Enterprise Resource Planning (ERP) systems have been somewhat of a straggler when it comes to moving to the cloud.  The complexity of ERP systems, the concerns of cloud security and potential performance worries, and the many existing integrations with on-premise ERP systems, are some of issues that have held back businesses from moving to the cloud.  However 2015 looks like a turning point for cloud ERP software.  PwC ‘ Beyond ERP’ report predicts that traditional, on-premise software will fall a further 30% by 2016, while cloud based ERP sales are growing rapidly.

Traditional ERP vendors like SAP and Oracle are moving aggressively to provide cloud options and hold onto their existing customers.

ERP generally deals with all the administrative and financial aspects of a business, leading to on-premise deployments being the industry standard. However, SaaS and mobile ERP systems have begun to produce significant growth. Lower budgets and stricture project deadlines have lead to faster time-to-market of products. In this regard, companies such as SAP have a strong advantage in the ERP market when it comes to growing Cloud based, SaaS ERP systems.

SAP is pushing cloud ERP, recently releasing a new version of their SAP suite called S4 Hana. Bill McDermott, CEO of SAP, said that SAP cloud revenue grew 45% in 2014 and that they are targeting 30% annual cloud growth over the next five years.  2018 is expected to be the year where SAP cloud surpasses revenues from SAP on-premise.

“We expect to grow our cloud business 7X,” said McDermott, noting the starting point of 1.1 billion Euros ($1.3 billion) in 2014. “Whether you call it sevenfold or seven times, it’s a lot. And we see the organic growth implied in this projection as being totally unmatched for a company of our size and scale in the industry.”

As existing ERP systems may continue on premise for a long time to come, for many businesses the cloud solution will become the new normal. The good news is that the big vendors such as SAP and Oracle are on side, and with that comes a great deal of investment in services, hardware and software – which should lead to greater functionality and lower costs.