BPR, BPM and ERP

I had a customer ask me about the relationship between BPM and ERP.  Does ERP implement BPM or do you need to have BPM before ERP?  Is an ERP implementation a BPR project?  Who’s on first?  As the ERP industry evolves it has become evident that additional disciplines like Business Process Management (BPM) and Business Process Reengineering (BPR) must be employed for a successful ERP experience.  In the following blog posting I plan to define and demonstrate the roles that BPM/BPR play in the ERP lifecycle.

BPR, BPM, and ERP Revisited

Allow me to establish some basic definitions for our discussion:

• Business Process Management (BPM) consists of methods, techniques and tools to design, deploy, control, and analyze operational business processes involving humans, organizations, applications, documents and other sources of information.
• Business Process Reengineering (BPR) is the redesign of business processes – and the systems, policies, and organizational structures that support them – to optimize the work flows and productivity in an organization.
• Enterprise Resource Planning (ERP) is integrated business software that supports multiple business functions across an enterprise.  ERP implies the use of Commercial Off-The-Shelf (COTS) packaged software rather than proprietary software written by or for one customer.

There are a couple of key concepts we should review to compare/contrast BPR and BPM.

Compare & Contrast BPM & BPR

BPM focuses on the business process model to monitor, identify, and implement incremental improvements.  These improvements or eliminations fall within the fundamental rules, parameters, and culture established by the existing business model.  However, there comes a point in time where the law of diminishing returns applies and a transformation to the underlying business model is required.  A more aggressive approach like BPR must be utilized to evolve to the next level of business process maturity.  Consider the following illustration to demonstrate how BPM and BPR interact along the Capability Maturity Model Integration (CMMI):

 

BPR, BPM within CMMI

Allow me to provide an example.  Company A performed a CMMI assessment of their purchasing process.  Results from the assessment showed that the purchasing process was defined for certain business sales (revenue stream) but not for all purchasing events (direct & indirect).  Another key finding was that there was no formal integration between demand planning, supply planning and purchasing which resulted in reactive purchasing. From the above CMMI reference, it was determined that Company A’s purchasing process is at the Managed level.  Company A implemented several incremental initiatives (BPM) to improve process execution including documenting purchasing tasks for all purchasing events and conducting periodic purchasing planning meetings with operations. 

Company A realized process improvement yet the value was limited by following model constraints: (1) each revenue stream (business line) had its own unique purchasing process & rules and (2) Purchasing had limited visibility across the entire supply chain.  Two fundamental mindsets have to change:

1. Move from unique purchasing processes to a common enterprise purchasing model that is flexible enough to address the competitive requirements for each business line
2. Enable Purchasing to have visibility across the entire supply chain to support a process-oriented management model versus a function-oriented management model.

Implementing these changes will require a formal, projectized (BPM) effort that will redefine existing business rules, culture, and business process activities.   As Company A continues to evolve their purchasing process they will conduct both BPM within the CMMI maturity level and BPR as they move to the next CMMI maturity level. 

How Do BPR, BPM, and ERP Relate?

ERP provides the automation of business activities.   There are two fundamental value propositions that ERP provide to customers looking to move up the CMMI maturity model

1. ERP reduces the effort required to perform tactical business activities so customers can focus on strategic activities. Expanding on our purchasing example, this would include basic functionality like automating the creation of purchase orders, approving purchase orders, and matching purchase orders with receipts & supplier invoices.
2. ERP provides the opportunity for visibility across business functions to support business process management.  That said, there are several factors that determine the level of visibility. 

Factors Impacting ERP Business Process Visibility

A competent ERP solution should provide robust, closed-loop integration between the functional modules provided out-of-the-box.  As a practical note, there is always a need to integrate ERP to legacy systems and this requirement should be not overlooked.  A business solution is only as good as its weakest integration.  Process consistency will enable a relevant comparison of results and management of business processes.

A mature ERP solution should provide automation and integration support for both tactical and strategic business activities across the CMMI model.   

Interaction of BPR, BPM, and ERP within CMMI

I am a firm believer that business should lead and technology supports.  Therefore, as the business model evolves it is important to identify the corresponding ERP functionality to support the business activities.   This model also communicates that the best approach to implement ERP is to follow a logical maturity path for business processes.

Common ERP Misconception and Mistakes Related to BPR & BPM

Allow me to address some common misconceptions and mistakes made during ERP implementations related to BPR and BPM.

BPR is part of the ERP implementation.

While I agree that the initial ERP implementation will result in major changes with existing business functions, BPR will not happen unless there is a concerted effort to redefine the holistic business model and organizational structure to be successful with the ERP software.

Implementing ERP will give us BPM.

The direct answer is no.  ERP does provide an information foundation that can support BPM.  BPM is more about a discipline for managing processes and less about software. 

Do I need ERP to mature my business processes?

Technically speaking, ERP is not a hard requirement for BPM.   However, manual routine tasks and limited visibility hinder strategic activities.  ERP can play a key support role in automating business tasks and provide visibility through integration.

Should I implement ERP features that support business activities at different maturity levels?

Business realities will necessitate that customers implement ERP features supporting different CMMI maturity levels.    The problem lies in two areas:

1. Customer expectations are not appropriate set regarding the limited value realized from mature ERP functionality due to less mature business activities supporting strategic activities.  Example:  A procurement process scorecard measuring standard Key Performance Indicators (KPIs) will have limited value if there is not a standard, enterprise procurement process.
2. Implementation partners and business solution advisors should provide a short-term strategy and roadmap to evolve the supporting business activities to same level of maturity.   This approach provides a “quick-win” opportunity for customers to drive additional value from the existing ERP investment.

Summary

Understanding how BPR, BPM, and ERP should relate to one another can be a challenge.  Some believe that it is an “either or” proposition.  I do not subscribe to this school of thought but rather believe that BPR and BPM are disciplines that should be interweaved as part of your ERP application strategy.  Knowing and appreciating these interdependencies will put you in a better position for ERP success. 

Business to IT Alignment – A Practical Discussion

Business to IT alignment is an objective that most technology and business leaders would agree as essential for agility.  However, ask for a definition of Business to IT alignment or how to implement an alignment strategy and the likely results are conflicting information and vague guidance.  In the following blog I will try to add clarity to this topic as well as provide practical guidance.

Definition

Let’s start with a basic definition of Business to IT alignment by addressing some common misconceptions.  Business to IT alignment is far more than just Project Portfolio Management (PPM).  Business to IT alignment consists of several domains:

Business – IT Alignment Domains

Several Tier I & Tier II ERP software vendors provide software solutions to address certain Business to IT Alignment requirements, including PPM and Communications (social collaboration).  However, it is important to remember that technology alone is not the answer.  Collaboration tools can be used to generate more noise than effective communication.   Also consider that having strategic initiatives stored in a common platform (ex. PPM) does not mean the all stakeholders share a common interpretation.    

Just as Business – IT alignment is more than just PPM, enterprise governance is much more than just IT governance.  In simple terms, enterprise governance is a process that ensures that enterprise capacity (Business, Operations, IT) are working on the right things at the right time to enable business goals. It’s a set of guidelines that focuses on organizational success while managing associated risks.  Alignment is hard to achieve when governance is not consistent across the enterprise.  Knowledge transfer is the most underestimated and misunderstood area.  Effective knowledge transfer is more about education and trust than software and templates.  Before one can be successful with Business – IT alignment it is important to fully appreciate the scope and breadth of effective alignment.  A viable alignment strategy must address the key challenges listed in the next section.

The Challenges of Business to IT Alignment

Consider the following alignment model.  This is a very simple model that I would like to use for discussion purposes.

Business – IT Alignment Governance Model

Allow me to highlight some key challenges associated with the traditional alignment model provided.  First is the notion that Business and IT operate separate silos.  Notice in the example above that there are separate Business and IT goals.  Thus, there must be an exercise to reconcile Business goals and IT goals to identify commonalities and gaps.  Practically speaking, given the level of effort required to align these separate strategies, a reasonable conclusion is that alignments occur periodically based upon corporate milestones.  This is where the model breaks down because effective alignment must be a daily activity.  Every business request from strategic initiatives to daily support tickets is an opportunity to reinforce alignment.  Another possible concern implied in this model is that the majority of alignment effort happens at the enterprise level.  Sustainable alignment must happen at every level within the organization.

A results-oriented alignment strategy must address the inhibitors of alignment.  Consider the following relationship between alignment and communication:

Alignment and Communication Inhibitors

Success alignment requires successful communication.  Successful communication requires the effective use of all the key communication skills

Key Communication Skills

Process is important but the soft skills like communications, emotional intelligence (empathy), and knowledge transfer will have the greatest import on long-term alignment success.

Practical Steps to encourage Alignment

Before you can start implementing practical steps you need to assess the level of alignment within your organization.  The Strategic Alignment Maturity model referenced below was developed by Dr. Jerry Luftman and is based upon the Capability Maturity Model Integration (CMMI).

Strategic Alignment Maturity

Once you have identified your current maturity level then you can devise realistic, increment steps to move forward to the next maturity level.  It is also important to periodically assess your organization’s alignment.  What gets measured gets done!

Summary

Why is Business to IT Alignment so hard? Consider the following statements to highlight  the key challenge with alignment.

Business vs IT Value Drivers

Is Business to IT alignment an impossible goal? No, as long as a practical, measured approach is taken to achieve tangible results.  Business to IT alignment is a strategic goal that can only be reached by taking tactical steps to bring Business and IT closer together to generate mutual understanding and trust. When alignment is achieved communication is effective resulting in valued partnership.

PeopleSoft Knowledge Map

Knowledge is power!

Knowledge is also the key enabler for customers to get the most out of their Oracle ERP investment.  I can understand the economic pressures to do more with less. Allow me to share with you the following list of available PeopleSoft information/training resources on the internet.

Available Resources:

• http://www.learnpeoplesoft.info (like a cliff notes for PeopleTools PeopleBooks)
• http://apex.oracle.com (Oracle Learning Library – search for PeopleSoft)
• http://www.peoplesoftupgrades.blogspot.com/ – PeopleSoft Upgrades
• http://peoplesoft.wikidot.com/resources – PeopleSoft Wiki (Look at Jim’s PeopleSoft Blog & PeopleSoft Tipster)
• http://psst0101.digitaleagle.net  PSST0101 (PS Tech Blog & Admin)
• http://www.oracle.com/us/industries/utilities/054275.html Oracle Information Datasheets for PeopleSoft (one-stop)
• http://docs.oracle.com/cd/E17566_01/epm91pbr0/eng/psbooks/psft_homepage.htm Online Hosted PeopleBooks
• http://peoplesoft.ittoolbox.com/ PeopleSoft Toolbox.com
• http://www.peoplesoftupgrades.blogspot.com/ PeopleSoft Upgrades
• http://www.learnoracle.info/ Learn Oracle
• https://docs.google.com/file/d/0B0t6SkC6OnQoeWdYbE9Rd3pvbVU/edit?pli=1   Integration Broker Training – PeopleTools 8.51

Knowledge transfer is a process, not just a milestone task on a project plan.  Customers – insist on a knowledge transfer plan from your SI partners.

If you gain value from this knowledge map then I would consider it an honor if you would consider purchasing my book on ERP implementation best practices.  I promise you won’t regret it.

ERP Requirements Mgmt 101: What + Why = How

One of the reasons why I am a consultant is that I enjoy solving business problems with technology. ERP provides a technical foundation that I can utilize to solve problems.  However, during my career I came to the realization that simply throwing technology at a business need is not in the best interest of the customer.  This is especially true when you do not completely understand the requirement.   There is a difference between an evolving requirement and an evolving understanding of the requirement.  In the next sections we will briefly review a practical approach for ERP requirements management.

 

Gathering Business Requirements is Just the Beginning

I think we all can agree that gathering business requirements is a key activity that will have a significant impact on ERP implementation success.  However, it is as equally important to focus on requirements validation before proceeding to implementing a solution for addressing requirements. Too often we jump from gather to design before we have a full appreciation of the business need.  When it comes to formal requirements management, I keep the following simple equation in mind:

Basic ERP Requirements Management

  

Defining What

Sounds simple enough but how you gather requirements sends a message.  Also, it is important to understand if the requirement is the result of a new opportunity or addressing an existing business pain.  The source should play a factor in your approach to gathering information.  Consider the following commonly accepted approaches utilized for gathering ERP business requirements:

 

Generally Accepted Requirements Gathering Methods

 

Please allow me to state that the above methods are valid and have their inherent advantages and disadvantages.  The challenge I find is not gathering the requirement but rather the limited effort spent on understanding how the requirement supports business process results. 

 

Determining Why

It is hard to provide a solution when you do not understand the business.  Asking why is less about challenging business requirements and more about gaining a better perspective of the requirement.  What are the desired result(s)?  How do the result(s) add value to the overall business process?   Odds are that you will have only a superficial understanding of the requirement if you do not understand the context (environment) of the business need.  Also note that asking why is the first step to validating your understanding of the business need.  Following is a list of the common validation activities for business requirements:

Requirements validation techniques

 

I firmly believe that all four validation methods should be employed as part of defining business requirements.  Unfortunately, not all of these validation steps occur during the deployment.  The advantage with ERP is that you have working software that you can easily demonstrate and confirm how business requirements would be handled.  Do not guess – prove what is possible!

 

Constructing How

This process is typically an area that is not executed well when it comes to ERP.  In the rush for faster results many assume that the solution must be implemented via technology.   Technology is good for many activities (repeatable, logical) but it can also be a costly option for conflicting requirements across a business process.  As a rule of thumb, I typically consider 4 options for addressing business needs:

 

Options to address ERP requirements

 

1. Automation: Developing a technical solution to address need.
2. Business Process: Creating business process to address need.
3. Acceptance:  Do nothing and handle as the need arises.
4. Avoidance: Eliminating the source of the business need.

 

Understanding both the What and Why will provide you the right insight to select the most viable approach for implementation of the requirement.  It provides you with the perspective and context for effective decision-making.

 

Summary

An enterprise technology platform like ERP is an empowering toolset for addressing business needs across an organization.  Yet, soft skills like requirements management have a greater impact on business solution success.  It seems like every couple of years there is a “new” ERP methodology that will address the challenge of gathering ERP requirements.   Often I observed too much focus on the methodology and not enough effort focused on the end result.  I’m sure that I may receive some criticism from my peers in regards to my attempt to “dumb down” requirements management.  However, I have found that the best approach is a simple approach that every stakeholder can understand and recall instantly versus having to go to a methodology book.  

Cloud ERP Strategy: Goodbye IaaS, Hello IaaS

One of the first deployment models for cloud computing was Infrastructure as a Service (IaaS).  Currently, there is a price war between the major IaaS providers like AWS and Rackspace to provide the cheapest infrastructure. However, enterprise customers looking to move their ERP solutions to the cloud should focus more on Integration as a Service (IaaS).  Integration, not infrastructure, will have a greater impact to TCO and ERP success.    In the next sections we will briefly compare the influences that infrastructure and integration have on an enterprise solution like ERP.

Cloud Infrastructure versus Integration

In a previous blog I reviewed the key competencies to consider as part of selecting an ERP cloud provider (ERP Cloud: Finding the Right Provider).  Both infrastructure and integration are key considerations yet I view enterprise integration the greater challenge.  Consider the following:

Key Cloud Consideration Factors

Cost

The cloud storage war appears to be getting the most press in cloud computing but consider two factors driving this type of pricing strategy

1. Vendors cannot provide a material differentiation or competitive advantage.
2. Technology improvements continue to drive down disk storage costs rapidly.  Combine this trend with the economy of scale that cloud providers generate to continue driving costs down by another 40% in the next 3 to 5 years.

Moore’s Law highlights the computing hardware trend resulting in greater technology capabilities and driving down MIPS costs.  However, the same cannot be said for integration.  As discussed in one of my earlier blogs (Best of Breed vs. Integrated ERP), integration costs can be up to 8 times the cost of the ERP software. 

ERP Integration Considerations

We have all heard the proverb “A chain is only as strong as its weakest link.” Applying this concept to business software, we would conclude that a business solution is only as strong as its weakest integration.

Business Value Realization

Allow me to make the general statement that outsourcing IT infrastructure to a cloud provider should result in a cost savings to customers.  However, I believe that IT organizations will quickly learn that providing this cost savings is a short-term value proposition to their business owners.  Ultimately, IT-driven innovation will drive business value realization.  Gartner identifies Integrated Ecosystems and Hybrid IT & Cloud Computing as two of the top 10 strategic technologies for 2013.     Every ERP solution has a portfolio of edge products/3rd-party integrations to external solutions to provide holistic support of business processes.  The only true method of creating business value is through business processes.

Socialization & Collaboration

The ERP software industry is realizing that people have the greatest impact on business results.  It is refreshing to see the increase in socialization and collaboration capabilities.  Infrastructure is necessary but integration is the critical path to success.

Market Trends

In my opinion, I expect to see the market changing for IaaS providers.  Given how important integration is to a viable cloud solution either existing IaaS will grow into a Platform as a Service (PaaS) or will be acquired by PaaS vendors looking to provide global support.   Just take a look at AWS and Rackspace’s transition from an IaaS to a PaaS:

• AWS Expands from IaaS to PaaS (Ovum, Lachal 2011)
• Rackspace continues buying spree to boost services (NetworkWorld, Butler, Aug 2012)

Summary

History always has a way of repeating itself.  Recalling the Y2K problem, storage (infrastructure) was seen as a strategic/limited resource.  This view resulted in the programming practice of representing the year with two digits and we all know how that came back to haunt IT organizations.   Infrastructure is a cheap commodity when compared to a collaborative, enterprise integration framework.  Infrastructure is a key enabler for cloud computing but integration will ultimately determine your success of ERP in the cloud.   

Building a Business-Aware Cloud Solution

In a recent study conducted by Forrester Consulting “Enterprise Cloud: Lessons Learned From Early Adopters” a key conclusion made is “A complete, application-centric, business-aware cloud solution is needed.”  Let’s say that your C-level executive stops by your office and asks you to lead a project to develop a business-aware cloud solution.  To be successful it is important to understand what you are building.  In the following blog I will attempt to define a business-aware cloud solution.

Defining a Business-Aware Cloud Solution

Your project objective is to develop a business-aware cloud solution.  As you are a competent project manager one of the first areas you want to define is the project scope.  As your humble project assistant, I have searched the internet for you and have leverage greater minds from the University of Edinburgh:

“What different employers mean when they talk about business awareness varies, however their views broadly fall into two areas: (1) understanding an occupation, and (2) understanding the business environment.”

What is Business-Awareness?

I would like to elaborate upon on this definition with the following model.

Defining Business-Awareness

There are three key areas that enable business awareness. The business process area includes the business functions, related-activities, and the individual tasks that must be performed in order to generate the desired business results.  The business role(s) area includes the concatenation (grouping) of business activities into responsibilities that can be competently accomplished.  Finally, business awareness also requires an understanding how an industry operates and how it is influenced by local, national and global economics.

Now, your experience as a project manager tells you that a well-defined project scope statement not only explains the end result but also elaborates on what is considered out of scope.  With this best practice in mind let us clearly articulate on some areas that may misalign the focus on business.

 

Blurring Focus on Business-Awareness

Please allow me to elaborate. A business function is a necessary structure resulting in a concatenation of activities/tasks that aligns with the skills/experiences of the organization to best support business processes.  The ERP software industry started as discrete, functional applications that continue to evolve into enterprise-wide, business process solutions.  In general, software applications focus more on business functions requiring the implementation of multiple applications to support an entire business process.  As a veteran project manager, you understand that an application focus may result in gold-plating or poor support of functional hand-offs (integration).  You also appreciate that technology is only one component of a business solution.

We are halfway to having a better understanding of our project objective.  Now, let’s focus on what some may consider the mystical realm of the cloud.

What is a Cloud Solution?

Forgive my “tongue-in-cheek” response above but it is hard to define a clear picture given the varied information available in the marketplace.  Once again, I refer to brighter minds (NIST) to provide a definition.

“Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

I would like to focus on what’s not in this definition that may be perceived expectations of moving business software to the cloud

Implied Expectations for Cloud

The immediate, short-term savings will be reduction in capital expenditures required for IT infrastructure requirements. As correctly pointed out in the book “Cloud Computing – Assessing the Risks“, there is a general misnomer that there is a risk reduction with the cloud.  There is a transference of risk from the IT organization to the Cloud Provider.  Technology results (reliability, response, availability, scalability)  may lead to business benefits – but it is not a guarantee. 

Now that we have a little better understanding of project objective, let’s briefly review the role that the key enablers will play in the implementation of a business-aware cloud solution.

Enablers for a Business-Aware Cloud Solution

As a competent project manager, you know that the project must address all three components of a solution in order to be successful in meeting all expectations.  For the sake of brevity we will only focus on a key expectation for each component.

Business Solution Defined

• People:  People innovate.  People accept.  People resist.  People ultimately drive project success. 
• Process: Innovation is a process and not just a brainstorming event.  IT needs to move up the business value chain with a rapid, iterative delivery method.  Governance is not an acceptable substitute for properly educating users on the effective use of cloud technology.
• Technology: A reasonable expectation is to select a cloud vendor that provides a  reliable, secure, scalable IT infrastructure solution on par (or better) than existing services.   For business software like ERP to be business-aware, the software must have access to business model, roles, and rule metadata that is maintained by business users.

Summary – Are We There Yet?

Do all the technical components exist in the marketplace today to build a business-aware cloud solution?  Technically speaking, the answer is yes if you want to seamlessly integrate multiple technical components with multiple UI experiences, data sources, and training requirements.  Will it be a practical and viable solution?  I suspect that there is room for improvement.  If you wait for a complete solution then it may be too late for your business users.  But you are not just a project manager, you are a project leader!  You know that this effort is a project program with iterative projects that incrementally build upon the individual project results.  Start planning, start delivering!

P.S.  I am conducting a webinar: Best Practices for Selecting the Right ERP Cloud Provider on Wednesday, December 12, 2012 1:00 PM – 2:00 PM EDT

Overview – Next stop: The Cloud! Everyone is talking about it but there is a fog of disjointed information out there regarding moving to the Cloud. In this webinar we will demystify the cloud and discuss one of the key activities customers should carefully consider in moving to the cloud – selecting the right cloud provider. We will also discuss some of the key factors to consider as part of your cloud deployment strategy. Register at http://www.oracle.com/go/?&Src=7604459&Act=251&pcode=WWPN12035291MPP257 .

ERP Cloud: Finding the Right Provider

I recently attended Oracle’s OpenWorld Conference in San Francisco this October.  There was a huge volume of information on the Cloud.  As I walked through the Exhibitor’s halls at the Moscone Center, I observed that every SI partner had ERP in the Cloud or could get customers to the Cloud seamlessly.  What I did not see is any offering or advisory service to guide ERP customers through the storm clouds to find the right provider.  In the next sections we will discuss the key competencies to consider as part of making an ERP Cloud provider selection.

ERP Cloud Provider Key Competencies

Hardware Competence

Typically, this is the first area that customers think of when evaluating Cloud providers.  For this discussion, hardware includes servers, processors, network, processors, and storage.  Now, I may be chastised by my technology peers but I take a very practical approach to hardware.  Business users are more concerned about technology results (reliability, response, availability, scalability) versus what hardware configuration is being used.  I’m all for engineered solutions if they provide a material impact to technology results.  I would not consider millisecond improvement on response time as a material impact on response time nor would I pay an additional $100 per hr /month for special hardware.  Remember to keep the end in mind – you are moving an ERP solution to the Cloud.  Review and identify Cloud providers that offer hardware configurations that best aligns to the hardware specifications and recommendations made by ERP software vendors.

Software Competence

For this discussion, software competence focuses on software and standards that enable a viable Cloud solution.

Selecting Cloud Providers – Software Considerations

For brevity sake, we will focus on a few of the key software enablers for the Cloud.

Software Area	Considerations
Open Standards & Technology	Open Standards promotes interoperability and data exchange among different products or services and are intended for widespread adoption.  This area will be a key enabler (and indicator) of portability.
Integration	A viable ERP Cloud solution must provide a robust toolset for integration back to the customer’s on-premise supporting systems.  Integrations can be a potential point of failure that must be addressed with a cost-effective solution.  Cloud + Poor Integration = Failure.
Load Balancing	Load Balancing is vital for effective distribution of work across a multi-tenant hardware environment.   Optimal resource utilization, maximize throughput, minimize response time, and avoiding overloads are not possible without a robust load balancing capability.  Be leery of simple load balancing algorithms like random choice or round robin.
Virus Protection	Viruses can live in the Cloud.  Malware known as Crisis can infect VMware virtual machines.  Moving to the Cloud does not end the need for antivirus protection.
Virtualization	Virtualization is a key enabler for Cloud computing.    In order to realize the technology benefits associated with virtualization, Cloud providers must be able to provide a robust solution for the following capabilities: Elasticity – dynamic scalability is an integral feature (enabler) for agility and fundamental IT cost savings. Logical isolation for data protection. Hypervisor management for VMs.VMs replications.
ERP Software	Not all ERPs are created the same for the Cloud.  Following are areas to review in determining how “Cloud-Friendly” is your ERP solution.     Single-Tenant vs. Multi-Tenant – Single-Tenant provides a more formal logical isolation for customer data.  Multi-Tenant reduces duplicate upgrade efforts and technology resources. SOA Compliance – How well does your ERP solution expose methods and related data components to external solutions via SOA services? Network Latency – High data volume transfer between Cloud server and the on-premise client. ERP Experience – Also ask if the Cloud provider has “hands-on” experience with supporting your ERP solution. A leading Cloud provider will have a competent level of technical support knowledge for your ERP software.

 Security Competence

Security is a key selection criterion for Cloud providers.  A realistic expectation is that Cloud providers should have a greater level of security than your current on-premise IT environment. Following is an illustration of the key security areas you should consider as part of your ERP Cloud provider. 

Cloud Provider Selection – Security Competence

 There are three key areas that I would like to further discuss.

1. Identify Relevant Security Standards:  Viable Cloud providers should be able to assist their customers in identifying and applying relevant security standards for their specific industry.  
2. Security Validations:  Leading Cloud providers are able to demonstrate their security competence via (a) audit and evidence gathering, (b) providing security audit findings for customer review, and (c) enabling customers to perform independent security audits if desired.
3. Data Encryption:  Encryption of customer data either in transit or at rest should be a non-negotiable requirement for Cloud providers.

 Value-Add Partner Network Competence

 Every ERP solution has a portfolio of edge products/3^rd-party integrations to external solutions.  It stands to reason that customers should consider the portfolio of ERP edge products that a Cloud provider can host as part of the selection process.

Cloud Providers – Value Add Partnerships

Selecting a Cloud provider is not a short-term relationship so ensure that you can grow and generate greater value from your ERP investment within the Cloud.

Services Competence

A strategic competency that I feel is being overlooked in the Cloud market is the service portfolio that a Cloud provider should deliver.   Consider the following reality check: 

Reality Check for ERP Cloud. Used by permission.

Technology is only part of the solution.  What is the value of providing new ERP features if end users are not formally trained?  Who will perform regression testing for both technical and functional upgrades?  In my mind, a leading ERP Cloud vendor should provide both an automated testing solution and on-demand training solution to facilitate rapid deployments.   Cloud providers should have a services framework such as ITIL or ITSM.  This is a validation that your Cloud provider is committed to delivering reliable professional services.

Summary

Overall, I am very excited about the opportunities that Cloud can offer to existing ERP customers and potential customers who could not afford a Tier 1 ERP solution.  Yet, we must not forget that there are advantages and challenges that we must address in order to provide a reliable solution for ERP customers.  It is also important that we keep realistic expectations for the Cloud.  Cloud is more about a new way of delivering computing resources versus being a new technology.

P.S.  If you are interested then the blog author will conduct a webinar: Best Practices for Selecting the Right ERP Cloud Provider.  Overview – Next stop: The Cloud! Everyone is talking about it but there is a fog of disjointed information out there regarding moving to the Cloud. In this webinar we will demystify the cloud and discuss one of the key activities customers should carefully consider in moving to the cloud – selecting the right cloud provider. We will also discuss some of the key factors to consider as part of your cloud deployment strategy. Register at http://www.oracle.com/go/?&Src=7604459&Act=251&pcode=WWPN12035291MPP257 .

 

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