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Why do SMEs Consider Cloud ERP?

Recently we as an SAP Business One Partner have seen an increase in enquiries for OnDemand or Cloud based ERP from smaller businesses compared to this time last year. Gartner estimates show the Software as a Service (SaaS) market is expected to grow to 18% of SME software sales by 2013, up from 6% of software sales in 2007. I have been out to meet most of these potential customers and found their reasons for wanting a Cloud solution to be very interesting. Initially I had assumed most people were looking to save money on buying and maintaining servers and software Cap Ex but cost is actually further down the list of reasons.

The majority of the businesses I visited had very similar reasons for not wanting an On Premise solution which I have highlighted below. I will also start a poll to get a better idea of what the main drivers for Cloud are for small firms, your input in commenting on this post will be appreciated.

Reasons given:

Need a scalable solution. The businesses I saw have all gone through a period of rapid growth, one of them were 5 staff in October 2011 and now employ 17 so they want a solution they can easily add users to in the future.

No in house IT Skills. This point was mentioned by everyone I saw. While you don’t necessarily need to be a techie expert to administer SAP Business One running on SQL Server it certainly helps to have some knowledge. If you factor in Active Directory and Exchange Server to the equation then these companies really felt safer letting someone else handle it and deliver them the finished article.

Multiple locations. They all work from multiple locations in the UK and some globally with employees working from flexible locations so the solution had to be delivered remotely somehow. Whilst we could look at the Terminal Services route, again this is something the customers did not feel comfortable handling On Premise.

Security. This really shocked me as I thought SMEs perception of Cloud ERP is that your data is in no fixed location and open to anyone to hack in to. 50% of the people I saw had experienced some sort of security breach in to their current legacy systems and felt that letting a reputable Cloud or OnDemand provider look after their data was actually safer than an on premise solution.

Save money. This was mentioned although by no means was it a major influencer. Severs and their upkeep and costs to power can become expensive and these costs can escalate if there are ever any major problems or disasters the business has to deal with. There is also the Software Capital Expenditure to consider with On Premise. Most Cloud providers charge on a per user per month basis so the business will see an ROI much quicker. This brings me on to my last point.

Business Continuity. This was mentioned by all the companies I saw, whilst most are used to taking tape back-ups off site, how many of them have actually run a DR or BC exercise with any success? Their view is that they would rather pay for High availability with a solid Business Continuity and Fail Over plan in place to prevent any potential down time.

This is promising and a good step forward for Cloud and the SME, with the advances of Office 365 and Cloud ERP becoming more affordable / reliable I think we will see a real uptake of subscribers as more and more businesses adopt the above views.

This post is based on my limited experience and I welcome comments, if anyone can help with some figures to back up the shift from On Premise to Cloud it would be appreciated. This infographic is courtesy of Office 365 but I quite like it. Washington DC top Cloud Friendly city!


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  • Good post Tim....don't forget that SAP Business One OnDemand integrates well with Office365 and also Google Docs for a full cloud solution.

    I'll be posting a couple of demo videos on my YouTube Channel shortly.


  • hi Tim - we are seeing the same set of reasons in the upper ME space as well in LE subsidiaries with solutions like SAP Business ByDesign as well as best of breed / point solutions like SAP Travel OD, SAP Sales OD and SuccessFactors.

    Underlying all of these reasons is a real need to focus on the business and see IT as an enabler. As the business could be changing rapidly, you need solutions that either keeps up or the ability to plug and play with new components, constantly adjusting your IT landscape.

    Cloud promises access to a variety of solutions that are all evolving rapidly. Vendors like SAP who provide suite solutions (SAP Business One, SAP Business ByDesign) have to work hard to ensure that the suite offers the best all round solution. 

    This is really good for customers. regardless of their size. And they can vote with their wallets. Ensuring that there i constant innovation from the suppliers.

    SMEs , ME, LE -> all are business struggling with the same issues. Just the scale differs.