ERP cloud adoption is a hotly debated topic and many IT executives are weighing whether they should consider moving their ERP systems to online offerings in the cloud. While most of them are mostly concerned with data security, cloud adoption continues to shake the workplace, with more and more organizations considering this option while a dozen others, even making the bold step to move a portion of their ERP services like human resources to the cloud. But a good number of CIOs are still skeptical about trusting their cloud provider with vital data such as those of finance and supply chain departments.
However, there are a number of aspects that these executives can consider before making a decision on whether to move their ERP systems to the cloud or stay on-premise. A number of organizational issues must be addressed: company size, industry the company operates in, security needs, solution complexity, and several others. In this perspective, you will learn how the pros and cons of moving your ERP system to the cloud – a framework CIOs can utilize to evaluate the viability of this option and how to make the entire process work.
ERP Cloud Adoption – Here is How to Make it Work
ERP Housing Models
Ever since the rise of full-scale ERP systems back in the early 1990s, organizations have been struggling to balance the high costs and complexity of the systems against the needs for flexibility and customized features. Before that, companies had no choice but go for an on-premise model: provided by companies like Oracle and SAP, and yet these systems remain the preferred option for many organizations. However, the early 2000s saw the advent of hosted solutions, where management of the platform is done off-site and the installation of software is on end users’ computers.
Organizations have witnessed a recent rise of a third model in which distribution of the ERP solution is done from the cloud and accessed by end users using Web browsers. Cloud adoption can offer substantial benefits like decreased capital expenditures, reduced overall costs and faster implementation. In fact, a bigger section of the ERP market is already moving toward this direction.
For instance, Oracle’s cloud-based offering for enterprise resource planning and budgeting continues to arouse interest and SAP’s recent announcement about its intention to avail its HANA platform-based applications via the cloud continue to gain traction despite significant concerns like limited functionality, security, performance reliability, and the possible loss of internal control.
The decision whether or not the cloud is the right choice should be considered carefully by IT leaders. After they have done an analysis and decided that ERP cloud adoption is the way to go, they can do a number of things to make it work.
To begin with, it is important to note that the history of ERP systems is characterized by both significant successes and serious failures, given the huge cost and complexity involved in these implementations. Fortunately, the cloud has a promising way to resolve these ERP’s notorious challenges.
Think About How it will Reduce the Cost
Instead of an outright purchase, cloud-based ERP implementations are based on a subscription model, which ideally includes the software and hosting fees, as well as support. Therefore, think of the cloud as an investment that requires minimal initial capital expenditure and operation costs, unlike traditional systems which may require you to dig deeper in your pockets.
A big plus for cloud providers is that they can scale up their cloud offering relatively easy with the evolution of an organization’s needs. The maintenance of both the hardware and software, as well as patches, refreshes and upgrades, is the sole responsibility of the vendors. Moreover, they also offer the necessary backups, user support, and system monitoring. By transferring all of this responsibility elsewhere, organizations are able to slash the size of their IT personnel and even free up resources for the activities that they cannot outsource. Ideally, a cloud-based solution reduces the total cost of ownership to about 50 to 60% of that of traditional solutions, especially over a ten-year period.
Both hosted and in-house ERP systems have one major drawback: system integrators and vendors often utilize existing templates that have to be customized and even configured to suit the specific company processes and practices. It takes months or even years to do implementations.
With cloud-based solutions, users can get a basic configuration, integrated with a few options designed to solve the problems of most businesses. This approach significantly reduces deployment time whilst tacking the most vital needs of the organization. The rolling out a cloud-based ERP system is determined by the time required to update affected business processes (if any) and convert any pertinent data. The time required to develop or build the system is irrelevant. So, companies have the duty of revamping their business practices in order to fit the system – which can significantly reduce complexity, as it is a reversal of archaic ERP implementations.
While cloud-based systems may have limited configuration, they allow organizations to instantly add new business functionality. For instance, you can add sales lead generation while at the same time meeting common requirements, including disaster recovery and high availability.
Flexibility and Scalability
Vendors have put a considerable amount of effort creating new ways companies can acquire new or additional software/ functions without having to go through the usual tedious software delivery process. Cloud-based systems are more appropriate for rapidly evolving organizations that wish to meet a fast, changing competitive environment. While there are numerous benefits of a cloud-based system, many companies are still skeptical about ERP cloud adoption.
The decision to adopt a cloud-based system is a tough one, but once you’ve made the ultimate decision to move your ERP system to the cloud, you have to make it work. Providers continue to invest a significant amount of resources in enhancing their cloud-based offerings, stretching the availability and functionality of their services, while reducing the risks associated with adoption. Both smaller and larger companies with the intention of moving to the cloud can greatly benefit from lower costs, scalability, and flexibility associated with this option. ERP cloud adoption is the future, and most companies already know this even though some are not yet ready to take the plunge.