Cloud ERP Systems

Penetration

Cloud services are gaining popularity worldwide. According to the Gartner^[1] report, ]cloud technologies will become the main focus of the ERP market for the next 5 years.

In a survey conducted by Gartner analysts in 2014, companies with annual income from $10 million to $10 billion from North and Latin America, Europe, the Middle East and Africa, as well as the Asia-Pacific region took part.

Cloud ERP Adaptation Plans

Gartner, 2014

Including 2% of organizations already using cloud ERP, 47% of the companies surveyed plan to move key ERP systems to the cloud within the next 5 years. Analysts believe that this figure is due to the fact that the requirements of these companies for ERP are reduced to administrative functions, such as finance, HR management and procurement management, so the work from the cloud is optimal for them.

However, about 30% of companies, on the contrary, do not plan to transfer their ERP system to the cloud in the foreseeable future. These are mainly production enterprises. It is worth noting that most companies planning to use ERP systems from the cloud will do this in the near future, and only 4% intend to switch to the cloud enterprise resource planning system no earlier than 5-10 years.

Advantages and disadvantages

The model allows organizations not only to significantly reduce the initial costs of equipment that supports ERP health, but also to seriously simplify the implementation process itself. The payment structure of cloud systems is also different from on-premise solutions. Organizations, as a rule, pay only an annual subscription to the ERP service from the provider, while the integrated version requires a single payment of a large amount. With a private cloud, savings can be achieved by reducing server hardware costs and optimizing performance.

A 2013 study by Panorama Consulting^[2], questions Gartner's optimistic forecasts for a massive transition to cloud ERP systems. According to the survey, the vast majority of organizations do not currently use cloud or SaaS ERP systems (85%). Compared to 2012, researchers even noted a decrease in the popularity of using ERP systems according to the SaaS model or from the cloud: 15% in 2013 compared to 26% in the previous.

The main reasons why companies do not use cloud technologies are "lack of knowledge about cloud offerings" (45%) and "risks to information security" (30%).

When asked what percentage of money was saved by implementing cloud services, the majority of respondents (54%) answered that savings ranged from 0 to 40%, and only 2% admitted that the volume of savings reached 80% or more

Indeed, together with undeniable advantages, cloud systems also have a number of drawbacks. First of all, this is insufficient reliability of data storage. Despite the assurances of providers in the absolute reliability of cloud services, not all company executives trust, for example, the storage of financial and tax statements on servers outside the company.

Another cloud vulnerability that hinders the spread of cloud ERPs is the dependence on Internet connectivity stability. If the Internet channel for some external reasons stops working, any actions in the system will become impossible. However, now a stable Internet channel is the necessary conditions for the operation of absolutely all IT infrastructure, and, as a rule, companies are trying to protect themselves as much as possible from various failures.

Obviously, in the cloud model there are both cons and pros, and each company decides for itself where the advantages of the "cloud" end and the disadvantages begin. Undoubtedly, the cloud trend will be one of the strongest in the global market of ERP systems and beyond 2014.

World market

2020: The global market for cloud ERP systems reached $45.3 billion

The volume of the global market for cloud enterprise management systems (ERP) in 2020 reached $45.3 billion, analysts calculated MarketsandMarkets. They did not give a comparison of the costs of such decisions with 2019, but stated an increase that was partly caused by the COVID-19 coronavirus pandemic.

In MarketsandMarket terminology, cloud ERP systems refer to the services that companies use to manage their daily business processes, such as finance and accounting, project management, purchasing, sales and marketing, and customer relationship management (CRM). ERP combines all these processes into one comprehensive system to optimize the various business processes and information within the organization.

The cloud-based ERP solution offers a centralized system that supports multiple functions across business units and provides backup and disaster recovery capabilities.

The study lists several factors that contribute to increasing costs for cloud ERP systems:

• growing demand from companies for tools to improve operational efficiency and streamline business processes;
• Increasing adoption of cloud solutions
• the COVID-19 pandemic, in which business began to use tools for remote organization of employees' labor more often.

The global market for cloud ERP systems reached $45.3 billion in 2020

According to experts, most ERP platforms include modules for inventory and supply chain management, and in a difficult epidemiological situation, many manufacturers also turned to specialized suppliers. A similar situation is observed in the Asia-Pacific region, the Middle East and Latin America. COVID-19 helped modern ERP systems fully realize their potential by expanding their functionality to support remote operation, the study said.

Analysts named the following companies as the largest manufacturers of cloud ERP systems:

• Oracle;
• Microsoft
• SAP;
• IFS;
• Infor;
• Sage Software;
• Workday;
• Plex System;
• Ramco System;
• Epicor;
• Acumatica;
• Deltek;
• Unit 4;
• Syspro;
• QAD Inc;
• IQMS;
• MIE Track Pro;
• Genius Solutions;
• OpenPro;
• Global Shop Solutions.

The study notes that for cloud ERPs, initial investments are usually much less, since in this case you do not have to buy your hardware - you just need to configure the software and start working with it over the Internet. Maintenance of the IT infrastructure falls entirely on the supplier - he monitors the functioning of systems and is responsible for the preservation of your data. This approach allows you to free up company resources and direct them to the development and growth of the business.

Use of cloud ERP systems in North America (by industry)

Over time, cash savings only increase and become more noticeable. According to the results of the study, for companies with a staff of 100 people, the total cost of ownership (TCO) of cloud ERP systems in 4 years is 50% lower than the cost of ownership of local ERP solutions.

Local enterprise resource planning systems require large initial cash injections to purchase hardware and deploy IT infrastructure. Moreover, such solutions continue to "pull" funds during operation: money goes to control and support the operability of hardware and software parts.

According to analysts, the global market for cloud ERP systems will grow by 17.4% per year and exceed $101 billion by 2025.^[3]

2011: The size of the market of SaaS ERP will grow up up to $4.3 billion - Gartner

According to Gartner forecasts, the market volume of ERP SaaS will grow from $1.9 billion in 2011 to $4.3 billion in 2016, showing an increase of 17.3% on average over the year. More recent data from IDC^[4]released in July 2014, indicate that only the ERP public SaaS market reached $10.78 billion in 2013, it accounted for 24% of the global public cloud market (the average annual growth rate until 2018 of this segment will be 18%).

Today, cloud solutions as an alternative to traditional implementation are offered by most of the largest ERP vendors:

• SAP offers a cloud-based version of the ERP system called SAP Business ByDesign. The decision was submitted in 2010 and is now used by about 1000 companies. It consists of a financial unit, an HR system, sales management, purchasing and a supply management unit.

• Oracle ERP Cloud Service focuses on financial procurement functions such as planning and budgeting. Since 2004, the solution has entered the market, at the moment it is used by about 300 companies.

• Microsoft announced the possibility of using the spirit of its ERP systems (Dynamics GP 2013 and Nav 2013) on the Microsoft Azure cloud platform in 2013. And in 2014, the company introduced a new version of its mid-business ERP system Microsoft Dynamics NAV 2013 R2, which can be installed both in the local infrastructure and in the Microsoft Azure cloud (the second option allows you to reduce costs during the initial implementation of the solution).

We add that, according to Panorama Consulting at the end of 2013^[5], among users of the Microsoft Dynamics 29% organization line have already used ERP from the cloud, among Oracle customers there were 28%, among SAP customers - 18%.

However, the market leaders for cloud ERP systems are companies that offer customers solutions exclusively according to the SaaS model. This is due to the fact that their offers appeared on the market earlier, precisely as an alternative to complex integrated systems from large vendors. For example, the American company NetSuite offered its first ERP system according to the SaaS model back in 1998 (then under the name NetLedger). Basically, the offer was interesting to small and medium-sized companies that did not fit the existing systems at a price. Today, NetSuite is the leader among the enterprise management programs offered according to the SaaS model. In 2009, company representatives noted that the number of their customers approached 7,000.

Along with NetSuite, Acumatica demonstrates growth. This is a Russian developer of cloud ERP solutions, Acumatica is currently conducting all research and development in Russia. However, its product is not represented on the Russian market - the company is focused on working with foreign customers. Acumatica was founded in 2007 and is the fastest growing provider of flexible cloud ERP solutions for small and medium businesses.

Acumatica's range of solutions includes products for financial management, sales management, customer base management and project management. The company's own platform, Acumatica Studio, provides independent vendors and OEM partners with fast and cost-effective tools for developing and integrating cloud applications. Acumatica products are distributed through a global network of partners.

Also popular cloud ERP solutions are offered by Plex Systems, Workday, Salesforce.

Russian market

The global market for cloud ERP systems is growing and developing. About the Russian market, we can say that here - as always, there are their own features and differences from world trends. Slowly but surely, cloud ERPs in Russia are gaining popularity. Cloud versions of their systems one after another began to represent large Russian ERP development companies.

In 2010, the SaaS ERP system, Infin.Online, appeared in Russia. The solution covers a full range of traditional business processes. The program includes commodity logistics, personnel registration of employees, accounting for simplified and general tax systems, payroll calculation. According to the company's representatives, all data is protected and securely encrypted using the SSL cryptoprotection protocol. The cost of accessing the system is, depending on the version, from 7 to 15 thousand rubles per year (for one user).

Compass, with the support of IBM, has developed an infrastructure solution for large and small businesses - Compass-Cloud. In April 3013, the system was introduced to the market. The cloud contains all the main modules of the program: production management, finance, document management, warehouse, personnel management.

As for the largest Russian vendor ERP, 1C, many franchisees of the company (for example, First BIT, 1C-Rarus, Rosintegra) have long been offering their own versions of cloud solutions on this platform.

We add that in 2013, Microsoft and 1C agreed on a strategic partnership and announced that soon the 1C accounting system: The enterprise can be used in the form of a service from the Windows Azure cloud. At the same time, the company launched the 1cfresh.com site, its own solution for cloud access to platform products.

The issue of competition between their own SaaS service and the interests of numerous partners in the company was decided as follows: you can subscribe to the service only by receiving an invitation code from one of the 1C partners. Partners can set their prices and earn interest on subscription fees, as well as earn on support services and configuration settings.

Galaxy Corporation has released a cloud version of the material property management system for municipalities and regional entities. To date, about 14 municipalities have already joined it. The system works with open information, so customers have no concerns about confidentiality. The company sees a prospect in the proposal of an ERP system from the cloud to universities.

Suppliers and integrators recognize that ERP systems in the cloud take root in the Russian market, but so far with difficulty. Such an opinion is held, for example, Dmitry Chernykh, Chairman of the Board of the Galaxy Corporation.

"The fact is that if the company has already deployed the system on its site, the transition to the cloud involves costs, the return on which is not obvious. In addition, enterprises are afraid to post their important data in public clouds. Nevertheless, we are moving in this direction, but we are trying to transfer not the entire ERP system, but its individual modules to the cloud, "Dmitry Chernykh explained his thesis

Although cloud technologies cannot be called completely new, in the field of ERP they are not used as widely as in other areas, agrees Efim Fish, Director of Business Development at Microsoft Dynamics AXTops Consulting (Tops Consulting). According to him, this is due to the fact that ERP systems usually contain the most important data for the company, and customers see certain risks in the use of cloud technologies related to ensuring the security and availability of data.

Cloud versions may be in demand by businesses that do not fear a breach of data privacy. The rest are not yet ready to post valuable information on remote servers third-party companies, IT companies recognize. To a greater extent, ERP systems in the cloud attract Russian medium and small businesses, large ones are very limited, experts add. " They IT Epicor noted that they do not see high demand for finished SaaS ERP in Russia, as, for example, USA in other countries.

TAdviser told 1C that as of mid-2014, there are few customers using ERP in full-fledged cloud technology, more often they use elements of cloud technologies in their own or leased data centers - there are a lot of such examples for the ERP-system "1C: Manufacturing enterprise management." Some customers announce plans to move to the ERP system completely in the cloud within a few years.

See also

ERP systems (global market)

Enterprise Management Systems (Russian ERP Market)

Main market trends in ERP systems (Russia)

ERP on tablet screen

ERP systems: concept, functions, selection and implementation features

Notes