So you’re considering moving to an ERP Program or Service in the Cloud.  Here is some insight on the opportunities, the risks, and things to consider when considering a cloud ERP Program, or Service:

The Opportunities and Benefits:
  1. Cost – Cloud computing eliminates capital expenses involved with hardware, software setup and upgrades. If the cloud is based off-site with a third-party it eliminates electricity and cooling costs associated with the electronic equipment involved, as well as the IT hours necessary to maintain and update servers and equipment.
    1. This includes replacement of data storage when it fails.
    2. Upgrade costs when new versions are produced.
    3. Note that previous capital expenses are replaced with operating costs for monthly cloud service fees.

 

  1. Scalability – An Organization may be able to adjust its technology requirements based on its need and adjust effectively and promptly since previous capital expenses won’t have any impact. Increasing or reducing services based upon necessity is easily obtained with an established CSP (Cloud Service Provider). (e.g. Amazon Web Services and Google).
    1. Ability to adjust cost in high-demand and traffic seasons.
    2. Ability to scale growth without altering infrastructure as well as vice versa.

 

  1. Decreased Management of Technology – This allows IT personnel resources to be spent on the business itself and not the IT structure behind it. IT function can focus on efficiency of devices and usage rather than the equipment and maintenance of the network allowing them to have more business-oriented goals.

 

  1. Security and Performance – Depending on the size of your Organization the security and performance protocols followed by a CSP may not be achievable in a cost-effective nature by an Organization of smaller size and therefore strengthen internal controls, security, infrastructure, and performance.

 

The Risks:
  1. Internal Controls of your CSP – An Organization may not have an influence on the CSP’s internal control procedures and therefore may be at the mercy of the CSP.

 

  1. Reliability and Performance – An Organization can ensure their ISP (Internet Service Provider) connection and devices are performing adequately, however, may not have direct influence in the performance of their CSP. Although a service contract may have specific requirements for performance, the CSP’s infrastructure must maintain the capability to perform in high demand periods.
    1. Consider this… if your CSP experiences a power outage… will your cloud go offline? And if your cloud goes offline…will the daily functions of your Organization come to an abrupt halt?

 

  1. Vendor Lock-in and lack of conversion capability – Consider the applications used under your CSP and their capability with other CSP and third-party programs. If the data created under your current CSP’s proprietary tools and the Organization’s data isn’t easily extracted or converted a large burden may arise if your Organization becomes unhappy with the performance of the current CSP and changing CSP or reverting out of the cloud may be encumbering.

 

  1. Cyber-Attacks – The more Organizations on a single cloud structure may present a more desirable target for hackers. Therefore, a risk of using a public or community cloud may be higher.

 

Other Things to Consider:
  1. Bandwidth/Device Capability – Consider the bandwidth your Organization currently uses without Cloud based systems. What do you consume now and what will a cloud-based system require?  Does your current Internet Service Provider (ISP) meet these requirements?  Is there room to grow if more applications move to the cloud or become more internet dependent?  Do your devices have the necessary hardware to support the speeds required to have smooth operation with cloud-based systems?

 

  1. Servers – General practices may suggest replacement of servers every 4 to 6 years. Will moving your ERP or the program you’re considering alleviate the need to maintain and replace servers and equipment?  Are you adjusting your savings or ROI accordingly?

 

  1. Backups and Recovery – How often will your CSP backup your data? Will it cost you to replace data?  Can you test and implement data recovery on a planned basis to ensure your controls are operating effectively in case a true loss occurrence happens?  Where does your CSP backup your data and is it at the same location the cloud equipment is located?

We understand there is A LOT to think about when it comes to an ERP. We hope this post can simplify some of the process for you.

Feel free to give us a call with any questions! Contact us 

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Kirk Hamblin

As an assurance manager, Kirk oversees municipal, water districts, special districts and not-for-profit audits. This includes collaborating with clients to establish expectations and helping to ensure that his team is providing the best level of service. He also provides recommendations for improvements and best practices. Using his strong organization skills, Kirk is responsive to clients and often manages multiple engagements at once. That being said, you can always count on his full attention when he’s working on your audits. You can reach Kirk at 714-672-0022. Read Kirk's full bio.