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Is a move to cloud ERP inevitable for most companies?

More companies are turning to cloud ERP for modernization, cost and security. Here's a look at whether those factors are enough to make cloud a foregone conclusion.

ERP vendor messaging often casts cloud ERP as the inevitable choice, particularly now that COVID-19 has created additional obstacles for implementations. The reality of cloud ERP's inevitability is a bit more nuanced.

Cloud computing has accelerated in recent years. As the reliability and security of cloud-connected systems has improved significantly, more CIOs and other leaders have grown comfortable with the idea of storing and processing their data off site. Nevertheless, on-premises deployments continue to be common, as many leaders weigh the benefits of cloud ERP against some of its potential downsides.

Here's a look at some of the factors that may affect the shift toward cloud ERP.

More mega-vendors going cloud-first

ERP software companies such as SAP, Oracle and Microsoft have all shifted to a cloud-first approach. There are economic drivers for that move, as vendors have discovered the benefits of subscription-based revenue.

Several key players have even announced end dates for their support of on-premises versions, but subsequently reversed course when customers complained. Nevertheless, in many cases ERP vendors are releasing new features and components as cloud-only products that can easily coexist with on-premises deployments.

More hybrid ERP systems

Many of the supplementary products that integrate with ERP systems are also cloud-only. These lend themselves to browser-based access, which means lower costs for installation, upgrades and ongoing support.

Web services standards provide a platform for efficient integration across systems that are geographically distributed. As more and more companies adopt this hybrid approach, the case for fully cloud-based ERP will be much easier to make.

More openness to cloud ERP

A greater number of organizations are moving to the cloud of their own volition. For many customers in the buying process, any new ERP system under consideration must be available in the cloud.

Ten years ago, it was common for CIOs and other business leaders to express concerns about cloud-based ERP business continuity and security. Today, those kinds of reservations aren't as common. This shift is in part due to a new and emerging generation of business technology leaders who have grown up in a cloud-connected world. The shift is also due to an emerging focus on core competencies. Instead of managing IT complexity in-house, business technology leaders can shift much of the burden to external vendors, leaving time to focus on initiatives that may add greater value.

Greater cloud ERP security

While no system is 100% secure, security practices have matured considerably as more and more critical business activities move to the cloud. At the same time, it has become clear to many that on-premises systems are often as vulnerable as cloud-based ERP, if not more so.

Backup, failover capabilities and other disaster recovery measures make for a strong case that in many organizations, cloud ERP may be a lower-risk option than on-premises deployments.

While the move to cloud ERP may not be inevitable, there is an evolutionary process in place that will undoubtedly result in increased cloud adoption in the coming years.

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