Cloud Can Bring Out the Best of ERP

Previously, I discussed some of the hard realities customers have to manage as part of a Cloud ERP solution.  However, these challenges should not deter customers from looking at a Cloud ERP deployment model.  There are broad advantages for Cloud ERP including incremental scalability and smaller start-up investment.  I would like to speak to some of the less known advantages that a cloud model can provide to ERP customers.

ERP Value Proposition Revisited

In a previous blog article (ERP Makes for an Expensive Custom Solution); I outlined the key advantages and challenges associated with ERP software.

ERP Pros and Cons

ERP Advantages and Challenges

 

For a successful ERP implementation, it is vital that the approach address both the inherent advantages and challenges.  The right cloud deployment model can address many of the ERP advantages/challenges in a more effective manner than a traditional On-Premise model. 

How Cloud Can Make ERP Value a Reality

Let’s briefly discuss how a Cloud ERP model can have an advantage over an On-Premise ERP model using the inherent ERP advantages and challenges as the context for the comparison.

How Cloud can support ERP Advantages

Cloud ERP vs On Premise ERP

Let’s discuss some of the less obvious advantages in more detail:

  • Standardization:  Cloud ERP will have an advantage over an On Premise model simply because the costs tend to be more visible to business users.  Traditional internal IT organizations in general do not have a service-oriented price model for their internal customers.  The cost of not standardizing business processes gets lost in the general IT overhead allocated back to internal businesses.
  • Share IT Development Costs:  as far as short-term capital expenditures and scalability costs, I can see where Cloud ERP has a definite advantage.  Longer-term or Total Cost of Ownership may swing the advantage to an On Premise model given factors like (a) customer size and (b) level of software customization required.

Next, let’s review a comparison between Cloud ERP model and On-Premise model on which model can better address inherent ERP challenges.

Cloud vs On Premise ERP Challenges

Cloud vs On Premise ERP Challenges

Let’s discuss some of the less obvious challenges in more detail:

  • Organizational change:  When you own the change the more likely you are to accept the change.  Even though there may be a divide between business users and an internal IT organization, they are both part of the overall organization.   A rapid deployment of functionality does not necessarily mean a rapid user acceptance and effective use of technology.
  • Requirements gathering:  Requirements gathering and business analysis is a gap that most ERP Cloud providers have not addressed effectively.  Onsite, face-to-face interactions is still the most efficient means of gathering and validating business requirements.

 Regardless of the advantages that Cloud ERP may have over an On Premise ERP model, a customer with unrealistic expectations for Cloud ERP will result in a disappointing experience.

 Beware Of Unrealistic ERP Cloud Expectations

Cloud ERP is an evolving solution model with as many misconceptions as hype.  In fact, many have labeled these misconceptions as cloud washing.  Following are common perceptions and misconceptions that customers may have with Cloud ERP offerings:

  1. Huge cost savings:  This can be a huge misconception if customers expect to run on the latest/greatest/fastest possible hardware.
  2. Quick solutionsThere can be a perception of a real-time, on-demand value generation for customers.  It is important to remember that Cloud ERP is only one component of a business solution.
  3. Greater collaboration: Cloud ERP or any technology does not automatically result in greater interconnection between people, departments, and companies.

Be careful of expectations that go far and beyond what the cloud is actually capable of providing.  Customers may want everything automated without having the discipline and effort to utilize technology appropriately.   As the saying goes “You can’t have your cake and eat it too!”

Summary

Cloud ERP is a maturing deployment model that may provide a greater opportunity to capitalize on an ERP investment.  A Cloud ERP model encourages standardization through visible economic drivers and provides the opportunity for greater focus on strategic activities. However, we need to balance our enthusiasm for Cloud ERP with realistic expectations.  There is no such thing as a push button solution. 

SI Partner for PeopleSoft ERP

Blog Sponsor – Cardinal Point Solutions, LLC.

Cloud ERP – New Dog, Same Fleas

I am very excited about Cloud ERP and the potential opportunities for customers, however, I like to speak to the minority opinion for a balanced discussion.  Just as ERP was deemed the panacea for all business automation pains, Cloud ERP is positioned as a revolutionary approach to deploying an ERP solution.  Cloud ERP provides a solution that is flexible, adaptable, scalable, efficient, and affordable.  Customers can enjoy painless upgrades, rapid deployment, and easy customization along with availability “anywhere at anytime”!  Practically speaking, Cloud ERP is just another deployment option available to customers.  The activities required for an “on premise” ERP implementation are also required for Cloud ERP.  The scope and responsibility for the implementation activities may be different but most assuredly they are still required.  Let’s further discuss the key impacts that a Cloud ERP deployment will have on the implementation.  For our discussion, we will refer to the following standard ERP life cycle.

 

ERP Phases

ERP Life Cycles

 ERP Life Cycle: Implementation

A repeated value proposition for Cloud ERP is a quicker implementation and deployment.  However, it is important to note that technology has a limited impact on accelerating implementations.  The deployment approach for cloud will naturally encourage a fixed, limited implementation scope – however, this is not unique to Cloud ERP.    I agree that from a technology perspective Cloud ERP offers a faster installation timeframe.  Nevertheless, it is important to note that Cloud ERP is only one component of a business solution.  There are still multiple disciples required for a Cloud ERP implementation – especially organizational change management.  Cloud ERP can provide very robust functionality but if the organization is not prepared to properly use the software then the value of Cloud ERP will quickly dissipate.  Also, note that data conversion and the quality of the data converted will have a significant impact on both the speed and value cloud ERP can provide.  Third, integration will be a greater challenge in a Cloud ERP model versus an on-premise ERP model – if only because the Cloud ERP will be outside the company’s internal network.   Now, let’s consider the impacts Cloud ERP will have on the maintenance life cycle.

 ERP Life Cycle: Maintenance

 There are two areas of consideration for the Cloud ERP deployment model: customizations and integrations.  These two areas are impacted based upon the cloud model.  Following is a summary of the most common cloud models.

 

Key ERP Cloud Offerings

ERP Cloud Models

The key consideration is whether the customer has a dedicated software instance or a shared software instance.  In general, a customer will have greater flexibility with integrations and customizations if the customer has a dedicated instance.  If multiple customers are on single software then the Cloud ERP provider may limit the level of integrations and customizations because the software changes may have an adverse impact on all the customers on a shared instance. 

ERP Life Cycle: Upgrade

ERP upgrades are necessary for software maintenance compliance and generating opportunities for greater return on investment.   The responsibilities may shift for performing the technical upgrade, however the customer must provide resources for providing input to the delta fit/gap process, conducting organization change, testing, and validation.  Another key consideration is if the customer has any flexibility on the frequency and timing of ERP upgrades.   Lack of flexibility may result in the customer managing to the Cloud ERP vendor’s timetable. 

ERP Life Cycle: Decommission

In general, the typical ERP life span is 10 years.  As most customers are “going concerns” focused on growing and becoming more successful, it is important to consider the options available to move across delivery models.  Consider the following illustration:

 

ERP Deployment Options

ERP Deployment Model

There is a relationship between customer size, integration requirements, customizations and ERP deployment models.  As a customer matures and grows there will be a need for greater integration and customizations to address unique competitive requirements.  Customers must balance cost and flexibility in selecting the right ERP deployment model.

Summary

Cloud ERP is providing additional opportunities for customers to leverage ERP as a viable option to support business operations – especially for smaller businesses with limited resources that require out-of-the-box functionality.  However, it is important to remember that Cloud ERP is not a short cut to success.  Responsibilities may change but the same activities are required to ensure a successful solution.  As with every deployment model, there are advantages and disadvantages to consider.  It is in the customer’s best interest to consider all phases of the ERP life cycle when selecting the appropriate deployment model. 

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