high-volume environments over the next two to three years.
  • The complex and critical nature of manufacturing systems has made them the last major segment to be reached by cloud innovation. However, the complex and critical requirements of new manufacturing environments — with rising data volumes and reinforcing competitive pressures — will ultimately drive new cloud ERP implementations.
  • Although cost savings and agility at the IT level are the motivating forces for many implementations, new capabilities at the operational and at external customer and supplier levels may deliver the greatest ultimate return.

Cloud ERP vendors have addressed many SaaS security concerns, but regulatory, geographic, or scale issues will lead to on-premises implementations of private or hybrid clouds in many environments. In these situations, customers will benefit from newer, more adaptable cloud technology but not as much as they would with the multitenant, offsite economics of SaaS.

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Relevant Analyst
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Laura Stuart

Analyst Independent Industry Research

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