October 28, 2013, 11:28 AM — Cloud computing has enabled small and midmarket businesses (SMB) to offload costly, resource-intensive functions like storage, web hosting, and email, but many smaller companies still struggle to cobble together sufficient enterprise resource planning (ERP) solutions to manage their business processes and plan for future growth.
ERP has long been a mainstay at large enterprises that use the software to monitor and manage their core business processes. It's a crucial business tool, helping to keep production, order processing, and inventory management running smoothly, and to make tracking business resources such as cash, raw materials, orders, payroll, and production capacity seamless between both internal and external stakeholders.
But for SMBs, there haven't been many options available, says Joel Stangeland, CEO of ERP solutions company Trek Global.
"As small and midsized companies grow, the solutions they've used aren't able to scale," he says. "Once a business outgrows Quickbooks, the next option is a Tier 1 enterprise solution, which is really costly and inefficient," he says.
"So, many growing businesses end up cobbling together piecemeal systems to handle finance, inventory, purchasing, sales, various databases, payroll, integration with Web stores and online ordering -- it's incredibly complex," Stangeland says.
Cloud Meets ERP
Stangeland's company, Trek Global, has just released a cloud-based ERP solution that designed to remove the obstacles to ERP integration for SMBs, he says. Because it is a cloud-based service, it leverages the cost-savings and efficiencies the cloud affords, while using a transaction-based payment approach, he says.
"In the midmarket, one of the big hurdles to greater ERP adoption has been the infrastructure. These businesses don't always have the funds or the technical ability to build their own data center, to have the infrastructure that can support a full-scale ERP solution," Stangeland says. But that requirement's going to evaporate with the cloud, he says.
In addition, a per-user, per-transaction pricing model makes ERP affordable for any sized business, and those cost savings can be reinvested in the business to spur growth, Stangeland says.
"The pay-per-transaction model is so much more affordable. Before, the licensing costs for traditional ERP solutions were very intimidating, and it was hard to scale systems; often times, companies didn't know or couldn't predict what type of volume they were going to see, so they ended up either purchasing an inadequate solution, or one that was too powerful for their needs," Stangeland says.
That meant that features and functions of these solutions just weren't used -- it was a waste of money, he says. Of course, the cloud has made the pay-as-you-go model a must-have for businesses and will eliminate these problems going forward, he says.
"Traditonal ERP obviously wasn't developed with the cloud in mind, since it didn't exist in its current form," he says. "We've designed this system from the ground up with the cloud in mind, instead of having to retrofit an existing product to work in the cloud," Stangeland says.
Gartner: ERP Vendors Slow to Embrace the Cloud
Even as the cloud becomes more ubiquitous, traditional ERP vendors have been slow to embrace the cloud, and forcing many businesses to adopt "a strategy that moves away from a monolithic ERP architecture to a more hybrid approach, which includes on-premises, cloud, mobile and analytical applications," according to Gartner's May 2013 report, CIOs: Use Your Strategy to Evaluate Cloud ERP.
Most ERP vendors haven't felt the impetus to move completely to the cloud, but, Stangeland says, as more and more customers demand the flexibility and efficiency the cloud can provide, they'll have no choice.
Gartner's research, too, advises companies not to "select an ERP solution based solely on your requirements today. Determine how well the product and the vendor's product strategy will meet your needs for the next five to 10 years."
Sharon Florentine covers IT careers and data center topics for CIO.com. Follow Sharon on Twitter @MyShar0na. Email her at firstname.lastname@example.org. Follow everything from CIO.com on Twitter @CIOonline, Facebook, Google + and LinkedIn.
Read more about enterprise resource planning (erp) in CIO's Enterprise Resource Planning (ERP) Drilldown.