Is Cloud ERP Right for Your SME?

In this article we discuss:

• What Is Cloud ERP?
• Core Features of Cloud ERP
• Benefits of Cloud-Based ERP
• Challenges and Limitations
• Is Cloud ERP Right for Your SME?

Small or medium-sized enterprises (SMEs) might not operate at the scale of large corporations, but they face many of the same complexities. Managing operations, financials, inventory, and customer data—often with limited resources—can be just as challenging, if not more so. Without the right systems to support smart decision-making, opportunities for growth may be missed.

Cloud-based enterprise resource planning (ERP) systems offer a solution. By centralizing critical business processes, cloud ERP provides SMEs with real-time access to data, optimized workflows, and the flexibility to adapt more flexibly to evolving business demands. Unlike traditional on-premise solutions, it eliminates the need for costly infrastructure and makes advanced capabilities—such as AI and detailed analytics—more accessible.

Cloud ERP systems also help companies keep up in increasingly competitive markets where cloud-based solutions are becoming the status quo. In 2024, 78% of organizations reported using cloud-based systems (up from just 65% in 2023), and the market for cloud ERP solutions is expected to nearly double by 2029.

We’ve created this guide to help evaluate whether a cloud-based ERP system is the right fit for your small or midsized business, and to enable you to take the next steps for long-term success. 

What Is Cloud ERP?

Cloud ERP is an advanced enterprise resource planning system hosted in the cloud and designed to unify critical business functions across the enterprise. It is primarily provided via software as a service (SaaS) vendors. 

ERP software integrates multiple data streams, such as finance, HR, and customer relationship management, in order to provide an easy-to-access single source of truth at an organization. Users can access this real-time operational data any time, anywhere, so long as they have access to the internet. 

Key Differences Between Cloud ERP and On-Premise ERP

Traditional ERP systems rely on hardware housed on company premises, requiring upfront capital investment and ongoing maintenance. They struggle with scalability, demanding expensive upgrades as a business grows.

In contrast, cloud ERP operates on a subscription-based model and is maintained by the service provider, offering businesses seamless updates, high availability, and the ability to adapt quickly to changes.

With cloud ERP, businesses eliminate many of the challenges of legacy systems, such as long implementation cycles, limited accessibility, and hidden maintenance costs. This makes cloud ERP particularly appealing for SMEs seeking enterprise-grade solutions without the accompanying overheads.

Core Features of Cloud ERP

Cloud-based ERP for SME offers transformative features that help businesses operate and scale with greater precision and intent. With features designed to meet modern demands, cloud ERP enables businesses to centralize their operations, reduce complexity, and stay focused on strategic growth. Key capabilities include:

• Advanced accessibility: Cloud ERP provides real-time access to data from any device, enabling decision-makers to remain informed on the go. This ensures that teams, from CFOs reviewing budgets remotely to supply chain managers tracking inventory across locations, can always act decisively.
• Scalability without limits: As businesses grow, cloud ERP scales seamlessly. Whether expanding to new locations, starting the process of going public, or integrating advanced modules, cloud ERP supports growth without requiring disruptive IT system overhauls.
• Predictable cost models: The subscription-based pricing of cloud ERP systems aligns costs with value, replacing hefty upfront investments with predictable monthly or annual expenses. This structure also eliminates surprise charges for maintenance or upgrades.
• Integrated intelligence: With embedded AI and machine learning capabilities, cloud ERP enhances automation, generates predictive insights, and simplifies complex processes such as forecasting and scenario modeling.

How Cloud ERP Integrates Business Functions

One of the defining strengths of cloud ERP for SME is its ability to centralize diverse business functions, breaking down silos and creating a unified system of record. By integrating the following functions, cloud ERP enables SMEs to operate with the precision and efficiency of larger enterprises:

• Financial management: Streamline complex processes such as revenue recognition, budgeting, and compliance reporting with accuracy and audit-ready transparency. Cloud ERPs provide live access to key financial information, making functions like accounts payable and accounts receivable smoother.
• Human resources: Manage employee records, payroll, benefits, and compliance through a unified system. Cloud ERP enables seamless hiring, onboarding, and workforce planning while providing insights into workforce productivity and engagement.
• Supply chain and inventory: Real-time inventory visibility combined with predictive analytics helps optimize stock levels, reduce waste, and prevent disruptions.
• Customer and sales management: A seamless CRM integration provides deeper insights into customer experience and behavior, helping teams personalize the customer journey at every stage.
• Project management: Track project timelines, budgets, and resources in one place. Cloud ERP ensures teams stay on schedule and within budget, improving accountability and project outcomes.
• Procurement and vendor management: Automate purchasing workflows and manage vendor relationships more effectively. Gain visibility into procurement trends, streamline approvals, and ensure timely delivery of goods and services.

Benefits of Cloud-Based ERP for SMEs

Cloud-based ERP systems offer SMEs a powerful alternative to on-premise solutions, providing access to enterprise-grade tools without the associated costs or complexity. They enable SMEs to operate with greater agility and efficiency while addressing common and pressing operational challenges. Here are four major business benefits cloud ERP can unlock for your small or medium business.

Improved Cost Efficiency

One of the most significant advantages of cloud ERP is its subscription model, since it avoids large upfront investments in hardware, software, and maintenance. This reduces initial costs and spreads expenses over time, allowing SMEs to allocate resources more strategically. Additionally, automatic updates and vendor-managed maintenance eliminate the hidden costs often associated with legacy systems.

Flexibility and Scalability

Cloud ERP systems grow with your business. As SMEs expand into new markets, onboard additional employees, or increase transaction volumes, the system can scale seamlessly to meet evolving needs. Businesses can add users, activate new modules, or increase storage capacity without the need for disruptive upgrades or infrastructure overhauls.

Real-Time Data Access

Access to real-time data is a game-changer for decision-making. Cloud ERP systems provide centralized, up-to-date insights across finance, operations, and customer management. Leadership teams can make faster, more informed decisions, whether it’s reallocating budgets or identifying emerging opportunities. Mobile access to live data also ensures connectivity between teams working across different work environments.

Streamlined Operations

By centralizing business processes, cloud ERP eliminates silos and ensures that departments operate cohesively. Automation of routine tasks such as financial reporting, inventory tracking, and order processing frees up time for employees to focus on strategic initiatives. This integration also reduces errors, improves collaboration, and enables SMEs to deliver better results with fewer resources.

Challenges and Limitations

While cloud-based ERP systems offer transformative benefits, it’s important for SMEs to consider potential challenges and limitations when evaluating their options. Understanding these three obstacles will help prepare businesses to plan effectively and set realistic expectations for implementation.

Ensuring Ongoing Data Security

Entrusting sensitive business information to a cloud-based system requires robust safeguards. While reputable ERP vendors implement advanced security measures such as encryption, multi-factor authentication, and compliance with data privacy regulations, businesses must also do due diligence by researching their vendor’s approach to security and training their employees on best practices.

Dependence on Internet Access

Cloud ERP systems rely on stable internet connectivity. Unexpected downtime can disrupt workflows and access to critical data. While most vendors offer high availability and uptime guarantees, SMEs in areas with unreliable internet service may face challenges in ensuring consistent access.

Implementation and Training

Transitioning to a cloud-based ERP system requires time and effort, particularly during the implementation phase. Migrating data, integrating with existing tools, and training staff can temporarily disrupt operations. Without proper planning and support, businesses may face longer timelines and slower adoption rates. Partnering with a vendor that provides robust onboarding and ongoing training can mitigate these challenges.

Is Cloud ERP Right for Your SME?

Deciding whether cloud-based ERP software is right for your business involves careful evaluation. Use this checklist to guide your decision-making process.

    1. Evaluate Your Business Size and Complexity

Cloud ERP systems are designed to handle a range of business sizes, but your decision should align with the complexity of your operations. Ask yourself:

• Do you manage multiple departments or locations?
• Is your current system struggling to scale as your business grows?
• Are you spending too much time consolidating data from different tools?

If managing workflows and data feels increasingly unwieldy, a cloud ERP system can simplify operations and provide the scalability you need.

    2. Identify Your Current Challenges

What bottlenecks or inefficiencies are holding your small or medium-sized business back? Consider issues such as:

• Disconnected systems that prevent real-time data sharing.
• Frequent errors in financial reporting or inventory tracking.
• Time wasted on repetitive manual tasks.

If these challenges resonate, a cloud ERP system can centralize your processes and automate many of these tasks, giving your team time to focus on higher-value activities.

    3. Assess Your Budget and Long-Term Goals

Cloud ERP systems typically operate on a subscription model, which offers predictable costs but requires ongoing investment. To evaluate whether it’s right for you:

• Calculate your total cost of ownership for both cloud and on-premise solutions.
• Align the investment with your long-term business objectives.
• Consider the value of reduced IT expenses, scalability, and automation when comparing options.

    4. Factor in Industry-Specific Requirements

Every industry has unique demands, and your ERP system should meet them. Choose a cloud ERP provider with experience in your industry and features tailored to your specific needs. Consider:

• Compliance requirements for highly regulated industries such as healthcare or finance.
• Supply chain visibility and inventory management for manufacturing or retail businesses.
• Customer relationship management (CRM) integration for service-based industries.

    5. Compare ERP Providers

Not all cloud ERP platforms are created equal. To find the best cloud-based ERP for your small business, evaluate potential vendors using this criteria:

• Features: Does the system include the functionality your business needs, such as financial management, inventory tracking, and reporting?
• Ease of use: Is the interface intuitive for your team to use without extensive training?
• Support: Does the vendor offer robust onboarding, training, and ongoing support?
• Scalability: Can the platform grow with your business?
• Integration: Will it connect with your existing tools, such as payroll software or CRM systems?

Take time to request demos, ask questions, and read case studies from businesses similar to yours to ensure you’re making the best choice. 

Taking the Next Steps

Cloud enterprise resource planning solutions offer more for SMEs than just a technology upgrade—it’s a strategic enabler. Whether you’re grappling with disconnected systems, inefficient workflows, or the challenge of scaling your operations, a cloud-based ERP system can help you overcome these hurdles.

By centralizing business processes, improving data visibility, and enabling real-time decision-making, cloud ERP empowers you to operate with the agility and sophistication of larger enterprises—without an unattainable price tag attached.

As you consider whether cloud ERP is the right fit, it’s essential to evaluate your unique business needs, from operational challenges to long-term growth goals. A thorough evaluation will help you identify how cloud ERP can align with your strategic priorities, streamline operations, and support your business as it evolves.

Workday can support you at every stage of your growth as a business. Explore how Workday and our Enterprise Management Cloud solutions can transform your SME and give you a competitive edge.