Cloud ERP – opportunities and key challenges
Cloud ERP – opportunities and key challenges
Cloud Enterprise Resource Planning (ERP) is changing the business software landscape. Overshadowed in the early days of cloud by online CRM software such as Salesforce, the cloud ERP market is finally taking off. While there is still demand for traditional on-premise ERP in some sectors, such as traditional manufacturing and large financial institutions, most new ERP purchases are now cloud-enabled.
True cloud ERP solutions, in the sense of genuine Software-as-a-Service (SaaS), continue to be few, however. NetSuite has been the market leader in the ‘built for cloud’ ERP market for a number of years, and the recent Oracle acquisition will add fuel to their push for full international coverage and sector-specific solutions. Oracle’s own Fusion platform is maturing rapidly and with aggressive marketing behind it will continue to gain market share. SAP’s online SAP4HANA solution is also beginning to gain traction, building on the strength of the HANA sub-brand in larger enterprises. Microsoft is beginning to make a big push into the space with the alignment of its ERP solutions under the Dynamics365 brand and can be expected to gain market share as it capitalises on its near-universal productivity software footprint. Most other challengers including Workday are yet to gain a true foothold outside of their native North America.
Implementing a cloud ERP solution, particularly a ‘greenfield’ (first time) ERP implementation, in any organisation can and should be a transformational opportunity. By combining the rapid time-to-deploy associated with cloud ERP, plus the traditional ERP benefits of standardised, automated business processes, there is a real opportunity to use a cloud ERP deployment as a chance to make a step-change in business efficiency. The access-anywhere feature of a true cloud ERP also supports global growth. For example, new subsidiaries can often be added in hours or days by simply copying down the global configuration and applying any necessary localisations.
What hasn’t changed, though, are the human aspects of ERP deployments. A cloud ERP project still requires very careful attention to change management. Admittedly, system training and basic communications may be sufficient for a small cloud project. But for any larger cloud ERP projects, a structured approach to change management will certainly be required. Aligning the solution design with the target business operating model remains as critical as ever, most obviously in order to align system roles and permissions with business roles, but also to ensure reports and workflows are set up for how the business wants to operate not how it has traditionally operated.
Commitment from the top
Robust project management and project governance remain key. Commitment right from the top of the finance function – and preferably from the office of the CEO – are the ‘sine qua non’ of cloud ERP projects. Business transformation outcomes simply won’t be achieved without this. A clear vision for how cloud ERP will improve the business is the starting point, preferably with quantified metrics such as reduction in back-office costs, improved lead-to-cash cycles or greater accuracy of management packs. Migration to new operating structures needs to be carefully aligned with the software build plan. HR often plays a critical role, not only in managing the human capital risks associated with organisational change but also freeing up staff to work on the project alongside the system integrator.
Careful business process design
System integration remains on the critical path for cloud ERP projects, as it always has for traditional business system deployments. Modern iPaaS (integration platforms-as-a-service) software such as Dell Boomi, Mulesoft and Jitterbit assist with the integration design and maintenance of cloud-to-cloud and cloud-to-legacy integrations, but there is still no way around the need for careful business process design underpinned by properly documented data flows between systems. These remain the prerequisite to successful use of any iPaaS solution in support of a cloud ERP deployment. Skills transfer of the integration mechanisms to the in-house IT team should be a priority.
The promise of cloud ERP is real and significant. The market has taken a number of years to catch up with the online CRM market, but buyers of ERP solutions now have a genuine choice among cloud solution vendors. Unless there is a good reason not to (such as poor internet connectively – rare these days), the default choice of many businesses is now to go to cloud ERP. Removing the need to worry about future upgrades, the ability to scale up almost without limit and the ability to access the system from any location on any device, are all reasons why the market has shifted in this direction. For increasing numbers of organisations, cloud ERP is the way to go with business software. Doing so with your eyes open about the opportunities and key challenges is critical.