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10 Min. Read

What Is Cloud ERP Software & How Does It Work?

What Is Cloud ERP Software & How Does It Work?

One of the advantages of living in the age of the internet is how easy it can make life. This is especially true for businesses and business owners. In today’s market, there’s a software option for just about any business activity you can think of. There are even entire packages of software that help a business function from the very beginning. One of the most helpful software options available today is enterprise resource planning (ERP) software. This software has been around for a while, and more modern entries are actually becoming cloud-based.

If you’re looking for cloud-based ERP software, you’ve come to the right place. We’re going to cover everything you need to know about cloud ERP software for your business.

Here’s What We’ll Cover:

What is Cloud-Based ERP Software?

The Components of Cloud ERP Software

Comparing Cloud-Based Options with On-Premises Options

Different Types of Cloud ERP Systems

What Are the Benefits of Using a Cloud-Based System?

Key Takeaways

What is Cloud-Based ERP Software?

Cloud-based ERP software is similar to ERP software, but it’s based in the cloud entirely. What does that mean, though? It means that the system, as well as its data, is located in a remote storage space. It is then accessed by using an internet connection. The remote server and storage location is something you’re familiar with already; the cloud.

Many cloud vendors and cloud platforms are able to be accessed in real-time, and from anywhere. This is a huge advantage over the technology of yesterday. It means that you, as well as your employees, can access the information vital to doing business when it’s needed.

While cloud-based ERP options have been available for a while, they became much more mainstream recently. This is largely due to the global pandemic. As businesses shifted to remote work, employees needed a way to access their software from home. A cloud-based ERP solution was the answer for many companies.

The Components of Cloud ERP Software

ERP software itself is fairly large. It contains many different components, designed to help an enterprise-sized corporation run. As you can expect, these components are all specialized, meant to help with certain processes. Most ERP software comes with financial and accounting functions. However, many cloud-based ERP systems come with much more. Below you’ll find many of the components offered by different software providers.

Financials and Accounting

These are the core business processes that ERP options aim to assist with. Arguably, they are the most important functions for any business. Cloud core financial management options offer access to financial data from anywhere. The same goes for the accounting side of things. You’ll want to have easy access to this so that you can stay on top of your business’s finances.

Human Resources Management

Many responsibilities covered by human resources can benefit from cloud-based software. It allows your recruiters and interviewers to obtain candidate information while on the go. It also means that all documents pertaining to human resources policies can be accessed easily.

Customer Relationship Management

Often, you’ll find that people confuse ERP software with customer relationship management (CRM) software. However, CRM software can be included in an ERP package. The same cannot be said for standalone CRM software. CRM programs are centred around customer service. They help streamline the customer service process, leading to a better customer experience. Customer satisfaction is a big part of being a successful company. If you have a largely customer-facing business, you’ll want CRM software with your cloud ERP program.

Inventory Management and Order Management

These two functions go hand in hand. Having a cloud solution for inventory management can help your business operations run smoothly. You’ll be able to tell when you’re running low on inventory, and make sure that you can order more. Being able to do both from the same program can save time and money for a business. This makes these functions an important part of cloud-based ERP options. Some even include options for warehouse management, as well.

Supply Chain Management

Manufacturing companies need to be able to manage their supply chain. Some of the largest issues we’ve seen during the global pandemic have been related to supply chains. Being able to handle all of your business’s supply needs in a single program eliminates wasted time and efforts.

Project Management

Businesses run on projects. Most processes can be made more efficient through a project, and expansion requires project management, as well. As such, making sure that you’ve got good project management functions is essential. A great cloud-based option for ERP software will allow your project teams to work together from anywhere. This makes projects far more efficient, in most cases.

Comparing Cloud-Based Options with On-Premises Options

You may be wondering how cloud-based software and traditional software are different from each other. Traditional software, also known as on-premises software, has some drawbacks by comparison. Let’s compare the two, starting with on-premises ERP software.

On-Premises Software

On-premises software is installed and managed by a company’s staff. The department responsible for this would be the IT department. When you use on-premises software, it has to be purchased or licensed outright. This is the case for many business applications. Then, to be able to run the software, your company will have to have enterprise-grade servers. These can be purchased or leased, depending on your business’s needs. Without them, the company won’t have access to the data, nor will they be able to run the program.

In addition to the initial costs, businesses will also have to pay for other programs that work with the software. They’ll need to purchase security software, backup systems, and supplementary software. All of these will have to be provided by the business.

Cloud-Based Software

When you choose cloud-based software, you can take a more hands-off approach. Cloud-based ERP vendors are responsible for everything regarding the software. This means that they take care of the installation, data storage, operating systems, and servers. They also maintain the centralized database for the program. This takes a lot of the responsibility away from the business, making it much easier to use.

When you choose cloud-based softwares, you get an all-in-one option, too. They don’t need supplemental programs in most cases. Additionally, they handle all of the security, with regular security updates. This makes it a more cost-effective option for most businesses.

Different Types of Cloud ERP Systems

With technology constantly evolving, there are many different software options available. The same can be said when it comes to cloud-based options. Not all cloud-based software is the same. In fact, not all clouds are the same! As such, there are quite a few different ways to approach cloud ERP programs.

  • Multi-Tenant: As the name implies, multiple businesses use this software. The vendor manages it. However, even though multiple businesses use the software and the same servers, the data is segregated. This prevents possible issues with data breaches. Most cloud-based ERP systems are multi-tenant.
  • Single-Tenant: Similar to the multi-tenant option, but only a single business uses the software. This allows servers to be made unique to the business using them. Sometimes, software companies will offer a single-tenant option or a multi-tenant option.
  • Public Cloud: This is the type of cloud that most people are used to. It’s a cloud that is available to multiple organizations, but data and applications are only accessible to unique users. Examples of this are Google Cloud and Amazon Web Services.
  • Private Cloud: A cloud that is owned and used by a single organization. No other organizations can access it.
  • Hybrid ERP Software: A software that has both cloud-based and on-premises functions. Therefore, the software is a hybrid of the two traditional models.

What Are the Benefits of Using a Cloud-Based System?

Cloud-based systems come with a host of benefits that on-premises systems don’t. We touched on a handful of them earlier, but we’re going to dive a little deeper.

Accurate Upfront Costs

When you decide to use a cloud-based ERP option, you have the benefit of having accurate upfront costs. Because the software is an all-in-one solution, you don’t have to worry about finding add-ons. On-premises software will need supplementary programs, antivirus and security programs, and hardware upgrades. A cloud-based software comes with everything you need to get started. They’re designed so that companies don’t have to prepare anything for them.

Lower Operating Costs

An on-premises software option has to be managed by someone. This can be your company’s IT department, or a third-party vendor. Regardless, it will cost a good amount of money to install and maintain an on-premises ERP system. Cloud-based systems are maintained and managed by the vendor. That means that if an issue arises, or the program needs an update, they’re handling it for you. You can reduce your labor costs throughout the lifespan of the software.


Cloud-based software has the advantage of speed on its side. Because the software doesn’t have to be installed to every computer, it can be implemented quicker. This means that employees can get to work with it right away. It doesn’t have to be phased in or done in stages. It’s ready the minute you subscribe to it.


When you’re using cloud-based software of any kind, you get the advantage of access. Because all of the program’s information is stored on the cloud, most devices can get to it. When you use on-premises software, it’s installed on the computer you’re using at work. Cloud-based ERP software has no limitations on where it can go. In fact, many of them provide mobile access! This means that using mobile phones, or another mobile device, you can get to the software. It can be taken anywhere.


Cloud-based ERP software grows with your business. Many of the vendors that provide this software offer it in tiers. This means that you can get the services and access that you need. Then, as your business increases in size, you can increase the scope of the software. This is great for businesses that expect to see a lot of growth in the near future, of course. You’ll only ever have to pay for what you need, and nothing more.

Key Takeaways

ERP software provides many solutions for large businesses. However, cloud-based ERP software takes it a step further. Being able to take your software with you wherever you go means that you can access crucial data anywhere. It really makes managing a company much easier. If you’re looking for more finance and business articles, visit our resource hub. We cover a range of topics for professionals and industry enthusiasts!