UNTIL recently most organisations would have felt that moving a business-critical solution such as an enterprise resource planning (ERP) system to the cloud was a risky bet. But today more companies are recognising the potential benefits of moving ERP to the cloud, as trust in cloud-based applications and IT grows. Can ERP in the cloud help meet these business objectives for today’s CFOs – who are not only under pressure to streamline and manage costs but also to modernise their business processes to enable enterprise innovation?
For CFOs considering ERP in the cloud, one of the key considerations will clearly be on cost. Any cloud deployment offers the ability to avoid fixed capital investments early on or during periods of corporate or economic uncertainty. The resource allocation flexibility that comes with avoiding large upfront investments in the early phases of deployment will be beneficial to many businesses. While it is true that ERP in the cloud requires less initial investment than on-premise, it is unlikely to generate cost savings in the long term. In fact, cloud is usually more expensive as it is an ongoing operating cost that never ends, instead of an upfront cost that is repaid over a number of years.
Increased agility and scalability
For CFOs considering a move to the cloud, the main drivers should instead concern increased agility and scalability to adapt to changes in the business environment.
With any software as a service (SaaS) model, organisations will pay per user, per month, so it is flexible and easy to scale up and down according to the needs of your business. As a result, ERP in the cloud is ideal for businesses looking to set up a new office or quickly deploy to new markets oversees as the need for additional hardware is removed and the associated implementation effort is significantly reduced.
Organisations also have the freedom to go office-less with cloud, strategically placing offices only where it makes sense to do so. Improved business agility is also a significant enabler for innovation within any organisation.
Reduce in-house IT support
In addition, the cloud reduces the need to have a large IT support resource in-house, as well as the costs associated with running your own data centres. Outsourcing the IT support to a reliable supplier can take away a significant amount of stress from your organisation, particularly with a project as large and complex as moving your ERP system.
It also means that organisations will have access to the latest software capabilities and regular updates, ensuring that your business is always running on the latest technologies.
Look towards real-time reporting
A move to the cloud should also be considered in terms of what it can enable in the future. The move towards real-time reporting will mean that CFOs will be expected to be able to report on financial performance ‘on demand’ rather than in the current quarterly reporting structure. According to a 2014 report from the Association of Chartered Certified Accountants (ACCA), two-thirds of CFOs say they would welcome a move to greater adoption of real-time reporting. ERP in the cloud will help CFOs automate the integration of financial data from across the business and consolidate that data in real time.
Improved business processes – such as increased collaboration – are also an important benefit of moving ERP to the cloud as it becomes much easier to collaborate with staff internally, as well as with partners and clients externally. For example, a retail organisation may need to work closely and plug in (integrate) numerous external partners to its supply chain.
Consider the journey to cloud
The challenges and complexities of moving an organisations ERP system to the cloud should not be underestimated. Careful consideration of the journey from the existing ERP solution to its future state is required – not just as regards the technology change, but also the impact on the people and processes within the business. Implementation partners will be able to help you plan for these changes, at whichever stage you are on the journey to cloud. Organisations will still need to go through the single biggest task associated with any ERP implementation: data migration. In addition, integration with existing on-premises technology will still need to take place, which can be time-consuming and challenging.
Is ERP in the cloud right for you?
While moving to the cloud may be the right step for some, each organisation is unique, has different business objectives, and is at different stages in its life cycle. For relatively young and fast-growing companies which do not have an existing ERP system, ERP in the cloud is likely to be the ideal choice. On the other hand, it may not be right to move ERP to the cloud for some organisations – for example, if your business warrants data security level IL3, there may be concerns about whether cloud is secure enough to protect that data.
So how can you be sure whether it is the right choice for your organisation? Companies are investing in ‘lab’ environments to trial new tech, often restricted to non-business-critical apps. The cloud makes testing different scenarios or processes, customisations and prototyping possible. All of this can be done quickly and is great tool for organisations in helping them decide whether or not moving ERP to the cloud is right for them. Organisations can see how this would work for them by using preconfigured industry template models and testing them on their own business. By testing ERP in the cloud in a lab-style environment, businesses can gain a better understanding of the impact it would have if they were to roll this out across a line of business or their entire organisation, and this would to help them make the right decision.
Moving an enterprise-wide, business-critical system such as ERP to the cloud should be considered, explored and tested on your own business processes. While the upfront cost savings will be lost over time, the benefits – particularly in agility and scalability – make moving ERP to the cloud a worthwhile consideration for everyone. Implementation partners will be able to work with you to test how ERP in the cloud will affect your business and help you on your cloud journey. ?
Tim Rowe, director, Hitachi Solutions Europe
• What your peers are doing – insight into attitudes on cloud-based ERP and how many companies have a move to the cloud on the horizon
• Defining a business strategy regarding cloud-based solutions
• Pros, cons and risks of adopting cloud vs on-premise ERP solutions
• The cost tipping point – where on-going rental costs exceed traditional implementation costs
• Address complexities of data migration, integration and change management when deploying on-premise versus cloud