Understanding Cloud ERP Software: Types, Benefits, Drawbacks and Costs

The market in Saudi Arabia is highly competitive, and businesses of all sizes are turning to advanced software like Cloud-based ERP to maintain an edge. A 2023 report shows that around 65% of global companies have already shifted to cloud-based ERP systems, while 35% continue to rely on on-premises systems. What’s fueling this trend toward cloud ERP?

Cloud ERP promises a lot: faster operations, lower costs, and easy, on-demand access. For small and medium-sized businesses (SMBs), the appeal is even stronger—it eliminates the need for significant upfront investments in hardware and software. Plus, with the right provider, businesses can scale their ERP systems effortlessly as they grow or bring on new companies.

But, like any tech investment, cloud-based ERP solutions come with their own set of questions: What benefits does it offer? What will it cost? How secure is it? And, most importantly, is it the right fit for your business?

In this blog, we’ll break down everything you need to know about cloud ERP–its benefits, drawbacks, and cost considerations—so you can make the best decision for your business. Read on to find out. 

Understanding Cloud-Based ERP Software

Cloud-based ERP (Enterprise Resource Planning) software is a system that helps businesses manage core processes like accounting, procurement, Sales, human resources (HR), and more—all from a centralized cloud platform. 

Unlike traditional ERP systems, which rely on physical servers and complex infrastructure, cloud ERP is hosted on remote servers and accessible via the Internet. This type of ERP is usually provided as a Software-as-a-Service (SaaS), where customers lease the software on a monthly or annual subscription basis instead of owning it. 

Key Features of Cloud ERP

• 24/7 Accessibility: Access critical data anytime, from anywhere.
• Centralized Data: A unified system for real-time updates across departments.
• Reduced IT Burden: Provider-managed maintenance, updates, and security.
• Scalability: Easily adaptable to business growth, with minimal upfront investment.

Now that we’ve explored cloud ERP, let's take a closer look at the different types available. 

Types of Cloud ERP Software

The main differences come down to two factors: SaaS models and ERP service models.

Multi-Tenant vs. Single-Tenant SaaS Models

• Multi-tenant SaaS: With multi-tenant cloud ERP, multiple businesses share the same software instance, but their data is kept separate and secure. This is a more cost-effective solution since the infrastructure is shared, but it typically offers less customization than a single-tenant system. It’s ideal for businesses that don’t require extensive customization and prefer lower costs.
• Single-tenant SaaS: Here, you get your own software instance, separate from other users. This means the software and its data are isolated from other users. This type offers greater customization and control, as businesses can modify the system to meet their specific needs. However, it can also be more expensive since it requires more infrastructure and resources.

Public, Private, and Hybrid ERP Service Models

• Public Cloud: Public cloud ERP is hosted on shared servers managed by the software provider. It is typically the most budget-friendly option, as the infrastructure is shared among many users. 

Public cloud ERP systems are scalable, easy to implement, and offer automatic updates, making them a popular choice for small and mid-sized businesses.

• Private Cloud: Private cloud ERP systems are hosted on private servers, either on-site or with a third-party provider. This type of ERP offers more control over data security, customization, and performance compared to public cloud options. Private cloud systems can be ideal for companies with specific data security needs due to government mandates or due to the sensitive nature of their operation, like banking/financial services requiring a more tailored setup.
• Hybrid Cloud: A hybrid cloud ERP system combines both private and public cloud features. This approach allows businesses to store sensitive data on private servers while utilizing public cloud resources for other non-sensitive operations. Hybrid cloud ERP is ideal for businesses that need flexibility, cost savings, and control over specific aspects of their data.

To help you better understand the differences, let's compare SaaS models and ERP service models.

SaaS Models Vs. ERP Service Models – A Quick Comparison

Benefits of Cloud-based ERP Solutions

The growing preference for cloud-based ERP solutions is no coincidence. Here are the key benefits that are driving this shift. 

1. Fast implementation and scalability

Setting up a cloud ERP system is much faster than traditional on-premise solutions. You can go live in just weeks rather than months. Since everything is hosted on the cloud, once you sign up and configure the software, you’re good to go. Plus, cloud ERP systems can easily scale as your business grows, meaning they can accommodate more users, data, and functionality as needed.

2. Cost-effectiveness with subscription-based pricing

Unlike traditional ERP systems that require hefty upfront costs for software and hardware, cloud-based ERP solutions usually operate on a subscription basis. You pay as you go, which makes it easier to manage cash flow, especially for small businesses. You get access to enterprise-grade technology without the heavy investment.

3. Easy integration with other applications

Most cloud-based ERP solutions are built to integrate easily with other software tools, such as POS tools, accounting software, and payroll systems. This means you can create a fully integrated ecosystem to manage all aspects of your business from a single platform.

4. Real-time visibility and accessibility

With cloud ERP, you get real-time data access from anywhere. This instant visibility gives you an advantage over competitors who may rely on outdated or delayed information. Accessing key metrics on the go can make a huge difference for small and mid-size businesses.

5. Automation and improved decision-making

Automating repetitive tasks is one of the biggest perks of cloud-based ERP software. With automation, you can reduce human error, save time, and allow your team to focus on more strategic activities. Plus, cloud ERP offers data-driven insights that improve your decision-making processes.

6. Provider-managed infrastructure and security

Given the rising concerns about data breaches and viruses, it's understandable to worry about the security of your ERP system. With cloud ERP, you don’t have to worry about maintaining servers or handling complex security protocols. Your provider handles infrastructure and security updates, ensuring everything runs smoothly and your data is protected.

7. Automatic updates

Cloud ERP providers frequently roll out updates to improve the system’s functionality, security, and features. With a cloud solution, you don’t have to worry about manually installing updates—everything is handled automatically, ensuring that you always have access to the latest features and improvements.

8. Visibility into cash flow:

Cash flow is everything for small and medium-sized companies, as management focuses on keeping costs in check. In order to grow and stay profitable, businesses need to carefully track working capital, expenses, and investments. Cloud ERP helps by connecting accounting with all areas of the business, making sure everything is accurately recorded. 

To see how these benefits translate into real-world success, read this case study to find out how Al Homaidhi Group successfully improved its retail operations by automating processes across more than 80 stores across Saudi Arabia with the help of HAL ERP. 

Drawbacks of Cloud-Based ERP Software

Now that we've laid out the benefits, let's flip the coin and take a closer look at some of the drawbacks you should keep in mind:

• Potential Data Security Concerns

One of the most common concerns with cloud ERP is data security. Since your business data is stored on off-site servers, the responsibility for protecting that data lies with the provider. 

Although many cloud ERP providers use advanced security measures like encryption, firewalls, and regular audits, there’s always a risk of breaches or cyberattacks. Hence, businesses dealing with sensitive data need to ensure their provider complies with industry standards and offers robust security features.

• Limited Customization Options

Unlike on-premise systems, cloud-based ERP solutions can have limited customization, especially in a multi-tenant setup. This may be fine for businesses with standard needs, but companies with specific workflows or specialized processes might find the lack of flexibility limiting. While some providers offer customization options, they can come at a higher cost or be more difficult to implement.

• Accumulating Subscription Costs

While cloud ERP’s subscription-based pricing is budget-friendly initially, costs can accumulate over time. As your business grows, you may need to purchase additional user licenses or subscribe to more advanced features, leading to higher ongoing expenses. It’s important to assess long-term costs before committing to a cloud ERP solution to ensure it fits within your budget.

• Dependency on Internet Connectivity

Cloud ERP systems are hosted on remote servers, meaning you need a stable internet connection to access and use the software. If your business operates in areas with unreliable internet connectivity, this could be a major issue. Any disruptions to your internet service could halt operations.

• Vendor Lock-In

Another drawback of cloud ERP is the potential for vendor lock-in. When you commit to a particular cloud ERP software, you may face challenges if you ever need to switch vendors. Migrating data from one cloud platform to another can be a complex and costly process, so choose your provider carefully.

While these drawbacks are worth considering, it’s important to find a cloud ERP solution that works best for your business. At HAL, we provide an ERP system that balances security, flexibility, and affordable pricing. 

Before you decide to make the switch, you must know important details about costs.

Cost Considerations of Cloud ERP Software

As we mentioned earlier, cloud ERP solutions tend to be more budget-friendly compared to traditional on-premise systems. Here’s a breakdown of the key factors that influence the approximate cost of cloud ERP software:

1. Licensing fees: These vary based on the provider, user count, and required features. Monthly costs generally start from  SAR 100 (Approx. $25~) per user, per month, depending on the selected package.

1. Subscription fees: Most cloud ERP providers charge a monthly or annual subscription, which typically starts from 2000 SAR SAR ($500+) for small to mid-sized businesses. Additional users or advanced features may incur extra charges. Some providers may include the subscription fees in the licensing fee, too.
2. Implementation costs: While the software itself is affordable, you may incur additional costs during the implementation phase. This includes training, data migration, and system configuration to ensure the ERP system fits your business processes. Depending on the extent of customization that may be necessary for the implementation, these one-time costs can start anywhere from SAR 18750 onwards (US$ 5,000)
3. Ongoing maintenance and support: In most cases, maintenance and support are included as part of the cloud ERP subscription fee/License fee. However, some providers may charge extra for advanced support services.  Typically, these costs will vary from vendor to vendor and can typically range from SAR 1875 onwards ($500) per month.

With HAL, you get transparent pricing and the flexibility to choose a plan that best suits your needs. Our plans start at just 1,999 SAR per user annually, with no hidden fees.

Challenges in Adopting Cloud-based ERP Software

While the benefits of cloud ERP are undeniable, the shift from a traditional ERP system or manual processes to a cloud-based solution can feel like a big leap. Here are a few common hurdles you may face during the implementation and how to tackle them: 

i) Training Employees on new systems: 

• Challenge: Switching to a cloud ERP system introduces new workflows and new functions, which can be daunting for employees used to existing processes.
• Solution: Develop a structured training plan that includes interactive sessions, online tutorials, and ongoing support. Appoint in-house "ERP champions" to help answer questions and provide peer support, ensuring that the learning curve is less steep.

ii) Handling resistance to change: 

• Challenge: Employees may resist switching to a new system, especially if they’re comfortable with the current setup. Research shows that organizational change is the single biggest impediment to a successful ERP Implementation.
• Solution: Clearly communicate the benefits of cloud ERP to each individual role —such as improved efficiency and easier workflows—early in the process. Engage team members by gathering their feedback and addressing their concerns, creating a culture that welcomes change.

iii) Staying compliant with regulations: 

• Challenge: Many industries have strict data storage and security regulations, which can complicate the adoption of a cloud ERP system.
• Solution: Ensure that your ERP provider/vendor is knowledgeable about your industry’s regulatory standards. Select a provider that offers compliance in accordance with local regulations and supports data residency and encryption options aligned with the legal requirements of your country.

iv) Data migration: 

• Challenge: Moving data from legacy systems to the cloud can be complex, with risks of data loss or discrepancies.
• Solution: Conduct a data audit before migration to identify which data is essential, redundant, or outdated. Work with your implementation partner/ERP Vendor or a data specialist to create a migration plan that includes data cleansing, testing, and verification to ensure data integrity post-migration.

v) Integration with existing systems: 

• Challenge: Integrating a cloud ERP with your current systems and tools may not be straightforward and can disrupt existing workflows.
• Solution: Plan and test integrations well in advance, working closely with both your IT team and the ERP vendor. Map out all necessary integrations, prioritize critical ones, and test compatibility to ensure seamless connectivity across platforms.

Final Thoughts

Cloud ERP is a proven solution that’s already transforming thousands of businesses across Saudi Arabia and around the world—and probably some of your competitors, too. By switching to a cloud-based ERP solution, you can take your business to the next level. You'll have instant access to the tools that can help drive change, with the flexibility to use them as new opportunities come up.

The benefits—such as scalability, cost-effectiveness, and real-time data access—make it a great choice for businesses aiming to stay competitive. However, it’s equally important to weigh potential challenges like data security and your business fitment to the product before committing to a cloud-based ERP software.

Get The Best Cloud ERP Solution in Saudi Arabia with HAL

HAL is the fastest-growing cloud-based ERP solution, which provides everything you need to manage your business, with the flexibility to scale as your needs evolve. With built-in AI tools and industry-specific applications, HAL gives you a 360-degree, real-time view of your operations to keep you on top of your business— anywhere and anytime.

To address the unique needs of businesses in Saudi Arabia, HAL works seamlessly with popular local ecosystem players like Foodics, and Noon, payment systems like Tabby, Tamara, and Geidea, or Online Payment gateways like TotalPay or e-commerce platforms like Salla, Shopify, Woo-Commerce. Plus, its unique AI-powered WhatsApp integration lets you have all the information you need on the go—right from your WhatsApp! 

Still not sure? Book a demo today to explore how we can help optimize your business processes and accelerate your growth.