What is the difference between Cloud hosted or Cloud ERP Solution?

The world of Enterprise Resource Planning Software (ERP) is changing very fast. The software, which in itself is not cheap, requires significant additional investments, including hardware. ERP software store critical data that is life and blood of the company. Protecting data, requires additional money to prevent viruses, trojans and cyber attacks from stealing the data. Additionally, mobility is an important aspect of todays business world. It is important that the executives are able to access the data on the move. Remote signing into the servers, increases the risk of hacking and hence requires additional effort and investments for Security Hardware and Software. All this also takes significant management time, especially for Small and Medium Enterprises who may not have adequate skill sets in-house.

The cloud technology has solved many of these problems. We have reputed service providers like Amazon, Microsoft etc providing cloud services. Many ERP software companies have also created their own cloud servers and offer to host their applications and client data. While all these has solved many challenges for small and medium enterprises that are planning to implement ERPs, it has also increased the complexity in selection of right ERP considering an additional option of choosing type of hosting such as cloud hosted solutions or Cloud ERP solutions.

What is Cloud Hosted or on cloud ERP Solution? ERP solutions such as SAP S4, Oracle J D Edwards, Sage X3 are traditional ERPs. They have different modules primarily based on functional requirements with Finance and Accounts at the heart of it. Data flows between different modules. These ERPs need to be hosted. Hosting refers to the actual hardware where the software and data is installed / resides and accessed. The ERP can be hosted on servers located at the premises of the company installing the ERP or the ERP can be hosted on a cloud server.

The only difference between on premise installation and on cloud ERP implementation is that the user does not have to invest in server and software such as operating system, anti- virus, firewalls etc. When it comes to paying for the ERP, the user pays the one-time cost for software, annual maintenance charges and upgrade charges.

The parties involved in such installations are

• 1. ERP provider such as SAP, Oracle, IFS, Infor etc.

• 2. Implementer – These are partner agencies of the ERP provider who configure and customize it to meet with the needs of the client.

• 3. ERP Consultant – who may help the client select an ERP, document and design client’s systems and work with client to ensure a successful implementation.

The revenue model of the ERP provider was to charge license fees. A company may have many users but it only had to pay for concurrent users or group of users who would be using the ERP at the same time. The license fees used to be pretty steep. Some of the examples of these ERPs are SAP S4, Oracle J D Edwards, IFS, SAP B1, SAGE X3 etc

What is a Cloud native ERP or SaaS ERP? Increasingly the ERP software provider companies are now using Cloud as a platform to provide ERP as a service, much like other Software as Services products. Unlike cloud hosted ERP, where the customer pays for the product that he has purchased (or taken license), in cloud native ERPs, the user/ customer pays for the service. Hence the revenue model is also very different. The user/ customer subscribes to the service and pays for it on monthly basis. Unlike the cloud hosted ERP, the customer is not able to access the software if the subscription fee is not paid for. There are no licenses or license fees. This means that there are no concurrent users. Irrespective of the role, company has to take subscription for every user who wants to use ERP, whether it is for viewing data or to perform other tasks like entering data, reviewing and posting data or to manage the data like creating a new user or vendor in the ERP database.

These ERPs are easy to deploy and need relatively lesser set-up time where the ERP provider configures it to the needs of the client and the client’s operations are up and running. Given the nature of the software and its deployment, many ERP providers offer free trial, mostly for a month. Again, given the nature of the software, the software is sum total applications. Unlike the ERPs hosted on the cloud, SaaS ERPs are built around apps. These apps could be a functionality and/or feature, or could be a collection of functionalities and features. Some of the examples of these ERPs are Oracle Netsuite, Microsoft Dynamics 365 (D365), Zoho etc. The SaaS ERPs are also more mobile app friendly.

Unlike cloud hosted ERPs, the customer can setup the ERP software himself or seek the services of the ERP provider. The parties involved are :

• 1. ERP provider such as Oracle, SAGE, Microsoft etc.

• 2. Application Developers – The ERP runs around Apps which may have been developed by the ERP provider or third-party developers. The ERP providers reviews the apps developed by third parties and certifies them. While the apps may have been developed by different companies, but the data flows seamlessly.

• 3. ERP Consultant – who may help the client select an ERP, document and design client’s systems and work with client to ensure a successful implementation.

How do I decide which one works for me? All this leaves a new dilemma. What are the advantages or disadvantages of Cloud hosted ERP and Native or SaaS ERP? We will talk about it in our next blog. Please do watch out for this space.