Manufacturers know that in order to be successful in the rapidly changing markets of the global economy they must make more efficient use of large amounts of data to leverage business intelligence and become more agile. They are looking to the cloud as a solution. The current explosion of cloud platforms, especially the Salesforce ecosystem, has led industry analysts to predict even more growth for cloud-based ERP solutions for manufacturing ERP.
Benefits of Cloud ERP
Cloud computing provides on-demand real-time access to data and resources, reduced costs, scalability and the ability to store large amounts of data. The flexibility of the cloud and the speed of deployment make manufacturing systems particularly well suited to cloud-based ERP solutions because cloud ERP brings core manufacturing tasks together. Cloud based solutions represent every critical function in the manufacturing process, including materials requirements planning (MRP), process manufacturing software, purchase order and inventory software, shop floor software and supply chain management software.
- On-demand real-time access to data and resources – The cloud provides on-demand access to data and resources stored in the cloud, enabling every department at every step of the supply chain to react instantly to changing business needs.
- Reduced costs – Cloud-based solutions can reduce IT expenditures, including infrastructure, maintenance and life cycle costs, by as much as 54 percent, especially when compared to the high costs associated with older, on-premise ERP systems.
- Scalability – Cloud-based systems can be scaled up or down with changing project workloads, an especially critical requirement for manufacturing firms. Software and hardware requirements are also scalable in the cloud.
- Data storage – The cloud is ideal for storing, managing and accessing large amounts of data. This ability to access “big data” is one of the driving forces behind the growth in cloud-based software.
These benefits translate into greater visibility into every function across many departments, faster innovation, improved productivity and efficiencies through integrated business processes and, more recently, mobile integration, which allows employees to access data and transform it into smarter decisions from any device anywhere.
The evolution of cloud computing is currently exploding, as companies emerge to provide solutions of all three cloud service models, including a variety of 100 percent cloud-based and hybrid cloud systems.
What the Analysts Say
According to a recent study by Gartner, SaaS-based manufacturing and distribution software will increase from 22 percent in 2013 to 45 percent by 2023. Gartner predicts that the catalyst for much of this growth will be two-tier Cloud ERP system adoption.
Gartner also predicted that, by 2016, “heavily customized ERP implementations will be routinely referred to as ‘legacy ERP.’ In its place will be a “more federated, loosely coupled ERP environment with much of the functionality sourced as cloud services or via business process outsourcers.” By 2018, at least 30 percent of service-centric companies will move the majority of their ERP applications to the cloud.
The same study found that a total of 47 percent of organizations surveyed plan to move their core ERP systems to the cloud within five years, and 30 percent said that the majority of their ERP systems would be on-premises for the foreseeable future.
Two-tier or hybrid cloud ERP solutions are attractive to companies who have invested great resources in their on-premise ERP systems. These firms see hybrid systems as a way to modernize their systems without abandoning their on-premise ERP system entirely - they can add compatible functionality or equip other locations with SaaS cloud apps.
However, Gartner’s study also predicted that by 2017, 70 percent of organizations adopting hybrid ERP will fail to improve cost-benefit outcomes unless their cloud applications provide differentiating functionality. There is the potential of actually increasing the total cost of ownership. According to Carol Hardcastle, research vice president at Gartner, "Most organizations still fail to recognize and plan for the total lifetime costs of their ERP solutions, whether on-premises, cloud or hybrid. Such an approach actually leads to increased total costs once the additional costs for connecting the solutions together are taken into account.”
Major Players in Cloud ERP
As cloud computing continues to dominate the discussion of manufacturing ERP, several major players have emerged, with Salesforce becoming the premier platform.
It’s no surprise that Amazon and Google are both vying to become big players in cloud computing. Amazon Web Services (AWS) is an IaaS. NewsCorp plans to move 75 percent of its physical infrastructure into the AWS cloud over a three-year period. Info is one cloud ERP vendor based on AWS. Meanwhile, Google Cloud Platform is a set of modular cloud-based services that lets you to create anything from simple websites to complex applications. Google Cloud Platform’s list of products is smaller than AWS and focuses mainly on classic IaaS and PaaS services.
Not to be outdone, Microsoft has released Azure, their cloud computing platform and infrastructure for building, deploying and managing applications and services through a global network of Microsoft-managed datacenters. It provides both Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) and supports different programming languages, tools and frameworks, including both Microsoft-specific and third-party software and systems.
Some cloud ERP vendors are offered on Netsuite’s SuiteCloud platform, which offers customizability, but can be complicated and time-consuming to configure. Plex is a multi-tenant SaaS model focused on three sectors: motor vehicles, food and beverage, and aerospace and defense, but it is limited by reliance on internal developers.
SAP and Oracle are the traditional leaders of on-premise ERP systems and they are perceived by industry analysts as late to the cloud. SAP recently released both an IaaS and PaaS products, the latter letting customers and partners extend existing applications (either cloud or on-premise apps) and create applications that deliver new capabilities. Oracle has its own Oracle Cloud Platform, which is also a PaaS.
However, Salesforce stands out as one of the best-known cloud computing companies. Forbes magazine has ranked it the most innovative company in America every year since 2011. Salesforce’s cloud platform has experienced incredible growth and now supports nearly every part of a business, from sales to manufacturing. In fact, the Salesforce ecosystem has become a kind of industry in and of itself; software developers are constantly creating new apps for the platform to expand the reach of the platform and add to their customers' experience.
As many companies are looking to move their systems to the cloud, they also want cloud-based software that can be easily integrated with other apps. Salesforce has a huge lead over its competitors when it comes to ecosystem and platform maturity, as it clearly has the most applications, customers, revenue and advanced features, making it the clear market leader, said Gartner.
What to Consider When Looking for a Cloud ERP Solution
Regardless of which model you choose, there are important things your company must consider when shopping for a cloud solution such as cloud ERP.
- Cloud computing enables speed, agility and innovation. You must move from the drawing board to deployment. Can your organization adapt?
- Choose a cloud computing environment that's right for your organization. Is a private cloud, public cloud or a hybrid cloud solution best for your company? Which vendors offer these solutions and will they be in business a year from now?
- Security remains a critical factor in considering cloud ERP solutions. Are you ready to extend your enterprise security policy to the cloud?
- Customization has always been an issue with ERP systems. Manufacturing firms must spend time determining how easy it is to customize and add enhancements to cloud ERP systems. Public cloud platforms such as Salesforce, offer significant advantages for IT departments, allowing them to easily provide their own customizations to the written natively on the public cloud platform.
Manufacturing ERP and Salesforce
Manufacturers who have moved to cloud ERP have found that the access to big data on demand leads to improved business intelligence, and they can use this information to coordinate and collaborate with every department at every step in the supply chain. As the leading cloud platform, Salesforce provides a stable and growing cloud ecosystem for manufacturers looking for cloud-based ERP solutions.
In most cases, manufacturers want to choose a cloud ERP system is designed specifically for the Salesforce ecosystem and is 100 percent native to that platform, which means that their software runs 100 percent within Salesforce. The cloud ERP solution should support multiple companies, multiple divisions and multiple sites, all within a single tenant on the Salesforce platform.
A powerful cloud ERP solution represents every step in the manufacturing process, increasing efficiencies, controlling costs and, ultimately, increasing revenue. Check to see if the ERP has modules for sales order management, purchase order management, production engineering, inventory management, lot and serial control, scheduling and capacity planning, shop floor control, material requirements planning (MRP), manufacturing cost control and project control modules.
Since the development of the Salesforce ecosystem, manufacturing firms can take advantage of such cloud-based ERP solutions to easily integrate other Salesforce-based apps. As Salesforce continues to outpace its competitors, there will be more and more apps that can be integrated with the cloud ERP software.
Pat Garrehy is the Founder, President, and CEO for Rootstock Software.