ERP in the cloud-CIOs are facing ongoing pressure from several angles to shift ERP to the cloud. Vendors are pushing their cloud roadmaps. The business is demanding cloud capabilities to achieve growth and gain competitive advantage. Some CIOs feel they are being asked to move to cloud ERP ‘for cloud’s sake’ without a business case that justifies it.
There are two parts to the cloud ERP discussion — hosted Infrastructure as-a-Service (IaaS) and Software as-a-Service (SaaS). Hosting ERP infrastructure in the cloud as IaaS can save money and increase enterprise agility and flexibility. Switching systems of record (SoR) like ERP to SaaS can be more risky and costly than advertised by the vendor. While SaaS for systems of engagement (SoE) can accelerate innovation, refreshing ERP by moving it to SaaS may not be the right move to drive innovation and achieve growth and competitive advantage.
As CIOs incorporate cloud technologies into their ERP roadmaps, they should understand the following common misconceptions and realities of moving ERP to the cloud, and make the move for business’ sake, not for cloud’s sake.
1. Shifting my ERP to the cloud as a SaaS suite is better than best-in-class SaaS
Reality — Operating an ERP suite as-a-service does not eliminate its complexity or improve the benefits of being tightly integrated. For installed ERP licensees, moving to a SaaS ERP model can be expensive, risky and cause disruption for little, if any, business improvement. The opportunity cost of ripping and replacing suites to SaaS is also huge. Resources could be better spent on best-in-class applications that can modernize your ERP to drive innovation faster.
Recommendation — Before replacing your ERP suite, evaluate your application strategy and ensure that your requirements can be met by a SaaS ERP suite. Also, SaaS doesn’t need to be approached as an all-or-nothing option. Consider where best-in-class SaaS makes the most sense. Assess whether shifting to a ‘cloud-first’ approach is appropriate. A hybrid strategy for ERP infrastructure and applications will be the norm for the next several years.
2. Buying SaaS applications from my current ERP vendor is the best strategy
Reality — ERP vendors develop products that fit the broadest common denominator of requirements, which means they may not be the best choice for your industry-specific or customized business needs compared to best-in-class alternatives. Also, your ERP vendor’s SaaS products typically operate on their proprietary cloud infrastructure which locks you in to the vendor’s cloud infrastructure.
Recommendation — Many alternative SaaS applications are better suited to meet complex business needs than those offered by your ERP vendor. The best strategy is to let your business needs drive application choices. Evaluate the features and functionality of best-in-class technologies in comparison to the ERP vendor’s offering to decide what best fits your business. Consider choosing SaaS products that are vendor cloud infrastructure agnostic.
3. I should move to my ERP vendor’s cloud infrastructure
Reality — Adopting your ERP vendor’s cloud infrastructure could lock you in to a platform that limits your choice of products and services. Instead of the best-in-class options for your level of business complexity, you are limited to applications that operate on — or integrate with — the vendor’s technology stack. Bear in mind too that ERP vendor IaaS can cost more. For example, Oracle’s price per Oracle compute unit (OCPU) doesn’t reflect the total cost of cloud infrastructure. Once other operational needs of running ERP in the cloud are factored in, it can cost more to operate an ERP vendor’s cloud infrastructure.