As ERP providers shift their focus to cloud-based Software as a Service models, a growing number of enterprises are evaluating their current ERP solutions and wondering if now is the right time to transition from traditional on-premise solutions to the cloud.
Businesses are considering a move to the cloud to leverage new functionality, lower operating costs, improve scalability and speed and to more easily adapt to business changes, explains Paul Gaynor, global technology and alliance consulting leader at business consulting firm PwC.
If your organization has decided that it may be time to elevate its ERP applications to the cloud, you can ease the transition by following these seven steps:
1. Consider the potential benefits
As businesses strive to reduce complexity and increase productivity, there is an obvious appeal to migrating to the cloud, notes David Krauss, global ERP evangelist for FinancialForce, a provider of cloud-based financial applications. "The agility of cloud-based ERP systems allows for accelerated deployment, which is a huge benefit for companies that are rapidly scaling or expanding into new and emerging markets," he explains.
Cloud-based applications also enable enterprises to rapidly standardize processes and reporting within new acquisitions or smaller subsidiaries, where on-premises solutions would typically take months, Krauss advises. Additionally, a cloud-based ERP allows immediate and easy access to new application features as soon as they become available "without the burden of complex, lengthy upgrades and data migrations," he adds.
2. Begin planning
The best approach to moving ERP applications to the cloud is begin with discussion, forethought and planning. "You’ll need to look at your overall business workflow and operations," says Ryan O'Ramsay Barrett, founder and CEO of ORAM Corporate Advisors, an IT consulting firm. "Employees on the front lines in each department can offer insights into processes, procedures, regular deadlines and operations that may impact your transition plan."
Work to achieve an organization-wide buy in. "There are many misconceptions about moving to the cloud, including fears about security, access concerns and so on," notes Rick Powers, a director in the operations excellence practice of West Monroe Partners, a multinational management and technology consulting firm. Spend time educating your organization on the benefits of a cloud solution, he recommends. "Ensure you have management’s complete buy in, as they will set the tone for the migration effort."
3. Set a course
It's important to develop strong business cases for anticipated business outcomes. "Then you can work with your vendor and consulting partner to get ready for the cloud by looking at the existing spend and how to convert [those funds] to SaaS, focused on your key business outcomes," Gaynor advises. Also factor in the changes the cloud will bring to staff performance and agility. "Consider the upskilling opportunity to modernize the workforce while modernizing the technology landscape," Gaynor proposes.
Organizations that clean up their existing ERP suite prior to moving to a cloud ERP can significantly reduce move-related costs. "Think of the example of moving from one house to another," says John Belden, project execution advisory services practice leader at UpperEdge, a firm that works with large enterprises to mitigate IT application risks. "Smart movers will always take the opportunity to clean out before they move out," he quips.
4. Compare and evaluate platforms
Organizations migrating their ERP applications to the cloud need to ensure that their new platform won't faithfully replicate any fragmented application architectures existing on their current on-premises site. "A modern, customer-centric platform should easily allow for data sharing across all business applications, from finance to HR to sales and marketing and support, to enable intelligent, predictive analytics," Krauss says. "While many SaaS vendors will promote disjointed 'ecosystems' that combine a variety of vendor technologies, this is a poor substitute for a platform in which applications were built to seamlessly work together from day one."
Additionally, enterprises that build an ERP environment based on a hodgepodge of multi-cloud solutions could find themselves seriously disadvantaged over the long term, Krauss warns."[They will be burdened] with limited access to leading-edge functionality and apps, brittle integration and added costs."
5. Establish a realistic budget
Most organizations underestimate the costs associated with implementing a new ERP platform. "Almost three quarters of ERP implementations exceed their initial budgets," Powers observes. "The budget should include adequate funding for change management, report development and interface development, as well as a contingency budget of 15-to-20 percent to account for 'unknowns' at the start of a project," he advises.
6. Exercise caution
Barrett cautions enterprises migrating their ERP applications to the cloud to avoid biting off more than they can chew. Move one department at a time after serious transitional planning, he urges. "The order of operations and departments that are moved to the cloud will depend on the unique needs of each company," he adds.
The biggest mistake organizations make as they transition their ERP apps to the cloud is failing to understand the needs of remaining on-premises and legacy systems. "Most companies have older systems in place ... that need to be able to connect with the ERP once it's moved to the cloud," Barrett observes. "For example, if a company has a large envelope printer from 1984 it still uses, that legacy system needs to be able to communicate with ERP to continue business operations without interruption."
7. Minimize disruption
"Transparency and awareness across your leadership teams and stakeholders on the benefits of the cloud is key to easing the discomfort of moving to a cloud environment," Gaynor says. Prepare for the changeover by conducting a fit-gap assessment and developing a reference architecture based on your organization's broader business outcomes and requirements.