The debate over cloud-based vs. on-premise based software systems is essentially over.
Investors backing new software companies essentially consider a cloud-based architecture table stakes. Legacy, on-premise software companies like Epicor, Infor and SAP are scrambling to port their older systems over to the Cloud—with varying degrees of success.
For any company evaluating implementing an inventory management system, the question is not whether to go with a cloud-based system, but when.
The benefits of a cloud-based inventory management system over on-premise based software systems are numerous. Here are some of the most significant:
IT savings. Because the vendor maintains and manages the software in a cloud-based architecture, customers are not responsible for the costs associated with server hardware, databases, data center operations and the IT staffing costs associated with it all. With cloud-based inventory management systems, customers will still need to pay for those things, typically in the form of subscription fees, but because all customers are sharing the infrastructure through technologies like multi-tenancy and server virtualization, the vendor can pass along those economies of scale.
Always on the latest version. In the case of Software-as-a-Service (SaaS)-based cloud deployments, all customers are on the same version of the software. That simplifies the upgrade and patching process. Cloud-based vendors release regular updates, typically twice a year, meaning customers are always on the latest version of the software. Moreover, because the updates are so regular with cloud-based inventory management software, the upgrades do not create the same business disruption that on-premise software can create, such as requiring new training and breaking integrations with other systems.
Ease of integration. Modern, cloud-based inventory management systems are built with open Application Programming Interfaces (APIs) that simplify integration with outside systems like Point of Sale and warehouse management. Additionally, as above, with SaaS-based inventory management systems, the customizations carry forward with every upgrade automatically, meaning those customizations and integrations don’t break.
Scalability. The elasticity of the cloud allows businesses to easily scale up—or down—as their needs change, whether they have 500 SKUs or 5,000. Without the need to set up hardware and infrastructure, manufacturers, retailers and wholesale distributors can quickly and easily open new locations, warehouses and stores. All they need is a web browser and an internet connection. Moreover, a cloud-based inventory management system allows businesses to easily account for multi-location planning because all data is unified on a single system in real time. Advanced systems allow locations to be broken down to the bin level to provide more finite tracking.
Yet, as before, the real question isn’t just whether to implement SaaS inventory management software, but when, and there are some compelling reasons to take that important step now rather than later.
Ongoing IT costs. The longer a business maintains its legacy systems, the more money its pouring into that software. That includes maintenance fees on the user licenses, IT staffing costs that could be cut or redirected to more strategic initiatives. Finally, servers and other hardware need to be refreshed as well, typically on a three-year cycle. Businesses that move to the cloud can escape that cycle and dedicate technology spending to other, more strategic inventory management initiatives like scanners, barcodes, IoT-enabled sensors and more.
Labor costs. In moving to a modern, cloud inventory management system, many businesses find that they can reduce or redirect staff who spend excessive time hunting down products, double checking inventory or reconciling spreadsheets. The money wasted on such efforts only accumulates the longer a business puts off a strategic move to newer inventory software.
Opportunity costs. Critical to any strategic discussion about whether or when to make the move to a cloud-based inventory management system is how much the lack of insight and agility of an existing system is costing. Be it lost business to customers frustrated with stock outs, an inability to take advantage of a new market or opportunity or a new customer base, lost opportunities can be difficult to calculate. But, based on the experiences of the thousands of companies that have made the switch from on-premise to on-demand applications, it’s clear that these systems can facilitate growth. The reduction of tedious, error-prone manual data entry allows staff to redirect their efforts to more strategic initiatives or customer service. Cloud systems that let companies track inventory in multiple locations, safety stock, re-order points, cycle counts, demand planning and distribution requirements planning enable product-based companies to move smarter and quicker, giving them a leg up on competitors still stuck on legacy, on-premise systems.
While point solutions designed to address inventory management alone offer significant incentives to move on from on-premise systems, a unified suite of applications that address all the data needs of product-based companies and those that mix product and services are real game changers. With a central repository of data around orders, inventory, customers, transactions and manufacturing processes, businesses have a 360-degree view of the entire business allowing them to meet the needs of the rapidly evolving business environment and the evolving demands of customers, both B2B and B2C alike.