Breaking Through The Clouds - Truth About Cloud ERP

There’s so much information about moving your ERP to the cloud. It often becomes difficult to see through the clouds and understand what moving to the cloud really means. Here the Tech Pro Unicorn will render his opinion on cloud ERP – the good, the bad and the, well... “evolving”. Depending where you source your information, you will range from the cloud being the panacea for everything to those with the opinion that a cloud ERP introduces elements of risk and opportunities for fraud. Many of the usual suspects have rendered opinions such as Gartner, KLASS and Forrester. 

One third of ERPs have now moved to the cloud in some sense. Gartner predicts that by 2024, 60% of all new midsize core financial applications and 30% of large ones will be cloud based. The movement of applications to the cloud is not to be disputed. But all the “noise” about the benefits is the real problem currently. We will systematically address all pros and cons of moving an ERP to the cloud, as hyped by the vendors and implementors themselves in the spirit of adding some transparency and breaking through the clouds. One thing is for certain. Regardless of the statistics, applications are moving to the cloud in all shapes and sizes. 

Below we will address the ?? and tackle the ?? of the world of cloud-based ERP from the perspective of a Unicorn.

??

Reduced Upfront Costs

Yes and no here. Do you need to spend a million dollars on hardware? No. Is there still a potential large upfront cost depending if you are simply moving like to like to the cloud or changing platforms?  Potentially. Cloud ERP is often being slung around with high ROI and over the long haul it will really evaluate the upfront costs, as they may not be as huge of savings as portrayed. I do think compared to traditional ERP, this is still lower and therefore, it gets a thumbs up.

??

Hardware Costs

This will for sure be lower, however to some extent you are trading these with cloud hosting or maintenance fees which can be more, so ensure this is explored in a detailed ROI assessment.

??

Modern

Both the look and feel as well as all the enhancements will be like driving a new car. Depending what platform you are using, the look and feel will almost for certain be different. Now, this can also have a negative effect. For instance, if you are coming from a green screen system to the cloud, you're learning curve and training will be far steeper. Having more application functionality should cause you to pause and transform your business processes with it. Failure to do so wastes an opportunity.

??

Lower Staffing Costs

The thought that simply putting your ERP in the cloud lets you reduce staff by 5 –8 FTE is insane. I really wish the ERP vendors would knock this off. You may be able to get rid of your ERP system admin if all they did 40 hours a week was patches and such, but that is hardly the case. Maybe the ERP work goes away but there are still things to test, etc. Always new projects to be managed to implementation. So, the roles change for sure. One of the most common questions I get is, “what does my support structure look like?” You may not need a DBA, but I bet the one you had supporting ERP was supporting 100 other applications, too. So, can they be repurposed? Yes. Will you reduce staff? Probably not. Any reduction in FTE is a good thing, so maybe you can combine the roles and reduce 1 FTE once the project is implemented, maybe.

??

Cost of Data Transfer

Getting to the cloud is the biggest challenge. There is effort, thus cost in data clean up and moving the data. Typically, the more data, the more cost. 

??

Cost of Implementations

Okay, this can be confusing because everyone will tell you that cloud implementations are cheaper than on-prem. Well, that’s not really true. These are new systems, so there are larger costs and timelines related to change management, training, testing, etc. If you cut corners on your implementation or listen to your ERP vendors, you will either wind up in change order hell, or very dissatisfied with a system that doesn’t meet your needs. 

??

Change in Platforms

If you are a maverick that wants to change platforms like Oracle to Workday, well, honey you just layered on so much complexity. You now have a huge training and legacy knowledge hurdle. The tables, terms, relationships, everything they know, now is useless (relatively). You will often chase the new shiny object only to realize, “oops”, and have significant regrets. I am not saying you shouldn’t if you have drivers but taking one of the pillars such as HR and moving that to another platform is higher cost and horrible enterprise user experience. Best of breed is dead. There, I said it, for so many reasons.

??

Continuous Innovation

With a cloud ERP you must work hard to fall behind in functionality! The new releases are pushed to you and you can test and implement pretty seamlessly. You are no longer on different platforms, etc. from your colleagues on the same platform. You can now talk about the process vs the technology. You get functionality much faster than you would in an on-prem environment.

??

Lower Cost of Ownership

Indeed, an ROI run over a 5-year or 10-year scenario will show significant ROI. Things like projects to do, upgrades annually and major implementations go away. Hardware costs go away, and reduced support costs contribute as well. If you negotiate your hosting correctly, (push real hard) you can have cloud ERP for not much more than you were paying in on premise annual maintenance (don’t tell them the Unicorn sent you).

??

Scalability

This is one of the keys to moving to cloud ERP. How many times have you run out of space? How about implemented an expensive server and then were at capacity within a year or two due to unforeseen business reasons? Being in the cloud makes scaling your resources very easy. Usually, this is even automated and happens without you knowing about it. Need more storage, easy. If you are a company rapidly growing or in a changing market, this alone can be your driver to the cloud.

??

Audit

How many of you who are on-prem turn on all your audit logging? It is okay to admit the truth to the Unicorn, I’m a mythical creature, I won’t tell. Exactly. Most turn off some of the logging capability of their on-premise ERP.  Why? Due to the amount of space needed, and space is at a premium. In the cloud, you simply get it all on both the application logs and the cloud logs, so auditors have a big smile on their face, with cloud ERP.

??

Drive Automation

Ever drive a car for 10 years then go to replace it and look at the new shiny car and be amazed at all the driver assist features it has? Well, welcome to cloud ERP. Most of the new ERP packages have significant enhancements in the way of process automation built in with all of them trying to build robotic process automation into their package offerings as well. You can transform your processes (maybe reduce staff) if you leverage these features.

??

Standardization

Okay, here I am going to poke the bear. If you tell me you’re “different” I will push back. If you tell me that you think your cloud ERP is your “competitive differentiator” I will also disagree. We are generally talking HR, Finance and Supply Chain. We all have different employees, financial conditions and widgets we are producing or selling, but generally these functions are all highly regulated. What I want to stress is that you can seriously save money here if the executive sponsor waves their wand and tells folks to get rid of the sacred cows. Want to save money? This is where it is hidden. Don’t do best of breed, it creates a nightmare support model and crappy end user experience. 

??

Real Time Data

Remember you had to post jobs, or worse yet, wait for this function to be out of the system before this other function could do their job?  That is gone. What you do in the system is real time for the most part and reflected in the cloud ERP. Also, what about if you want to model forward or model historical on a certain data? Cloud ERP delivers. It is a huge advantage, especially for analytics and companies that are rapidly evolving.

??

Support

It won’t be perfect, let's get that out of the way. It is also typically the part of cloud ERP that gets rated the lowest. But you won’t be calling support any longer about space, system resources, etc. Generally, it will be about the application. Ensure your cloud ERP agreement includes the level of support and response times you need.

??

Performance

Going out on a limb here to say this will be better. Typically, the functionality is so enhanced, compared to what you were doing, the new system will allow you to complete your processes much faster, thus enhancing performance. Though, it isn’t perfect, there will still be downtimes for maintenance and such.

??

Complexity

On the outside, it sure does look pretty! These are very complex systems in terms of functionality, configuration, and support. It may be that your current team won’t be able to make the move to cloud ERP with all the new concepts required to be successful. With great power comes great complexity.

??

Politics

Not the national type, but internal. These come in to play anytime you undertake such a large transformation. Who owns it?  What are you trying to get out of the system?  How will it be shared across the organization? It will be a struggle to answer collectively. Strong, ongoing governance is needed to ensure this effort produces desired results.

??

Workforce Adaptability

New skills required here for sure. Employees will make the jump on the end user side for functions like benefits and finding their payroll check, but your core ERP employees may not be able to make the jump. Be prepared and ensure you have this group highly involved to get buy in.

??

Security

This cloud ERP will be a very secure data center, far more secure than whatever you have on prem I assure you. Additionally, this may be the time to address ADFS and dual authentication if you haven’t already.

Okay, those were the most common factors discussed in cloud ERP. These will be buried by the vendors in ROI spreadsheets, algorithms and other glossy handouts. Where does the Unicorn see his primary concerns? I am most concerned with resources and thus, change management is huge in any cloud ERP undertaking. The people, both the end users, the employees and the ones receiving the outcome of this, will need to be involved and communicated with throughout the life of the project. The other common concern is around when and why to migrate. What are your drivers? You should have this top of mind and be able to easily explain this. Compliance is another issue. Ensuring you have addressed segregation of duties, for example, in the security setup in the new system is often dusting off work you did 15 years ago in your legacy system. Security is often a concern folks have as the organization's information will be in the cloud and shared on a DB server. This is very true and a legitimate concern, but this technology is now perfected (well close to it) and if there were a breach, there would be huge payouts to cover you.

Why should you do this? Lower cost of implementation, improved employee experience, the performance benefits, and access to the better tools are the reasons top of mind.

Where do I see people failing? Well, in a larger application strategy and long-term roadmap. Have a plan and execute against it to reap the biggest rewards.

There you have it, cloud ERP from a Unicorn!