The How And Why Of ERP Scalability
Scalability of technology is a huge factor to consider while making a purchasing decision. Most established businesses dismiss scalability as something that only small businesses should worry about. That’s because scalability, by definition, implies an infrastructure that can sustain the rapid growth of a business. Businesses that already have millions of dollars in turnover do not normally grow exponentially at that stage and hence scalability concerns do not matter much to these companies.
However, in doing this, corporations miss out on a crucial opportunity to save money by scaling down the infrastructure as and when necessary. Consider the case of a wool supplier. This is a business that is seasonal in nature. Demand for woolen products go drastically up before the onset of winter and are pretty lull during the spring season. What this means is that the resources that work on inventory management, demand planning and budget allocation are overworked for half the year before the start of the peak season and may be under-worked for the rest of the year.
An Illustration in ERP Scaling Inefficencies
For the sake of this discussion, let us solely focus on the inefficiencies arising from the technology infrastructure in a scenario as this. As we can see, a wool supplier requires a full-fledged ERP infrastructure only during the peak months. During the rest of the year, the business may make do with a bare-bones ERP that only handles the basic elements of their business. However, this is difficult to implement in a traditional set-up.
Traditionally, businesses that require ERP to manage inventory have to invest in both the hardware and the software components of the technology. This is mostly capital cost that cannot be written off during the lull periods of the year. Also, the licensing cost of the software is calculated based on the number of computers this software is installed on. Consequently, the licensing costs are paid for the whole year irrespective of the number of months the software is required.
When ERP Doesn’t Scale Properly
This is an example of a business where the ERP has not scaled as desired. Typically, such unscalable ERP systems result in several thousand dollars being lost every year. An alternative to this scenario is cloud ERP. These are ERP systems that are hosted in a remote server and are accessed over the internet – very much like accessing your Gmail account. An example of such an infrastructure is the EnterpriseOne JD Edwards hosting offered by Oracle. In a cloud-based system (also referred as SaaS ERPs), the business can increase or decrease the number of access logins at the click of a button. Moreover, there are no capital costs required in setting up the hardware and software on the individual computers. The savings that companies see with this is massive.
To take the example of a wool supplier business again, the cloud ERP system could help the business create several access-logins during the peak months and unsubscribe these extra users during the lull period to save costs. This way, the business could ensure maximum resource utilization during the peak months and ensure effective budget optimization during the inactive months.
The technology division of any offline business has traditionally been considered a cost center. Consequently, the task of a CTO or a CIO has constantly been to work on ways to ensure the cost liabilities of the business is brought down. Cloud ERP is thus a wonderful avenue to effect a significant impact on the technology expenses of a business.
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