ERP in the Cloud: Enterprise Still Stick with On-Premise

A decade ago only the largest companies could afford to use an ERP system.  That’s changed.  More affordable options have become available.  Much of the affordability of ERP is due to technologies like SaaS and the cloud.

A few of the benefits of putting ERP in the cloud include:

• Providing greater accessibility of ERP across employees
• Zero Maintenance and Regular software updates
• Greatly reduced need to support the software with in-house personnel

Some recent studies examined whether cloud-based ERP is gaining ground.  An Aberdeen Group study of ERP usage by large organizations found that, as of yet, the number of enterprises running ERP in the cloud is relatively small.  63 percent say that they are running their ERP systems on premise and do not even use virtualization software.  Those that do use virtualization tend to be enterprises that Aberdeen calls ‘best-in-class’.  Similarly, for Cloud-based ERP: 26 percent of ‘best-in-class’ organizations are using ERP in the cloud, compared to just 20 percent of other organizations.

Aberdeen found that few organizations (less than a few percent) use ERP as either a hosted system in the cloud or as part of a hybrid cloud solution.  The report notes that because of the complexity of ERP, building a hybrid on-premise/cloud solution would be challenging.  The report also noted that ERP is typically viewed as a mission-critical application that many thought should not be allowed to move outside the corporate data center.

Aberdeen’s numbers seem to match well of those from Plex and the Manufacturing Peformance Institute (MPI).  The Plex survey found that roughly 60 percent of manufacturing companies use traditional on-premise ERP software, 22 percent are using SaaS ERP systems, and 18 percent have no ERP system at all.

A third study by IFS surveyed industrial executives of medium to large-sized companies about their use of ERP.  The report found that few of these companies were using cloud-based ERP.  Rick Veague, IFS North America Chief Technology Officer , said that “It is clear that despite the general interest for SaaS solutions, most companies still prefer more traditional delivery methods for ERP.  SaaS, private cloud and on-premise implementations each offer their distinct advantages, with SaaS holding more appeal for best of breed solutions than for ERP.”