Enterprise ERP heads for the cloud

While small and midsized businesses have led the way in migrating their ERP applications to the cloud, enterprises have been lagging behind.

And there’s one very good reason for enterprises not plunging ahead with SaaS ERP — it’s hard.

ERP systems at large companies are vast, complicated, and deeply entrenched in an organization’s infrastructure. ERP is so integral to an organization that the time, expense and disruption a move to the cloud might entail has discouraged IT managers from undertaking the task.

But that’s starting to change.

As a recent report by Forrester Research puts it, “Whereas thousands of smaller and midsize companies have already adopted SaaS ERP systems, enterprises are in the very early adoption stages. Several leading software suppliers are aggressively investing in SaaS ERP capabilities that will appeal to multinational enterprises as customer demand accelerates.”

The report is based on a survey of 770 North American and European technology decision makers. In 2012, 12 percent had already replaced or planned to replace within two years their traditional ERP with SaaS ERP. In 2014, the number grew to 35 percent.

“ERP has seen a significant level of adoption, but certainly much less than customer-oriented apps like CRM, as well as other areas like procurement and HR. The functional breadth of ERP has not been fully replicated in SaaS-native solutions to the extent it exists in mature on-premises ERP solutions. Also, the ability to support industry-specific scenarios and company-specific requirements requires a high degree of configurability and extensibility in the SaaS platform in lieu of customization. This is starting to materialize,” says Paul Hamerman, vice president and principal analyst at Forrester.

While the number of SMBs moving ERP software to the cloud is higher than the number of enterprises doing so, the enterprise number is on an upward trajectory, says Robert Anderson, vice president at Gartner.

“The number of 30% by 2018 across all enterprises still holds true. If you look at the SMB segment alone, it may be 40% or more accounting for those that will move current on-premise ERP solutions to cloud and an entire net new range of service-centric businesses that will embrace it that haven’t experienced ERP before. By 2020, it should be well on its way to 50% of SMBs in the services sector having embraced some form of cloud ERP apps,” he says.

For SMBs, according to Aberdeen Group, the shift to lower costs, as well as increased scalability, flexibility and ease of use have spurred cloud deployment. In a survey, Aberdeen found that midsized organizations are more than twice as likely to have cloud ERP solutions than legacy ones. Aberdeen says those that have moved ERP to the cloud have seen significant advantages, including: 1.9 times improvement in profitability over the past 24 months; 3.2 times improvement in time to decision over the past year; 1.8 times improvement in cycle time of key business processes over the past year; 33 percent greater improvement in complete and on-time delivery; and 2 times improvement in internal schedule compliance.

Will enterprises hit those numbers?