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Weighing up the Pros and Cons of Cloud computing is becoming increasingly topical. The leading ERP software providers are moving more and more programmes to the public cloud. This inevitably forces ERP users to consider the implications.
These are not insignificant for companies. Especially when ERP software is installed locally and standard office solutions (such as Office 365) are running in the Cloud, it is important to get a clear overview.
What is 'Cloud Computing'?
Cloud computing describes computer systems that are completely hosted on the internet and made available to the user via a web browser. This means that the user does not have to worry about hosting his software solution. The software solutions and platforms are operated directly by the providers in Data Centres. The user only needs to have a Client with an internet connection to use the software from the cloud.
Comparison
Why is Cloud computing a topic that needs to be discussed in the context of an ERP implementation?
Computing from the public cloud has been gaining ground for years, with many companies now slowly giving up their initial reservations. Besides the obvious advantages, there are still stumbling blocks that should be considered and overcome to ensure a sustainable decision. Some relevant questions are addressed in the following article: -
The Pros of Cloud Computing
1. Cost Savings & Cloud Computing
One of the most common reasons cited in favour of public Cloud computing is certainly the fact that no on-site infrastructure is required for the services. The Cloud provider makes the necessary resources available in its own data centre, with Users usually only needing a web browser and an internet connection to access their services. The elimination, or at least a significant reduction, of physical hardware such as servers and the I.T. professionals to maintain them, are strong arguments in favour of cloud-based computing. The cost savings can often be even greater if the incidental costs incurred - e.g. for maintenance work or electricity to run and cool the company's own servers - are included within the calculation.
Companies using cloud computing services in selected countries in Europe in 2020
2. Scalability of Cloud Software
Scalability essentially means that resources can be added and removed promptly and cost-effectively. The good scalability of public cloud solutions compared to on-premise solutions is undoubtedly one of the most important arguments for switching to cloud computing, bringing with it a number of advantages for companies: Short-term increases and decreases in demand can be absorbed almost optimally. Furthermore, cloud software can simplify and accelerate the implementation of strategic decisions at the corporate level. For example, newly acquired companies in a group or corporation can be quickly integrated in terms of software with the help of ERP solutions from the cloud. If one of the associated companies is then to be sold, it can be similarly quickly spun off again and equipped with another ERP software from the public cloud suitable for the transition phase or continued operation.
3. Up-to-Date Innovative Services Through Cloud Solutions at the Ready
The cloud provides access to dynamic innovative services. With innovations advancing so rapidly in todays world, it pays to be well equipped and prepared for this with your integrated software, this is easily achieved through cloud computing. Access to the latest software can normally be achieved at an affordable price and includes not only a modern, user-friendly interface, but also access to innovative functions such as Machine learning, Analytics or the Blockchain.
4. Security in Cloud Computing
I.T. Security is a topic that proponents and critics of public cloud computing alike use to support their respective positions. On the positive side, it is usually the case that a public cloud service provider can and usually does invest much more in data security than the majority of SME's would probably ever be able to. The reasoning for this being that security is part of the cloud provider's main business and they usually have a lot to lose by neglecting this matter. A comparably high degree of standardisation of the software solutions offered also benefits a cloud service provider here. If a major problem with a software is discovered or reported by a customer, the other software users of the same cloud provider usually automatically benefit from the problem resolution.
Figure: Impact of the cloud on digitalisation.
To what extent has the use of cloud computing contributed to the digitalisation of the following aspects in your company?
The Cons of Cloud Computing
Cloud computing may also introduce new challenges, however this should not mean that the Cloud should generally be judged negatively, instead such challenges should be taken into account. Only when the potential challenges are weighed against the advantages will a basis for an economically sustainable decision emerge. A detailed analysis often reveals that some of the disadvantages discussed do not apply at all or only to a limited extent to the given initial situation, while others can be ruled out or at least significantly mitigated with reasonable effort.
1. Data Security Data Availability
The argument of dependence on one provider can weigh heavily for a company. When it comes to data security and availability, one is usually dependent on the cloud provider, a challenging decision not helped by the seemingly regular reports of data and security leaks both on the internet and elsewhere.
There are also reports in circulation where, for example, companies suddenly had no access to the software and their data in the public cloud because their access was blocked by the provider due to a debit error or a similar incident. Such incidents can of course occur and it would be foolish to ignore them. However, to reduce the chances of this it is always prudent to be aware of the services that are provided by the cloud provider.
This topic will be dealt with in more detail in a separate article in this series. However, a brief note on this: it is also in the interest of most cloud service providers - who are now operating in an increasingly competitive market - to avoid such incidents or reduce them to a minimum. Furthermore, effective precautions can often be taken with acceptable effort.
2. Limited Individualisation
Another point is that cloud solutions are commonly more standardised than their 'on-premise' equivalents. The cloud providers want to provide their software to as many users as possible unchanged or only slightly customised. In this way, they can save costs and ultimately also offer cloud services significantly cheaper than on-premise software.
From the point of view of companies that need individual solutions, this is a disadvantage that disproportionately restricts their leeway. For example, this can come into play to a greater extent when ERP software from the cloud is to work together with local software.
3. Dependence on the Cloud Provider and Cloud Service Provider
A similar topic is the debate about so-called vendor lock-in and portability or interoperability. The idea behind this is that cloud service providers try to bind their customers with specific and proprietary solutions and thus make it difficult to change providers.
4. Poor Portability
A switching option and a data relocation scenario should always be an integral part of every good cloud strategy. There are a number of reasons why it may be necessary to switch providers or move data back into the company. This could be, for example, a realignment of the company that would make certain cloud services superfluous or a discontinuation of a cloud service on the part of the provider, or in more drastic cases, a complete change of ERP software.
Summary
ERP solutions from the public cloud - as much as their advantages are publicly advertised - certainly also have disadvantages that should be both recognised and addressed in detail as part of a balanced decision-making process. Of course, this does not mean that the public cloud is a bad solution per se. It can be assumed - the currently increasing acceptance also points in this direction, and there are enough studies and white papers by various manufacturers such as Oracle, SAP and Microsoft - that the public cloud will increasingly displace or complement local software solutions due to the often predominant advantages. It's just a matter of carefully weighing up the respective advantages and disadvantages. Depending on the individual starting position, the result could be different - but often in favour of cloud computing.
