Confronting the myth: Is cloud ERP the only solution?


Moving with the times when it comes to technology is no longer an option, but a necessity for businesses across the board. For manufacturers and distributors, investing in an Enterprise Resource Planning (ERP) system is no longer an option, but an essential software, regardless of industry or size.

However, as the world rushes deeper into the digital future with cloud computing at its helm, many have misinterpreted the term “cloud-first” to mean “cloud-only”, applying this concept to the implementation of their ERP systems.

While there are undeniable benefits to a cloud-hosted ERP system, the “Must use cloud” myth held by many organisations is exactly that, a myth. This is especially true for manufacturers and distributors in Africa where cloud penetration, although growing, remains extremely low. In fact, for some, a strong case still exists for on-premises and hybrid approaches to ERP system implementation.

The case for cloud

Like most other misconceptions, there is good reason many have been led to believe that cloud ERP is the only option. Improved operations and processes, the ability to explore new business models, lower operating costs, and flexibility to quickly scale and integrate with new technologies are among these key benefits all of which help manufacturers and distributors better cope with supply chain disruptions.

This flexibility is especially attractive to manufacturers who operate across several different time zones. In these cases, the single system created by cloud ERP comes with additional benefits such as centralised reporting, and stronger governance and compliance. Furthermore, since the system can be accessed by everyone, without the need for local instances, there is also improved collaboration and less need for multiple skill sets to support different locations.

However, even though cloud reduces the need for on-premise hardware, it does not reduce the need for IT skills within the business. In fact, cloud ERP may actually increase the need for manufacturers and distributors to invest in IT talent and retrain their staff. I believe, that it is at this point that the case for cloud-only faulters, especially in a South African context.

The case for a hybrid approach

It is important to note that the choice of where to deploy your ERP system is not binary.  There is no reason why you cannot divide your business systems between the cloud and local hardware, creating a hybrid environment. In fact, I would argue that there is a strong case to be made for hybrid in many, if not most cases, especially in South Africa.

This is in-part due to South Africa’s extremely high bandwidth costs. Recently, South Africa was ranked the 9th most expensive destination for fixed broadband globally. This drastically reduces the cost-saving benefits of cloud often making on-premise the more economical solution.

Furthermore, South Africa has mediocre internet speed at best, sitting 8% lower than the global average. This makes latency a significant concern as uploading large amounts of data could bring your network to a halt, counteracting cloud ERP systems productivity benefits. Recovery time objective in the case of a disaster should also be taken into consideration here. In some cases, it may be cheaper to retrieve lost data from a local source, rather than spending hours downloading it from the cloud. As a result, those operating in last-mile destinations where these problems are amplified or those with high bandwidth requirements, opting to deploy your ERP system across both on-premise and the cloud is more likely to help you achieve your desired success.

Finally, while most applications will migrate well to the cloud, that is not the case for the systems and applications this is not always the case. Manufacturers using legacy on-premise storage solutions will likely find full migration to the cloud impractical, finding that there is no easy route from local to cloud storage. Similarly, for those using highly customised integrations and non-standard interfaces, migration to the cloud poses significant a significant challenge.

There is no question that cloud ERP is crucial to enabling sustainable long-term growth, however, every manufacturing or distribution company has their own requirements and limitations, all of which will influence how they choose to deploy their ERP system. This choice ultimately depends on what is right for your business. While a cloud-based approach comes with numerous benefits, these can be enhanced by taking advantage of the benefits on-premise has to offer, leading to a sustainable and balanced solution.

By Johan du Toit, Strategic Sales Executive for SYSPRO Africa