In recent years, many sectors of business have increasingly been shifting from traditional on-premise Enterprise Resource Planning (ERP) systems to cloud-based solutions. This trend reflects the growing recognition of cloud ERP systems' benefits, including scalability, cost-effectiveness, and flexibility. According to a 2023 report by Gartner, by 2025, 85% of all ERP systems are expected to be cloud-based, up from just 35% in 2020. The migration is driven by the need for more agile, efficient, and globally accessible systems.
Here we explore seven key reasons why companies are transitioning to cloud ERP systems, backed by statistics and real-world examples.
- Cost Reduction
One of the primary reasons for the shift from on-premise to cloud ERP is the potential for significant cost savings. Traditional on-premise ERP systems require substantial investments in hardware, software licences, and IT staff to maintain and update the system. In contrast, cloud ERP solutions operate on a subscription-based model, eliminating upfront capital expenditure and reducing operational costs.
Key Statistics:
Total Cost of Ownership (TCO): According to a report by Forrester Research, cloud ERP systems can reduce TCO by 30-50% over five years compared to on-premise systems.
Infrastructure Savings: A 2022 survey by Panorama Consulting found that companies reported 70% lower infrastructure costs when adopting cloud ERP due to the elimination of physical servers and data centre maintenance.
Example:
A mid-sized manufacturing firm in the U.S. switched from an on-premise ERP to a cloud-based system, cutting IT infrastructure costs by 40% within the first year. This transition allowed the company to reallocate those savings to R&D, enhancing its product development pipeline.
- Scalability and Flexibility for Growing Businesses
On-premise ERP systems are notoriously difficult to scale. As companies grow, they often need to purchase additional hardware, licenses, and storage, which leads to higher costs and operational complexity. In contrast, cloud ERP systems are inherently scalable, allowing businesses to adjust their resources based on current needs.
Key Statistics:
Scalability Benefits: A study by IDG Research in 2023 showed that 65% of businesses cited scalability as a key factor in choosing cloud ERP systems.
Growth-Oriented: The same report revealed that companies that adopted cloud ERP were able to scale their operations 45% faster compared to those using on-premise solutions.
Example:
A global retail chain with operations across Europe and Asia migrated to a cloud ERP system, which allowed it to open new locations in emerging markets seamlessly. As the business expanded, it simply adjusted its cloud capacity, eliminating the need for costly infrastructure upgrades and enabling faster market entry.
- Enhanced Accessibility and Collaboration
Cloud ERP systems offer universal access, enabling employees to connect to the system from anywhere with an internet connection. This is particularly valuable in the era of remote work and geographically dispersed teams, where collaboration across regions is crucial for success. The overnight lockdowns of the Covid-era emphasised the need for remote access to critical business systems and this need has only grown over the past few years, as more and more companies embrace workplace flexibility where they can.
Key Statistics:
Remote Access: A 2022 survey by Flexera found that 82% of businesses using cloud ERP solutions reported improved accessibility for remote workers and global teams.
Collaboration Efficiency: According to Nucleus Research, companies experienced a 20% increase in productivity after switching to cloud ERP due to better real-time collaboration and data sharing.
Example:
An international logistics company with offices across North America, Europe, and Asia transitioned to a cloud ERP system to improve collaboration between regions. Employees could now access real-time data from different locations, enabling faster decision-making and better coordination of global supply chains.
- Seamless Updates and Reduced Maintenance Burden
With on-premise ERP systems, businesses and their support partners are responsible for managing system updates, applying security patches, and ensuring compliance with evolving regulations. These tasks can be time-consuming and costly. When the ERP solution is hosted in the cloud, however, updates and maintenance are included and ensure a seamless transition to the latest software version or most up-to-date security features.
Key Statistics:
Reduced IT Maintenance: A report by Deloitte found that 62% of companies that migrated to cloud ERP experienced a significant reduction in the time and cost associated with IT maintenance.
Security: 88% of businesses in a 2023 IDC survey stated that cloud ERP systems provided better security features, with automatic updates ensuring protection from emerging threats.
Example:
A financial services company that switched to a cloud ERP system reported a 35% reduction in the workload for its IT department. With maintenance and updates handled by the cloud provider, the company was able to focus on enhancing customer-facing services instead of worrying about system upkeep.
- Faster Implementation and Time-to-Value
Deploying an on-premise ERP system can take months or even years due to the need for custom configurations, hardware installations, and software development. We have all heard the scare-stories of ERP failures and implementations gone wrong, which has cost businesses millions. It is much quicker to implement a cloud-hosted ERP solution, however, because they require less custom infrastructure and come with pre-built integrations and templates that businesses can adopt quickly. Being able to get up and running with their new ERP solution comparatively quickly accelerates the time to value, and means that businesses can soon reap the benefits of their new solution.
Key Statistics:
Faster Deployment: Panorama Consulting’s 2022 ERP report found that cloud ERP implementations are 30-50% faster compared to on-premise solutions.
Time-to-Value: Businesses adopting cloud ERP systems can start seeing ROI in as little as six months, whereas on-premise implementations typically take 12-24 months to deliver measurable value.
Example:
A healthcare provider in the UK replaced its outdated on-premise ERP with a cloud-based system. The implementation took just three months, a significant improvement compared to the one-year timeframe originally projected for the on-premise option. This allowed the organisation to rapidly modernise operations, improve patient care, and reduce operational costs.
- Business Continuity and Disaster Recovery
Disaster recovery and business continuity planning are critical for organisations in today’s environment of increasing cyber threats and natural disasters. On-premise ERP systems are vulnerable to disruptions caused by server failures, hardware issues, or localised incidents. Cloud ERP systems, however, offer robust disaster recovery options with automated backups and failover capabilities, ensuring that businesses can continue operations with minimal downtime.
Key Statistics:
Disaster Recovery: A report by Veeam in 2023 revealed that 74% of companies using cloud ERP systems experienced faster recovery times in the event of system outages compared to their on-premise counterparts.
- Security and Compliance with Evolving Regulations
With data privacy regulations, such as GDPR in Europe and CCPA in California, businesses are under increasing pressure to comply with stringent data protection laws. On-premise ERP systems often struggle to keep up with these changing regulations, as compliance requires constant updates and security improvements. Cloud providers, however, are better equipped to handle regulatory changes and ensure compliance across multiple regions.
Key Statistics:
Compliance Support: 70% of businesses in a 2023 PwC survey reported improved regulatory compliance after adopting cloud ERP systems.
Example:
A financial services firm operating in Europe migrated to a cloud ERP solution to comply with GDPR regulations. The cloud provider ensured that all data handling met GDPR requirements, and the firm could automatically access updates to remain compliant as new data privacy rules were introduced.
Cloud ERP as the Future of Business Operations
The shift from on-premise to cloud ERP systems is no longer just a trend—it’s the future of business operations for companies of all sizes. The ability to cut costs, easily scale, enhance collaboration, and ensure robust security and compliance are driving this transformation.
What does this mean for SAP Partners and how can Cloud4Partners help?
The drive towards cloud ERP presents a significant opportunity for SAP Business One partners around the world. As SAP Business One was initially launched as an on-premise ERP solution, the ability to offer SAP Business One in the cloud gives partners the opportunity to create additional business and a new recurring revenue stream.
Cloud4Partners was established to offer SAP partners the ability to offer cloud hosted SAP Business One to their customers. Our service-based model eliminates the need for partners to have their own cloud platform or in-house cloud expertise and enables them to access our cloud hosting service for SAP Business One on a subscription basis. Cloud4Partners handles everything related to our purpose-built AWS cloud platform, which means SAP partners can concentrate on what they do best – selling and supporting SAP Business One and providing the best service to their customers.
To find out more about how you can make the most of the demand for cloud-hosted SAP Business One, increase your business and generate new recurring revenue streams, please contact our friendly team now.
Related Reading: Benefits of Moving to a Cloud ERP
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