Why does ERP system feel better in the Cloud?



ERP-accounting system for the enterprise





WHAT IS ERP SYSTEM AND WHY DOES BUSINESS NEED IT?

To succeed, the business needs to base its strategy on rational resource management. This approach is called ERP, Enterprise Resource Planning.


Despite the fact that this strategy is relatively recently, from the 1990s, the current business cannot be imagined without an information system for accounting and management of the company's processes, organizational structure, and resources. Implement the ERP strategy to help the eponymous application software package, ERP system.


In other words, ERP helps the company to navigate what it does, which resources it has, how to distribute income, what to report to fiscal authorities, how to work with employees, what way to choose for growing, and how to adapt to the current circumstances without losing sight of the strategic target. In IT terms, ERP is an application package that accumulates, stores, processes, analyzes, and distributes data critical for business. So everything is pretty simple.


Even if your company has implemented a super-advanced IT system, always remember the basic rules of information security. Let's repeat them again by reading our article Corporate cybersecurity: How to defend information values». It is crucial!


The key task for any ERP system is to optimize the working process in the company and increase efficiency by automating workflow, operations, and business processes. It is quite clear that even the most straightforward accounting application for expenses and income frees up a significant share of the resource of employees, at least due to the automated generation of reports instead of manual costing. Besides, automation can reduce not only costs but also the error probability.


The ERP solutions market is diverse and largely depends on local conditions. For example, globally, the leaders in user reach are Oracle, SAP, and Microsoft, according to a 2018 survey by Panorama. At the same time, in the market of Russia and some ex-USSR countries, the 1C enterprise management system prevails on SAP in popularity. It is due to the greater adaptability to the dynamically changing legislation of the post-CIS and Eastern European countries.



WHAT ARE ERP COMPONENTS AND HOW DOES ERP WORK

Regardless of the local features and tasks that are solved using this system, the comprehensive ERP package has common features in terms of structure and principles of operation. Let's consider them.


ARCHITECTURE AND MODULAR STRUCTURE OF ERP SOLUTIONS

Any ERP system is based on a three-tier client-server architecture: database layer → application layer → presentation layer (client interface)


As we told above, the ERP system is a complex of modules combined into a whole structure. The modules are interconnected and do not have well-defined boundaries — although the modules are divided on an application layer, they exchange data intensively, and general settings allow accessing them from the presentation layer. However, in addition to modules, ERP has core components that ensure functioning within the client-server architecture, module integration, and, as a rule, cross-platform.


The modular structure allows you to implement the ERP system in stages by launch modules accordingly to the priority of business tasks. For example, you can apply the accounting module first, then the inventory management module, and later, add the CRM and the HR-management module.

ERP system structure Basic elements of an ERP system


The basic ERP modules contain the following functionality:


  • Production — the integrated management of production (or engineering) process including planning, accounting for raw materials and production capacities, product specification, quality management, supply, sales, etc.;
  • Financial and Accounting — all components of financial statements, management accounting, planning and budgeting, asset accounting, risk management, business audit, etc ..;
  • HR Management — accounting for employees, their salaries and additional payments, planning, recruiting, motivation, talent development, etc .;
  • CRM — often this module is used as a standalone Customer Relationship Management System. This system allows you to collect information about customers, both existing and potential, to analyze it, plan the development, keep records of transactions, etc.;
  • Inventory or/and Logistics — automation of the supply process management, resources control, management of stock balances, transparent organization of tenders, etc .;
  • Project Management — costing, organization of work, analytics and project planning, etc .;
  • Industry specifics solutions — modules customized for specific tasks, e.g., for managing schools and other educational organizations, transport companies, entertainment, HoReCa, small business, etc.


The configuration and composition of the ERP apps package can significantly differ at companies and institutions of various sizes and areas of business.


HOW DOES ERP WORK

The operating principles of the ERP system directly depend on its structure:


  • ERP is an integrated transaction-based system;
  • it works in real-time;
  • a common database for all users of the company, which is connected to all application modules;
  • consistency and interconnectivity of all modules;
  • cross-platform — the ERP system can be installed to various servers and operating systems;
  • access to the system is via the client interface anytime and from anywhere;
  • the multi-level user access both vertically (in the hierarchy of the organizational structure of the company) and horizontally (within the department);
  • options of a platform to deploy: on-premises server, cloud solutions, or SaaS


The basic principle is the unified work of all users of the company with the database: creation, adding data, editing, upload/download, etc. But the levels of access for modules and data among employees of different departments vary depending on the hierarchy in the organizational structure, profile of activity, and other factors. At the same time, access rules don't depend on the geographical location or the platform from that the user accesses via the client interface. E.g., the logistics manager does not need access to the reports of the HR department, but he needs to control the stock balance of raw materials and finished products in the warehouse. Another example, an inventory accountant does not need access to the CRM module, but integration into the financial accounting module is vital. Besides, remote employees can log into the ERP system from mobile gadgets on Android or macOS, and office employees are connected to corporate Windows.


An equally important principle underlying the functioning of ERP systems is a transactional approach. Transactions with the database allow you to upload and download all necessary data.


Earlier, one of the essential principles of the ERP system was called replicability, which means the suitability of one software product to use in different companies, regardless of their business specifics and size. In the early 2000s, this approach really was justified, allowing businesses to save on information systems. In cases when the company had some specifics, its coders just changed the source code of the program. But such intervention into the proprietary software leads to terrible consequences, including bugs of varying degrees of criticality may appear, or losing the guarantee for the software product, or even crash of the system. That is why vendors of ERP solutions decided to develop the modular structure of their products actively, and then make additional functionality that takes into account the specifics of the profile of enterprises and organizations of various business sectors.


Thus, a new fundamental principle of ERP was formed — a combination of necessary (core) components that match for all companies, with support of modules for industry specifics depending on the business profile


Another principle follows from the previous one — support for multilanguage, multicurrency, and adaptability to the various countries legislation. Within the globalization circumstances, it is an unreasoned approach to limit an IT product such as an ERP system to the market of one country. Multinational corporations and enterprises oriented to the international market need an IT-complex of managerial and financial accounting with support for various currencies, languages, and the ability to integrate the regulatory requirements and law of different states


The principle of scalability is related to this principle, depending on the organizational structure of the company. It implies the ability to maintain in a single system various levels of corporate organizational structure (parent and subsidiary, branches, affiliates, etc.), multiple forms of ownership, different taxation schemes, charts of accounts, accounting policies, etc. The same principle is used in the formation of the ERP complex for companies with geographically dispersed teams.


Up-to-date ERP solutions implement all of the above principles. But it is clear that over time, the list of essential operating principles of ERP systems will be added with new ones.



ERP benefits for business

Let's consider the advantages of an ERP system implementation in the enterprise, as opposed to the archaic model of paper-manual accounting, and attempts to control the process using a variety of IT systems and products with weak integration of each other or even without it at all.


The benefits of an integrated ERP system are derived from its basic principles and structure described above. So, the ERP system:


  • Creates a single information space at the enterprise for effective interaction of all users both vertically (in the hierarchy) and horizontally (in the context of departments);
  • Accumulates and processes data, and form reports based on all the information necessary for decision-making;
  • Allows you to manage the levels of user access to a common corporate data array;
  • Automates docflow and company management processes;
  • Increases the user experience through the use of IT algorithms, processes, tools;
  • It works in real-time around the clock;
  • Allows you to use remote access;
  • It can be used in corporations with a branched organizational structure and remote employees;
  • Perfectly matches to use globally: through the use of different currencies, different languages ​​and paying attention to the specific financial and legal requirements of various countries, enterprises can work with contractors and clients around the world;
  • Does not depend on the hardware platform and operating systems;
  • Provides full control over the operating activities of each department of the company and the production process;
  • Standardizes company reporting and documentation;
  • Optimizes and synchronizes business processes;
  • Reduces costs and expenses associated with the geographically dispersed organizational structure of the business;
  • Simplifies analytics and forecasting, improves decision-making;
  • Provides the necessary data and tools for human resource management: talent acquisition and development, motivation, training, retention, corporate culture, loyalty management, etc .;
  • Increases the security of corporate information through a variety of information security policies, differentiation of access to data, the cryptographic protection for data transfer channels and data storage, etc .;
  • Integration with low-level systems (application equipment) allows you to get full control over the production process;
  • The modular structure allows you to implement the system step-by-step, adapting to the needs of the business;
  • Scalable as the business grows;
  • The use of industry-specific functionality allows companies of various fields and scale to obtain the most effective solution for business accounting;
  • Increases profit due to optimal resource management, and information transparency at all levels.


Sure, each of the business that uses ERP solutions will add its own list of benefits. But no matter how many there are, all they come down to one significant consequence: ERP makes better the business.



ERP system in the Cloud — the best way to the business efficiency

So, we can answer the question, does the business need an ERP system — definitely, yes! And the next issue is — where an ERP should be placed? Actually, there are several options – either on the on-premises corporate server or the capacities rented from the provider: on the VPS, or a dedicated server, or in the cloud. Current trends in the ERP market show that more and more companies of various scales and areas of activity are choosing the cloud for their ERP deploying. Why exactly cloud solutions attract users more? Let's explain the reasons.


By installing a whole ERP apps package or separate modules on an on-premises server in the company's office, it is critical to remember that its computing capabilities are limited. By choosing the required technical characteristics of the server (the number of processor cores, RAM, drive space, network interfaces, and other settings) — is worth considering the prospects for business growth. When the time is coming, you'll need to upgrade or even replace the equipment with a new, more powerful one, and it is always troublesome and increases costs.



In the cloud solution provided by the high-end infrastructure provider, the equipment works according to a different principle: all servers, routers, switches, data storage, backup systems, and other components are combined into an entire resource pool of computing capacities. Users can be allocated from this pool as many resources as they want to rent.


Below we list the essential benefits of deploying ERP in SIM-Cloud IaaS in opposite to an on-premises server:


Benefits of hosting an ERP accounting system in the cloud Benefits of the cloud deployment of ERP solutions
  • Cost-efficiency — Costs of the IT infrastructure maintaining are transferring from CapEx to OpEx. You do not need to purchase expensive server equipment and communication networks, as capital commitment with the amortization. It is enough to pay for access to the provider's resources on the Internet on time and to purchase inexpensive terminals for the remote working of users. Thus, the use of leased cloud infrastructure is similar to receiving services from suppliers of electricity, heat supply, telecommunications services, etc.;
  • Increased high-availability of the system due to locating cloud servers in Tier III+ class datacenter in Germany;
  • Improved information security due to the use of cryptographic protection to hardware and software, secured data transfer channels, the advanced backup service SIM-Cloud BaaS, and storage for backup archives in the remote data center;
  • Legal protection — the equipment and all data of the cloud, which is deployed in German data centers, is reliably protected by the Law of Germany. Therefore, your ERP is not at risk of unauthorized capture;
  • Quick software updates and system upgrades in the cloud (your participation doesn't need in);
  • Flexible scaling when changing needs — e.g., when the number of users is increasing, or adding new modules of the ERP system, etc .;
  • Convenient integration of ERP with other cloud services using load balancing, virtualization, so on.

Before migrating your ERP software to the SIM-Cloud IaaS, you can order a free trial of our cloud. To do it, please, contact our Customer Care, and our experts will help you!



The cloud is a great choice to host an ERP company. But, moving to the cloud, keep in mind the following points:


  • You need a reliable Internet service provider, or better, two because access to the system running in the cloud is not possible when the Internet connection is failed or disabled;
  • Some of the IT department employees could be of your company since the tasks of supporting and administering the equipment are transferred to the provider;
  • Pay for the cloud services to the provider on time to avoid the disabling of the services.


It's important to decide what type of infrastructure will suit your project before you are choosing a cloud platform for hosting ERP:

  • public cloud, a popular, multi-tenant infrastructure, where a large number of users isolated from each other work simultaneously by using shared resources between them;
  • private cloud, a single-tenant solution, significantly greater management, control and level of security, but at a higher price;
  • a hybrid cloud that combines the capabilities of private and public clouds: most of the calculations are performed in a more secure private cloud, and the resources of the public cloud are used during peak loads.


But anyway, no matter what exactly cloud option you choose, it is essential that your choice fully matches the needs and capabilities of your business. We, SIM-Networks, help our customers to specify their needs, and then we offer optimal solutions. We care about how your ERP system will feel in our cloud.


CONTACT us at any time — our specialists are in touch around the clock. SIM-Networks engineers will quickly and professionally help you migrate your ERP solution to our cloud at a convenient time for you!


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