The strategic adoption of Cloud-based ERP systems is accelerating
As organizations face the very real challenge of staying competitive, the adoption of Cloud-based ERP systems is emerging as a strategic priority. This shift is not merely a technological upgrade but a move towards enhanced efficiency, security, and innovation.
In fact, while 70% of organizations were satisfied with their on-premises ERP systems in 2021, this number has dropped to just 38% in 2024.
This is according to the IDC InfoBrief, “Maximizing Your ERP Transformation through Cloud Migration.” IDC is a leading global provider of market intelligence, advisory services, and events for the technology and telecommunications sectors.
In this blog, we explore why there is now an urgency for businesses to move to the Cloud.
While 70% of organizations surveyed in 2021 found their on-premises enterprise applications adequate, this figure has plummeted to 38% in 2024 due to various operational challenges and disruptions. This marks a 32-point decline in just three years!
IDC InfoBrief “Maximizing Your ERP Transformation through Cloud Migration”
Why the shift toward Cloud ERP?
Cloud ERP offers a host of advantages, addressing many of the issues that have led to dissatisfaction with on-premises systems. Organizations are increasingly recognizing that Cloud-based systems provide better scalability, security, and flexibility.
The Cloud model also reduces operational costs by eliminating the need for physical infrastructure and IT maintenance while offering continuous access to the latest technologies, such as AI and machine learning.
Businesses are now grappling with issues such as hybrid work, rising software maintenance costs, and stringent security compliance. On-premises systems are struggling to meet these demands, making Cloud-based ERP solutions more attractive.
The IDC market data reflects this trend: by 2027, Cloud-based ERP systems are set to overtake on-premises solutions in terms of market share, growing from 42% in 2023 to 52% by 2027.
This represents a significant shift in just a few years, with Cloud ERP growing three times faster than on-premises solutions. The Compound Annual Growth Rate (CAGR) for Cloud services is 15%, compared to just 4% for on-premises solutions.
Click to read How Cloud ERP can change your organization for the better gated
Key benefits of Cloud ERP systems
- Risk mitigation and security: Cloud-based ERP systems provide advanced security features that meet the growing demand for data protection and regulatory compliance. Cloud providers continually update security protocols, mitigating the risks associated with cyberattacks and data breaches.
- Access to innovations: Cloud systems offer real-time updates, ensuring businesses are always equipped with the latest technological advancements, which is crucial in staying competitive.
- Seamless integration and data flow: Cloud ERP systems allow for smoother integrations across various departments, facilitating unified data access. This improves decision-making by promoting a data-driven culture across the organization.
- Cost efficiency and scalability: Cloud solutions eliminate the need for substantial upfront capital investments in hardware and IT infrastructure. Instead, businesses benefit from a subscription-based model, which spreads out costs over time and allows them to scale up or down as needed.
The consequences of delaying ERP modernization
The cost of not modernizing ERP systems is becoming increasingly clear. Organizations that continue to rely on outdated, on-premises systems face rising operational inefficiencies, higher maintenance costs, and potential security vulnerabilities.
As digital transformation becomes the norm, businesses that fail to adopt Cloud-based ERP systems risk falling behind their competitors.
The operational challenges posed by hybrid work environments, increased security threats, and the rising costs of maintaining on-premises systems are only expected to grow.
IDC predicts that by 2027, on-premises ERP systems will shrink by 10%, while Cloud solutions will expand by the same margin. Organizations must act swiftly to modernize their ERP systems to ensure long-term sustainability and competitiveness.
A strategic approach to Cloud migration
Migrating to Cloud-based ERP is more than just a technical upgrade; it’s a strategic initiative. Organizations should prioritize clear KPIs, robust change management, and a solid data strategy to ensure a successful transition.
By adopting standardized best practices and limiting customizations, businesses can maximize their return on investment (ROI) and achieve a streamlined ERP system that meets the ideal of a "perfect" ERP.
The IDC InfoBrief, Maximizing Your ERP Transformation through Cloud Migration emphasizes the growing strategic importance of accelerating the adoption of Cloud-based ERP systems.
While on-premises was the enterprise application deployment type of choice for past generations, modern organizations are increasingly turning to the Cloud.
IDC InfoBrief “Maximizing Your ERP Transformation through Cloud Migration”
Here’s a round-up of their key points:
- Dissatisfaction with on-premises systems is massively increasing. Many organizations find on-premises ERP systems inadequate, particularly as operational challenges evolve, such as adapting to remote work, regulatory compliance, and AI integration. Between 2021 and 2024, satisfaction with on-premises ERP dropped significantly, from 70% to 38%.
- Migrating to Cloud-based ERP systems is crucial to future-proofing organizations. Cloud ERP systems offer greater scalability, lower maintenance costs, enhanced security, and access to the latest innovations. This shift helps organizations avoid the risks and growing costs associated with legacy systems.
- The Cloud is expected to overtake on-premises ERP by 2027 in market share, growing over three times faster. Cloud ERP systems allow for easier integration, agility, and scalability—enabling organizations to adopt more data-driven, flexible, and standardized operations.
- There is an urgency for ERP migration because delaying modernization increases exposure to security risks, maintenance costs, and operational inefficiencies. Organizations are encouraged to start planning their ERP Cloud migration to gain competitive advantages.
Final thoughts…
The shift to Cloud-based ERP systems is not only accelerating—it is becoming a necessity. The benefits of Cloud ERP extend across technology, processes, and people, offering improved security, integration, and innovation.
With market trends showing that Cloud-based solutions will soon dominate, organizations should make ERP modernization a top priority. Those who embrace this change will be better positioned for growth, agility, and long-term success.
Success in ERP modernization requires a clear vision, effective change management, robust data strategies, and the minimization of customizations. This approach ensures organizations can quickly adopt innovations, improve internal processes, and maintain an agile operational framework.
How Unit4 can help your organization accelerate your Cloud journey
The era of on-premises ERP systems is drawing to a close. Rising costs, security risks, and growing dissatisfaction have made Cloud migration a strategic imperative.
At Unit4, we're dedicated to guiding organizations through a seamless transition to the Cloud. By leveraging our expertise and proven methodologies, we help businesses maximize the benefits of Cloud-based ERP.
Delaying modernization can lead to increased operational vulnerabilities and missed opportunities. Embracing Cloud ERP not only mitigates risks but also unlocks a wealth of potential for long-term growth and success.
You can download the full IDC InfoBrief “Maximizing Your ERP Transformation through Cloud Migration” (doc #EUR252433524, August 2024), sponsored by Unit4, to learn more about the Unit4 ERP Cloud solutions, and find more information on our Unit4 Cloud migration journey here.
