Enterprise Apps Today recently covered what the top four ERP vendors in terms of overall market share - SAP, Oracle, Infor and Microsoft - are doing with cloud ERP software. But companies such as NetSuite, Epicor, FinancialForce, Acumanica - which are among the pioneers of cloud-based ERP - are also highly active in the market.
ERP in the cloud has been gaining momentum as companies look for ways to reduce the upfront costs of ERP systems, speed up deployment times and make it easier to customize software for their individual needs. Unlike traditional ERP systems, which are installed on servers and hardware located on a company's premises, cloud-based ERP is installed on third-party servers and software and delivered via a cloud computing model.
Cloud and Two-tier ERP Model
A two-tier ERP model in which companies run more than one ERP system, often a primary one at headquarters and additional cloud ERP services at subsidiaries, is popular with many customers of cloud ERP vendors.
"The predominant model is to have an on-premise ERP supported by cloud-based ERP, as many have invested millions of dollars and thousands of hours in on-premise ERP systems. So they are understandably reluctant to rip them out," said Craig Sullivan, senior vice president of Enterprise and International Products, NetSuite. "But to expand quickly to new markets and be able to adapt to change, they need ERP systems that can be deployed in months, not years, and that can grow with their business, which is why they are adding cloud-based systems."
More than just introducing new features, two-tier ERP is about making business units more agile and helping them explore new opportunities, he said. Companies that are spun out by a divestiture, for example, are re-launching their businesses on cloud ERP solutions.
Similarly, fast-growing new businesses typically began in the cloud and don't plan to leave any time soon. Rather than a two-tier ERP strategy, they use a single code base and a single instance of cloud ERP software.
Short List of Cloud ERP Vendors
Let's look at what 11 cloud ERP vendors are offering:
NetSuite unifies CRM, e-commerce, inventory and order management into one cloud ERP software suite. More than 30,000 organizations use it worldwide, giving credence to its claim to be the number one cloud ERP product. Unlike late-comers to cloud ERP like SAP and Oracle, it was built for the cloud from the start and incorporates real-time analytics.
"Typically our customers are running legacy on-premise systems like Oracle or SAP at headquarters and using NetSuite as the core system for subsidiaries and more nimble startup-like organizations, which feed the core financial data back to headquarters," said Sullivan.
For example, Shaw Industries, a subsidiary of Berkshire Hathaway and the world's largest carpet manufacturer with more than $4 billion in annual sales, uses NetSuite OneWorld in a two-tier ERP model, running a new 210,000-square-foot manufacturing facility in Nantong, China, and managing 10 international subsidiaries. The Chinese plant, which opened this year, is on NetSuite OneWorld for financials, financial consolidations and reporting, order management, inventory management, manufacturing and purchasing, while headquarters in the U.S. uses an on-premise ERP instance.
Epicor ERP can be deployed in a multi-tenant or single-tenant cloud, or on premise, but the architecture employs the same code base regardless of how a company decides to use it. Recent enhancements include expanded country-specific functionality and better compliance capabilities. It is also finding its way into organizations, at times, as a second tier of ERP.
"Some companies view a two-tier ERP strategy as an audition to see if they even need their legacy ERP platform," said Craig Downing, senior director of Product Marketing, Epicor. "Businesses are starting to look at tradeoffs of ERP systems and evaluating whether a system purchased 10 years ago has everything they need to run their business today."
He thinks many businesses venture into the cloud in a two-tier ERP set-up to make sure their deployment is cost effective and provides what they need before jettisoning on-premise software in favor of all-cloud ERP software.
"We are seeing less urgency for bridging the cloud and on-premises systems as companies continue to be anxious to redesign many of their enterprise workloads to leverage the pervasiveness of cloud- deployed solutions," he said. "For many companies, the last time they purchased an ERP platform, there was no iPhone. But with the advancements in technology, larger companies are starting to ask about moving their ERP system to the cloud; something that could not be done previously with their legacy platform."
FinancialForce's software uses the Salesforce App Cloud. Its suite includes financial management, professional services automation and human capital management (HCM). The latest release of its financial management application permits tailoring of accounts data entry, 360-degree customer views and collaboration features, built-in intercompany reconciliation and automated elimination entries.
Acumatica Cloud ERP
Acumatica Cloud ERP and Cloud Accounting are aimed at small and medium businesses. The software can run on iPad, iPhone, Android, Windows, Mac or Linux, making BYOD (Bring Your Own Device) initiatives easy to implement. It includes modules for financial management, distribution, manufacturing, project accounting and customer management.
In addition, it has integrated its cloud ERP software suite with document management (DM), something normally only found in large enterprise deployments. When a production batch or shipment is flagged for recall, therefore, the integration of ERP and DM makes it possible to facilitate immediate communication with retailers, manufacturers and customers to expedite the process.