In the face of growing competition and a challenging business climate, many job shops and manufacturers are looking for ways to reduce costs, streamline operations and improve the bottom line. Implementing Enterprise Resource Planning (ERP) software is a proven solution for running a business efficiently and effectively. Yet, a large percentage of job shops and manufacturers have held back from implementing an ERP system due to high initial costs, long implementation times, and competing demands for time and resources.
Cloud ERP, sometimes referred to as Software-as-a-Service, or SaaS, delivers financial, implementation, and operational benefits to job shops and manufacturers.
As job shops and manufacturers improve operational efficiency, and increase their competitive standing, most realize that an ERP system can help streamline their business processes and improve operational efficiency. However, recent estimates suggest that the lack of ERP is holding back companies. This is especially true in smaller companies. High initial costs – including software, hardware, and supporting infrastructure – lengthy and complex implementation projects, and the staffing necessary to implement and maintain ERP systems all become barriers to ERP implementation.
With traditional on premises software deployments, customers purchase, install, manage, and maintain the software as well as supporting infrastructure, such as hardware and networks, in house. In a cloud deployment, the software vendor hosts, manages, and provides customers access to the software as a service over the Internet. Rather than pay for the software up front out of their capital budgets, cloud customers license it on a subscription basis, usually per user, per month, or per a specified number of transactions. On-going maintenance, upgrades, and support for the software and infrastructure are all the responsibility of the software vendor and are included within the subscription fee. ERP systems that are cloud deployed can also drive a significant reduction in the total cost of ownership, compared with legacy on premises deployments. The cloud model offers a wide range of financial and operational benefits for manufacturers which may include lower and more predictable ongoing costs, faster implementations and time-to-value, reduced cost of ownership, greater reliability and availability and reduced IT complexity.
Benefits of Cloud ERP for Manufacturing
What are some of the other benefits of cloud ERP for manufacturing operations and busy job shops?
- As cloud deployed solutions are hosted and managed by the vendor, customers have no application hardware to set up and install. The implementation is solely focused on configuring the system and, if necessary, importing data. Advanced cloud deployed ERP systems come pre-configured based on best practices to further simplify and expedite the implementation process. This typically translates into faster, less complex implementation projects. Because implementation is rapid and customers invest little up front capital, but receive the benefits from the system as soon as they go live, customers may achieve a faster return on their investment.
- With a cloud based solution, customers pay only for users that actually use the software. Businesses don’t need to invest in all the peripheral resources and technology to support an on premises deployment. If the needs of the business expand over time, the customer simply adds users at a incremental cost without worrying about investing in additional resources. In addition, with a shared, multi-tenant SaaS model, vendors can pass along lower costs due to the economies of scale achieved through the use of a shared data center, network, and management services.
- Cloud ERP vendors typically offer reliability that exceeds that provided by the IT departments within most job shops and small manufacturers. Due to the economies of scale associated with cloud solutions, vendors can make significantly greater investments in skilled staff and technology than an individual company. These investments go towards ensuring performance, reliability, and security. In addition, most cloud vendors offer service level agreements that guarantee up-time, typically 99.5%, assuring customers of system availability.
- The cloud deployed model transfers the burden of managing and keeping the system up-to-date and running from the customer to the software vendor. The software vendor takes responsibility for maintaining the application and system infrastructure including: networks, storage, operating systems, databases, application servers, web servers, disaster recovery, and backup services.
- Cloud deployment eliminates the need for users to upgrade their software to the latest release and to update outdated infrastructure (including hardware) to support major software upgrades. Further, the vendor also takes responsibility for all upgrades, ensuring that the system is always running on up-to-date hardware and the latest software version, driving even greater total cost of ownership to customers.
One of the most important benefits of the cloud deployment model is that it frees the manufacturing enterprise or busy job shop from the responsibility of maintaining and managing most of the application hardware, software, and infrastructure associated with ERP systems. Instead they can focus on and devote their time, staff, and resources to their core business and new strategic opportunities.
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