October 7, 2024 With The Cloud There’s ERP For Future High-Tech Giants

Cloud ERPs establish a platform for standardization and modernization, opening the doors wide for AI while setting the table for growth.

By Patrick Maroney

Enterprise resource planning (ERP) systems have a myth to bust: that their complexity, built up over 50 years, puts them at a price point only the Fortune 500 can afford.

Ten years ago, when you needed on-premise data centers and a big, dedicated team to customize, maintain, enhance, and upgrade these end-to-end systems that integrated all aspects of a business, that was true enough. But then came the cloud.

Embodying industry best practices designed to solve specific business challenges, ERPs running in secure public-cloud environments bring enterprise resource planning to small and midsize high-tech companies with as few as a couple dozen employees.

Efficiencies are the currency of modern capitalism. Growth is the lifeblood of high-tech companies. If you’re a $50 million company gunning to be a $200 million company in the next five years (or the next Nvidia in ten), modern, software-as-a-service (SaaS) cloud ERP isn’t a luxury. It’s a necessity.

Process matters as you scale

Small, ambitious companies can use cloud ERP to improve efficiency and competitiveness while positioning themselves for growth. As you scale, process becomes increasingly important in achieving efficiencies and effectiveness. An ERP system establishes rock-solid foundations of master data and core processes across your diverse business activities.

It is critical to justifying the investments in technology. Whether you’re a software developer, fabless chip maker, component maker, or assembling it all, your solutions must be implemented quickly, with predictable and acceptable costs, and your architectures must accommodate your growth. Those solutions must also bring you process improvements that, by addressing your challenges, pay for themselves. 

With cloud ERP, ambitious high-tech companies can now leverage the enormous intellectual capital, in terms of industry best practices and systematized process baked into these systems, for pennies on the dollar.

Scalability with size and organizational complexity

Because ERP-providers operate these systems in the cloud, you don’t need expensive hardware and infrastructure investments to implement them. With a fit-to-standard approach based on industry best-practice processes that meet most of what your business requires out-of-the-box, you also don’t need legions of IT consultants to implement cloud-based ERP. Vital here is that the cloud ERP provides you with the ability to extend the solution without compromising the core code. That lets you implement unique processes that give you competitive differentiation while also keeping the core clean, enabling low cost and fast upgrades at the push the push of button.

As you grow, a cloud ERP will scale with you, assuming you go with an ERP provider with a track record of handling the demands of large, complex organizations with sophisticated product and service portfolios. Be sure to select a cloud ERP that doesn’t require you to re-implement if your business processes change from, say, manufacturing hardware to adding embedded software, a move that requires managing multiple revenue models simultaneously (subscription-based, consumption-based driving recurring-revenue) in addition to dealing with revenue recognition and proper user entitlements.

Minimize risks

Opportunities favor the bold, and aggressively expanding a business comes with legitimate business risks. Don’t add unnecessary risks related to how you handle routine business processes that cloud ERP software can handle in ways proven to drive optimization, address regulations, and satisfy present and future investors.

Patchwork solutions of spreadsheets, cheap data lakes that are easily hacked, and entry-level software that doesn’t scale are not cheaper in the long run. They leave you vulnerable to inflexibility, regulatory compliance, and hidden maintenance costs, driving up total cost of ownership. If your competition is exploiting the latest technology and process innovations, will they see insights sooner, move faster, adapt better, and take market share you should have earned?

Set the table for AI

Analytics are a big part of the value proposition for cloud ERPs, and artificial intelligence is taking strategic decision-making to the next level. It starts with access to your diverse business data – customer, human resources, supply chain, project management, order management, financial, and beyond – and opens doors to organization-spanning insights from AI use cases that can yield real competitive advantage.  Because you’re running a SaaS Cloud ERP, you automatically have access to the latest technology its platform provides, including AI algorithms and capabilities.

Cloud ERPs are increasingly embedding AI into core processes, enabling growth companies easy, low-cost access to innovations in areas that build competitive advantages and are seamlessly integrated into workflows, reducing barriers to adoption and cost. Another advantage of cloud ERP-embedded AI: It’s thoroughly tested, it’s reliable, and, because it’s based on your data, it’s relevant to your business. 

Adopting and leveraging new tech to drive competitive differentiation is critical to growth. Top-tier cloud ERPs can be delivered with simplicity, predictability, speed, and continuous innovation by providing out-of-the-box industry best practices, adoption and acceleration services, learning tools, embedded AI, and an extensibility for integration to other tools and data. All that reduces risks while providing high-growth companies with a secure platform for scale, resilience, and business value.

Patrick Maroney is a principal in SAP’s High Tech Industry Executive Advisory, working closely with customers on digital transformation.

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