Where cloud ERP pays off: raw transaction processing

ERP systems are not intended for heavy-duty transaction processing, but cloud systems are. This is where the two can meet.

ERP systems are notoriously expensive and complicated to implement and manage. But cloud may help ease some of this pain.

Clouds Crane over Hudson River  cropped June 2013 photo by Joe McKendrick
Photo: Joe McKendrick

That's the word from Joshua Morrison, who proposes new ways to handle ERP systems. In a recent post, he suggests that corporate financial transaction processing would be better handled by Software as a Service providers. ERP was always intended for analysis and reporting, not transaction processing. "SaaS will not replace the ERP, rather it will compliment it through the integrated exchange of transactional data to feed ERP and support enterprise planning, reporting, and analytics," he writes.

Morrison, a seasoned financial systems expert and small business owner, is bullish on the potential of cloud-based ERP. He proposes a hybrid approach that leave analysis and reporting work in on-premises ERP systems, and offload transaction processing to a Software as a Service provider.

Cloud offers a lot of functionality for small to medium-size businesses that usually can't handle the costs of ERP systems. This may not involve sensitive, internal corporate financial data, but data that is shared between trading partners. "It is becoming a best practice to migrate the processing of financial transactions with supply chain partners outside of the ERP and into the cloud," Morrison states.

Morrison lays out the numbers involved in cloud-based financial transactions versus maintaining them in on on-site ERP system. "Transaction management accounts for about 80 percent of ERP implementation time with the remaining 20 percent focused on data management, reporting, and analytics," he says. "Considering the average implementation costs upwards of $10 million, saving 80 percent of resource time and cost is quite significant."