For many years, global enterprises have tried to use a single on-premises enterprise resource planning (ERP) system to run business operations across several countries. This model has proven to be not only highly expensive and resource-consuming, but also not very effective.
To solve this problem, businesses would turn to cloud ERP solutions to implement at subsidiaries in different countries. Since cloud ERP systems are more affordable and can easily be rolled out, it was the logical choice to expand the ERP without having to replace the entire system.
However, global manufacturers and distributors are finding that there are great benefits to cloud ERP beyond just cost savings. According to an article on InformationWeek by Zach Nelson, CEO of NetSuite, a worldwide provider of cloud ERP solutions, “…it’s no longer just speed and cost that are paving the way for two-tier ERP. New divisions, divestitures, business models, markets and channels are all compelling use cases for two-tier ERP.”
As the article explains, business agility was the predominant reason cited by businesses that switched to cloud ERP systems in 2012.
“A Forrester Research survey of business decision-makers found that the percentage of people citing lower overall cost as a reason for adopting cloud went from 71 percent in 2009 to 57 percent in 2012, while those citing improved business agility went from 60 percent in 2010 to 70 percent in 2012. Forrester didn’t even ask about business agility in the 2009 survey; that’s how quickly cloud computing is changing the marketplace,” Nelson writes.
Manufacturers and distributors are discovering that it makes more sense to use a system that can house financial, e-commerce, point of sale and customer data in one system that’s able to be accessed worldwide. This capability has always been lacking in on-premises ERP solutions.
“Extending that hairball across a global deployment with each subsidiary running distinct and sometimes unique systems meant visibility across the entire organization was likely months behind, if it was even achieved at all,” Nelson explains.
Nelson champions the two-tier solution, which uses both on-premises and cloud ERP solutions working in conjunction with one another. Such a solution will likely one day replace many of the on-premises implementations now being used by many manufacturers and distributors. Either way, it’s clear that international businesses need to leverage a solution with multi-language, multi-currency and multi-tax-law support.
The real benefit of cloud ERP is business agility, which offers businesses a chance to do more than just save money. They can seize global opportunities for growth, which would normally be out of reach with outdated, on-premises software.
Source: InformationWeek, November 2013