The Top 5 Challenges in Adopting Cloud ERP

* This article is part of a White Paper called “THE ESSENTIAL GUIDE TO ASSURING CLOUD ERP ADOPTION.”

Software implementation and adoption is like a game of Chutes and Ladders. You climb ever higher slowly while mastering each process along the way. Then a software change or system migration comes along and “wheeeeeeeee” down the chute you go. Well, I say “wheeeeeee” because slides are fun, but the reality is that getting farther away from realizing the ultimate goal of mastering your software is a pretty terrible feeling.

The main challenges in implementing a Cloud ERP solution differ slightly depending on whether the implementation is from scratch or a migration from an existing solution to a cloud version. Either way, the core set of challenges is common to both approaches.

Here are the key challenges to adopting cloud ERP and my recommended strategy to overcoming these challenges:

1. Identifying the optimum architectural and licensing models

For many companies this is a time to pause and consider whether to change ERP horses. This would be a case of being careful not to place the cart before the aformentioned horses. Before you even ask which is the model, think long and hard about whether the change is necessary at all.

Other questions to ask include: is our current on-premise system available in a Cloud version? If yes, is the functionality of the Cloud version equivalent (at least)? What variant of Cloud ERP architecture and licensing model would suit us best? Is this a good opportunity to re-visit our main business processes (this could be mandatory with some Cloud ERP systems)? Is a hybrid ERP the best solution for us right now?

As Gartner phrases it: “organizations will need to plan for a hybrid ERP environment where the core on-premises functionality will be augmented by a number of specialist applications targeted at specific, user-centric processes that do not fall within the boundary of the core ERP system, many of which will be deployed in the cloud.”

Compared with other industries, manufacturing organizations suffer with fewer cloud ERP options that support industry specific manufacturing capabilities. There are many well-established ERP solutions with good industry functionality for midsize and large organizations. Many of these vendors either already offer, or will soon offer, cloud-based delivery of their solutions.

Recommended Strategy: Carry out a feasibility study and establish a range of acceptable solution options bearing in mind the issue of hybridization; organize a Request for Proposal (‘RFP’) process so as to obtain solution proposals from suppliers (check the maturity of their offerings) and review these in the context of the feasibility study.

Cast your net wide, even if you do expect to stay with the same software company and just migrate from an on-premise configuration to the Cloud. This work must be done in conjunction with the customization strategy.

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2. Customization to Your Organization

This one is the giant slayer. You have built a system of customized processes, how will existing customizations be moved to the new deployment? What happens to them in a change to a SaaS platform – will they have to be dropped or will business processes have to be changed to fit the ‘standard software’ corset? Is such a change really feasible?

Recommended Strategy: This must be carried out in conjunction with the Architecture/Licensing Model feasibility study. The RFP process should include a customizations list with potential suppliers responding to each functional requirement in turn.


3. Change Management Done Intelligently

The technical side, while important and necessary is something that the IT and systems administrators will handle. This next part of the process is as important but even more interesting — the human element. The implementation of ERP in the Cloud requires real investment in change management. The impact that this change might have on your employees (not least that of a potential downsizing of the IT department) must be managed well and not underestimated.

Recommended Strategy: Make it fun. Stop laughing, it’s possible. If you prepare well in advance, and start even before the ERP migration/procurement process, your employees will know what to expect and manage their expectations. Make a senior manager responsible for Change Management and identify Change Champions. Develop clear messages to engage users.


4. User Onboarding and Training

Delivering effective training is always an issue, but especially so in this case. No one flies an airplane without logging a few dozen hours on the simulator. Underinvestment in this activity is a fatal mistake that many companies make. Companies see training as money wasted, especially when employees leave the company and take your training with them. How can employers square this circle?

Recommended Strategy: Make sure that the budget for user onboarding is adequate and protected. Invest in durable on-boarding and training toolsets – this will ensure that training capital is preserved and carried in a system repository and not in heads of the staff.

Note: Even if the key challenges of Architecture/Licensing, Hybridization and Customization are manageable, the issue of User Onboarding (within the overall context of Change Management) remains the final key to success.


5. Data Security in Cloud ERP – a Concern but not a Challenge

The concern is real but the challenge is not as severe as in some of the other examples mentioned above. The Cloud conjures up a vision of higher risk levels. This perception of a higher risk level is, in general, off the mark.

In fact, there is credible evidence that putting your data on one of the leading Cloud platforms (such as Amazon Web Services) offers a higher degree of data security than you could enable in-house. After all, governments use commercial Cloud services (and the government is never wrong). Seriously though, we don’t classify it as a challenge though it is certainly a concern.

Recommended Strategy: Satisfy yourself by making sure that the ERP Cloud offering you are considering meets industry standards (including ISO27k) for Cloud Services provision. A credible service provider should also be able to provide standards compliance audit reports.

If you prefer your data to reside in-country (and depending on your industry there may be a legal requirement for that), then make sure the proposed service ticks that box.

This article is part of a White Paper called The Essential Guide to Assuring Cloud ERP Adoption.”

Claim your free copy by filling the form below.


The White Paper covers a range of topics including:

Chapter  1: Key Conclusions from Data about Cloud ERP Adoption

Chapter 2: Do Cloud ERP Offerings Stack Up Functionally?

Chapter 3: The Top 5 Challenges in Adopting Cloud ERP

Chapter 4: Overcoming the Challenges of User Onboarding

Chapter 5: Tools You Must Know About that Will Make Adopting Cloud ERP Easier

Chapter 6: The Checklist for Successful Cloud ERP Adoption

Marissa Hart is the Lead Author & Editor of ERPeople. ERPeople is a blog focused on all Enterprise Resource Planning business management platforms. ERP can be used by a company to collect, store, manage, and interpret data from many business activities, including: Product planning, cost, manufacturing or service delivery, marketing, and sales.