More and more vendors are offering cloud-based ERP solutions, making it difficult for companies to decide which vendor to choose. With such an overwhelming variety of ERP products available, how do you know which cloud ERP solution is best for you business? The following tips will help you choose the right cloud-based ERP solution to suit your company’s specific needs.
The first step in choosing your cloud-based ERP solution is to analyze your business needs and understand whether a cloud solution can support the entire organization, or if it’s better to go with a departmental rollout.
While the cloud is advancing at a rapid pace, it has yet to reach functional parity with on-premise solutions. If you’re a large organization with complex needs, it may be best to go with a point solution -- such as a CRM or HR suite -- rather than trying to adopt full-suite cloud ERP.
A point solution approach to cloud ERP allows for the realization of cost savings while creating a starting point for cloud technologies to enter the organization. On the other hand, small- to medium-sized organizations may be able to adopt a full-suite option that can support the complete needs of the company -- from accounting to inventory management. That’s why it’s so important to understand the functional depth that is required of the software.
In general, the process for selecting the right cloud vendor is similar to the selection process for on-premise software:
· - Narrow the choices down to a few vendors after conducting upfront research.
· - When meeting with vendors on the short list, be prepared with a list of questions to make sure the software meets organizational needs.
· - Many cloud vendors offer a demo version that can be used as a trial run. Use that opportunity to test the software.
List the top 10 processes you want to automate and find out if the proposed system can handle them. That will simplify your selection process by helping you zero in on your most pressing needs.
There are many different ways to deploy cloud software, and this exerts a big influence on purchasing. The three main deployment options are:
· - Deploy an internal cloud. (You own the license.)
· - Deploy your software on a hosted service. (You own the license.)
· - Deploy as a service (You rent the license and outsource operations.)
Some vendors allow you to own a license, while others require ongoing annual software payments. If you are not comfortable handing your operations over to a third party, then select a vendor that offers its software for use on an internal cloud.
Make sure you understand whether or not vendors charge extra for storage, bandwidth and additional users. In addition, determine how you can get access to your data and the format you will get your data in. Companies in manufacturing, financial services, retail and other verticals should look for a vendor with deep domain expertise in functional areas of the business most critical to their operations.
In addition, companies should make sure their chosen cloud solution offers seamless data sharing and integration with complementary applications on the platform. The cloud computing platform you consider should offer time-tested, robust Web service APIs to make it easy for you to connect specialized legacy systems and databases you may have or your suppliers may maintain.
Identify and rank “must-have” versus “nice to have” functionality. This can make a difference when it comes to final negotiations.
Cloud ERP No-Nos
Companies should avoid getting locked into an undesirable contract. Even though the cloud streamlines enterprise software pricing and delivery, contracts can still be tricky to negotiate.
For instance, some buyers forget to negotiate scalable pricing. Contracts should state clearly any price changes for adding or subtracting users. Similarly, check for penalties for reducing user count.
Some cloud vendors entice potential buyers with steep year-one discounts and prices that rise dramatically after that, Johnson warned. As the cost of switching ERP providers is almost always high, the last thing you need is to see those kinds of increases. Make sure that your vendor gives you the option to own your license so you are not forced to pay more if your vendor increases prices.
Probably the biggest mistake to avoid, however, is buying cloud for cloud’s sake. Don't make a decision for a cloud ERP solution ONLY because it's in the cloud. Focus on functional fit for your company, and avoid hosted models pretending to be cloud models (i.e. relocating a dedicated server and storage system from your offices to a third party data center) which actually adds cost, complexity and risk.
Is Your Incumbent ERP Vendor Ready for Cloud?
Up to now, we’ve discussed new ERP rollouts, but how about those who already have ERP in place? Perhaps it is an ancient system in need of a serious upgrade, or maybe it’s just not nimble enough. Rather than ripping it out, the best course forward is often to approach the incumbent vendor and see what they can offer.
Ask your vendor if they have a cloud solution available, and if they do, ask if you may be able to negotiate a discount for sticking with the same vendor. If they don’t, it’s still worth seeing what kind of contract can be negotiated to keep your business.
Keep these issues in mind when considering a cloud-based solution: What are the terms of your current contract; what’s the penalty for ending that contract; and how soon is renewal coming up?
Other questions to investigate involve architectural and platform changes. Is the new version built on a modern software architecture, or is it the same as an older version with a few new features added? How often will future upgrades be released? What guarantees are there around maintaining functionality of customized processes?
Questions about required resources for maintenances are important as well. How often are patches released? How long does it take to apply patches and upgrades? What tools have been included for data integrity or for integration with other systems? How will they avoid getting into the same situation they are currently in, several generations behind in technology and functionality?
If you’re happy with your incumbent vendor, ask if they intend to change their pricing and business model to be cost competitive with the leading cloud companies. One of the biggest challenges for incumbent vendors is coming to terms with the dramatically different business model of cloud computing.
If you’re still happy with the answers you’re getting from your incumbent vendor, ask how they intend to support real-time collaboration and capture of information around any piece of data or screen in their system with employees, vendors and customers inside and outside of your company. Don’t forget to ask about the additional investment and IT skills needed to support the new server, storage, networking, and security hardware they expect you to install and maintain for their upgrade.
By putting your existing vendor through those hoops, it will become clear whether they have a competitive cloud offering that is attractively priced or are struggling to keep up with the cloud ERP young guns.