Pat Garrehy, Rootstock Software, Founder and CEO
Why Organizations Should Invest in Cloud-Based ERP Systems
Part 2: Qualitative Benefits
In my previous post, we talked about the quantitative benefits of moving ERP to the cloud. Now, let’s focus on the qualitative approach to making the ERP case.
To begin with, let me offer a caveat: unlike quantitative benefits, which are quite similar across organizations, the qualitative advantages tend to reflect each organization’s unique circumstances. As a result, the best examples I can offer are the reasons our customers gave us for implementing our cloud ERP solution. There were two main groups of customers, all using salesforce.com®.
One group was smaller and growing companies, where spreadsheets or very simple ERP packages had been outgrown. That was the situation at Pro-Tech, a company known for innovative products for commercial-level snow removal and containment. They were being constrained by their technology – an outdated version of Macola, supplemented by an unlinked collection of spreadsheets. With cloud-based ERP from Rootstock, Pro-Tech has realized productivity increases in both their front and back office operations. They’ve also been able to eliminate costly third-party technology consultants.
The second group, comprised of larger firms, had been using an on-premise ERP system that was no longer providing what they needed. A company with multiple divisions and differing ERP systems cannot obtain the global deployment and integrations of systems that it needs to be competitive. The cost/benefit analysis for a new cloud-based enterprise-wide system will often show significant economic advantages over maintaining multiple on-premise ERP versions and their required interfaces, conduits, and translators.
Overall, we found three main features/benefits that encouraged prospects to move to cloud.
#1: Leveraging salesforce.com and the Salesforce Platform
Salesforce.com customers and users want solutions that hook into their presently installed software. But, that’s just table stakes. They need a cloud ERP that also provides the integrity, robust performance and flexibilities that traditional ERP provides.
1st Light Energy, an installer of custom-designed solar energy and conservation lighting systems for residential, commercial and public sector applications, is one such organization. In 2013, faced with the need to update and upgrade their technology so it could support their growth, they conducted a search for a cloud-based ERP solution that would integrate with their Salesforce CRM solution.
Naturally, this ERP solution had to interface easily with salesforce.com and/or the Salesforce Platform. From that point on, the reasons to decide to sign up were dependent on the package’s capabilities and how the software manufacturer could perform for them. 1st Light Energy chose Rootstock, based on their review of several options. According to a recent Nucleus ROI Case Study, the integration was seamless. Ultimately, 1st Light Energy was able to increase the productivity – and job satisfaction – of IT, management, and front-line employees.
#2: Addressing Continuous Software Enhancements and Customizations
Most small companies do not have the resources to develop and maintain all of the features their growing businesses demand. Their legacy software does not allow the customizations and integrations they need. But why would a business owner invest in a new cloud ERP if the new software won’t provide those sorely needed capabilities? To spend more to be in the same vacuum of information is simply a waste of money, even though it might interface with salesforce.com. Yes, there might be some improvements but not enough to force a solid payback on the new ERP.
The same holds true for larger concerns. With the supply chain now being global, additional importance is placed on certain features of ERP, such as multi-plant inventory, planning and tracking of freight and other shipment logistics, plus having to track consigned inventory and sub-contract expenditures. Increased machine automation means they require more analysis regarding the cost of materials versus the cost of labor. Meanwhile, there are a host of manufacturing corporations that are making changes to the businesses to create a competitive edge with their engineering and services. They are looking for new ERP system features which provide better information and analytics in those areas as compared to tracking detail on the shop floor.
Thus, from a “features/functions” standpoint, these differences mean next-generation systems need to be more functional in different business areas than their predecessors. To be competitive, you must be able to rely on an ERP software vendor to continue to provide additional features and extensions. Likewise, you need to assume that, as your business and industry evolves, you’ll will want to define some modest extensions to your ERP software to help yourself, and only yourself, thrive.
Bottom line: why switch out the old, dated on-premise system if the wanted capabilities can’t be provided?
Smaller and larger prospects may wait, hoping that some vendor will add what they need to their old legacy ERP package. But, while continuous software enhancements to the new ERP system are an absolute requirement, there is always at least one company that wants a feature not requested by others.
So, the new contemporary cloud ERP software must make these customizations easier than legacy on-premise ERP software. This means a customization can be done to a cloud ERP system while still receiving the continuum of future upgrades. This also means that these customizations can be done in such a manner as to not impact other customers that are using the same ERP system, but don’t require this feature. It additionally can be done in such a manner that doesn’t add overhead, making the standard ERP system more costly to maintain because the customizations were made within the core ERP code versus “seamless integrated bolt-ons.” Lastly, the cloud platform where the ERP system resides, as well as the system itself, must be built so both are conducive to accepting customizations that can be done on the platform but “outside” the core ERP engine.
#3: Deep Functionality
Many cloud ERP packages have fallen short, because in the rush to get to the cloud they are either severely limited in functionality or they are replications of a legacy ERP package supporting one business type. They do not acknowledge that manufacturers require a greater variety of manufacturing methods and services to be supported. Rootstock customers regularly acknowledge that the deep functionality of our cloud-based ERP solution (a reflection of our roots in the manufacturing sector), coupled with the ability to extend that functionality simply by adding other apps from the Salesforce platform, makes this a non-issue.
The Bottom Line
To purchase a new software suite, owners and upper management must see how the new investment will make money and provide a solid return on investment. According to a June 2016 Nucleus Research study, based on the review of data from 45 case studies, cloud-based ERP customers realize a 43% faster payback than those who use an on-premise solution.
Whether you look at the qualitative or quantitative aspects of it, the case for moving to cloud-based ERP is strong. As time passes and, as more manufacturers gain more experience, I expect that the advantages of cloud ERP will only grow more obvious.