Digital transformation is knocking at every company’s door. Cloud enabled ERP has the potential to create a tectonic shift in the way companies operate. There is finally an end in sight to multi-million-dollar ERP implementations that span years, and require armies of technical consultants to endure months of design, develop, test cycles.
A couple of big question still vex IT leaders and managers:
- Is my business ready for the cloud?
- How do I select the right cloud ERP?
To answer the first question, companies should conduct a detailed digital readiness assessment to evaluate if business leaders, process owners, and IT groups are ready to take advantage of digital capabilities in the market place.
The rest of this blog will focus on how to select the right cloud ERP.
In the past, companies that are pursuing a new ERP documented their business requirements in detail and then conducted a thorough, tactical evaluation of every feature and functionality of the ERPs under consideration. The goal was to ensure the ERP offered all the functionality the company required. Updates were few and far between and were expensive, due to high customization requirements for business processes. Depending on the maturity of the organization, a custom model was created, or the best of breed applications were extensively integrated, often leading to cost escalations. The cloud ERP (Iaas/SaaS ERP) changes that paradigm. ERPs now offer industry standard business process templates, which allows businesses the opportunity to streamline their often overgrown and complicated business processes. Businesses that can adapt to cloud ERPs benefit from reduced costs and headcounts; simplified software upgrades; 99.7% or higher uptime; and cutting-edge cybersecurity and business continuity, all for a fixed price.
The old ERP selection process consisted of creating a detailed RFP with hundreds of questions. In today’s new marketplace, this process does not work anymore. Instead, one needs to explore the following questions:
- What cloud option is right for me?
- Which ERP provider is more eager to collaborate with me?
- Who has a more complete product and a reliable roadmap?
- Who offers the most flexible cloud deployment options?
- How well integrated is my implementation partner with the ERP provider?
The cloud is not a one-size-fits-all public cloud option. There are some very robust solutions that offer a wider set of cloud deployment options, such as managed hosting, private cloud, and hybrid cloud options. Organizations should spend gain a better understanding the options. For example:
- Public Cloud ERP (a.k.a. SaaS): Also known as multi-tenant cloud; this option offers limited ability to make changes to the application to match unique business needs is extremely limited. Some extensibility is possible, but organizations cannot modify the existing application, which is shared by multiple “tenants”. The advantages are numerous. If the ERP meets business needs, it is the most cost-effective option. Organizations are, however, forced into quarterly upgrade cycles in most cases. This solution is better suited for small and medium sized organizations.
- Private Cloud (a.k.a. IaaS): An organization can host its ERP with cloud hosting provider, such as Azure or AWS, or with an ERP provider. In this case, companies are not limited to hosting it on their own premises or data centers. Private cloud offers hardware scalability, security, and all the benefits of a data center without having to own one. Private cloud offers better control over upgrade cycles. A private cloud is generally more expensive than the public cloud.
- Hybrid Cloud: It is not uncommon for larger organizations to adopt a hybrid cloud architecture, where the consolidated ERP is in the cloud, but other more distributed systems are maintained locally and integrated with the cloud ERP.
When seeking out the right partner for cloud ERP services, it’s important to consider the following:
Collaboration is Key: Unlike in the past, when ERP vendors sold licenses and walked away, a cloud ERP requires a close relationship between companies and their vendors. Since new fixes and functionality are being released quarterly, organizations must know and understand the ERP roadmap, and trust that the vendor will deliver on its promise. Companies should be empowered to work with ERP providers to add requirements to the ERP roadmap. ERP vendors are becoming more heavily vested in the success of their clients. In the SaaS model, failure is not an option for the client or for the vendor. Having trust in the vendor is paramount.
The gap is shrinking: In a recent review of eight different ERP vendors of various sizes, all on the cloud, revealed the digital platform has afforded the smaller players an opportunity to leapfrog their technology to match that of the larger players in the market. Using the digital platform, most ERPs have a greatly enhanced end-user experience – the “wow-factor”. The story of analytics and core functionality mirrored this trend, as well. The gap between tier 1 and others is narrowing considerably. This presents a new set of options for a company that plans to upgrade to a new ERP and is considering cloud options.
Turn-key Vendors offer great alternative: Look for implementation vendors who can offer a turnkey solution, from implementation to hosting and support. Turnkey service can provide a significant price advantage.
It is important to see the cloud ERP deployment as a journey, where new functionality will be delivered often (quarterly on public cloud, bi-annually or annually on private cloud), and made available to all. With limited or no customization, organizations will be better enabled to remain current at a much lower cost. It is now possible to run a lean IT team on a smaller ERP budget – a clear win for companies.
There is, however, a price to pay for this win. To adopt a truly cloud enabled (SaaS) model, a company must have the discipline to eliminate the need for customization. Many companies, both large and small, grapple with this challenge and the mind shift. Organizations can embrace a lower level of customization by adding the visualization layer and data warehouse cubes. SaaS does allow for some customization, but organizations should be cautious and understand the implications.
Digital transformation is fundamentally changing the ERP landscape. It allows businesses to transform themselves in this digital age, at a lower cost and with smaller teams. For those who are contemplating upgrading their legacy ERP, cloud can offer a unique opportunity to rethink their strategy. The increasing importance of “as-a-service” models (SaaS, PaaS, IaaS etc.) has changed the relationship that a company has with its ERP vendor. This shift will drive the selection of the next generation ERPs.