The second generation of cloud-based ERP Systems
30 Dec 20
30 Dec 20
That cloud-based is the way for future ERP systems is not news, even though there are still vendors who put their heads in the sand and think they can withstand this trend for a few more years. The statistics on selected ERP Systems in Scandinavia during 2018 and 2019 show that 95% of all small organizations (up to about 100 employees) have chosen cloud-based ERP Systems. In the segment of medium-sized organizations (approx. 100-2000 employees), the frequency today is around 70% of choosing a cloud-based ERP system. For the largest organizations, we are today at the level of about 50%. Having lower numbers for medium-sized and large organizations is natural as these organizations usually have a rather complex infrastructure with hundreds of applications and where it adds limited value to only subscribe the ERP system as a cloud-service. But even in this customer segment, the trend points upwards when it comes to interest in cloud-based systems.
There are several reasons why organizations switch or choose to forgo a cloud-based solution and that topic is not the focus of this blog. Instead, this blog is about the change we are now clearly seeing amongst the providers that offer cloud-based ERP systems.
The first wave was primarily about the customer having the opportunity to switch to a cloud-based platform where the vendor supports with maintenance and frequent upgrades. And where the customer could follow the development of the system in a simpler way. Many vendors also tried to attract customers by pointing at a long-term reduced cost, but this is an argument that has been refuted. At best, the cost will be about the same. There are is also statistics showing that the long-term cost can increase with a cloud-based solution. At the same time, the business benefits received over time must be weighed in, which often justifies a slightly higher running cost.
The challenge with the early cloud-based ERP systems was that they were very limited in flexibility, and where the customer had no or limited opportunities to deviate from the standard configuration offered by the vendor. And even though “standard” sounds tasteful in many contexts, we can state that a large proportion of all companies still have needs that must be met in order for the customer to be able to differentiate themselves from their competitors.
The above is only a very short example and the list can be made much longer. Most of the early cloud-based business systems lacked support for all or most of the bullets above.
What we now see in the second wave is that the established cloud-based ERP systems have begun to complement their systems with tools so that the customer can make all these changes and improvements to better fit in with the actual needs. The result is that the customer or the customer’s partner can modify and improve the system as new needs arise with the customer. And that the customer can create a configuration that differs between different subsidiaries or business areas within the group.
The negative one then claims that we are back to the time when the customer was modifying the system and making it too complex. The positive one says instead that the customer receives a flexible and changeable system that opens up opportunities going forward. Regardless of which, the trend is clear, the leading providers of cloud-based ERP systems have realized that the systems have been too rigid and have now begun to offer more open and changeable systems. And once this becomes a little more mature, it will be the last hurdle before even the big organizations will fully switch to cloud-based ERP systems.