Cloud ERP: The rising alternative to hosting your own

CIOs faced with brittle on-premises ERP systems and the desire to free up valuable IT resources are increasingly looking to the cloud as a reliable, scalable solution for their ERP needs.

Credit: Claudia Regina

One of the first tasks Tom Doria was charged with when he was brought on board as CIO of SeneGence International late last year was to evaluate cloud services for ERP.

The global manufacturer and multilevel marketing company for women’s cosmetics is experiencing tremendous growth and its platform couldn’t match the pace needed for the company to remain competitive, says Doria.

“We have been using an ERP package that was designed more for a small or medium business market and didn’t have the extensibility and scalability capabilities that we were looking for to run a Fortune 500 company,’’ he says.

Doria is in the throes of evaluating “all the major players” in the ERP space, but has no doubt the cloud is the future home for SeneGence’s core business apps.

In fact, while he continues his research, as an interim step, Doria has already moved all the company’s Acumatica ERP processes into Microsoft Azure to take advantage of what he calls “scalability and survivability.”

He has no illusions that a full-blown migration will be a quick or easy process. “Implementing an ERP package is not an instantaneous journey; it takes 12 months or potentially longer.” But Doria is convinced it will be well worth it and be a panacea for helping SeneGence address the needs of a high-volume business that operates 24/7/365.

Momentum for cloud ERP growing

SeneGence is by no means alone. By 2020, the organizational norm will be hybrid ERP environments, where a combination of on-premises and cloud-based models will be deployed, according to PwC.

Gartner projects at least half of large enterprises will successfully implement a software-as-a-service strategy by 2025 and run their core ERP systems in the cloud. The reasons mirror why other workloads and apps are steadily being moved to the cloud: scalability, reliability, elasticity and cost savings, to name a few. IT leaders also say maintaining hardware, software and infrastructure is no longer a core part of their business, and freeing up IT resources enables staff to play a more strategic role in helping their organizations be innovative and competitive.

“Businesses need to think differently than they did 20 years ago,’’ explains Michael Guay, research director of ERP strategy at Gartner. When it comes to deciding whether to move an ERP system to the cloud or keep it on-premises, Guay tells clients they need to strike a balance between “the functionality I get and how much of a good fit is it, versus going with best of breed, which will make my life more complicated because it means more vendors and more products in the mix.”

It’s not an either-or proposition, he adds. “The reason a lot of people were dissatisfied with their ERP system [was because] the decision was not ‘Should I buy from one or two vendors’ — if you were an Oracle shop you bought from Oracle. Often, that meant you had a functional app that didn’t suit the needs of the business, so you had to customize a solution and that leads you down a very bad path.”

By contrast, most cloud vendors allow you to extend a suite without having to modify the code, Guay adds.

Human resources systems, for example, are a natural fit for the cloud because there is not a tremendous amount of integration required for them to work with other systems, he says. In that case, an organization might opt to buy its financials and HR systems from the same vendor. It’s important to look at the functionality the systems provide and determine whether they have so much data flowing between the two that it makes sense to get the components from the same vendor, or if they can buy standalone systems, he says.

The ins and outs of cloud ERP migration

The decision to migrate off-premises was clear-cut for the San Diego Tourism Authority, which had been using Oracle’s basic ERP system for about 10 years. By 2016, the system needed upgrading, but the non-profit organization didn’t have the money, says Isabel Sauerbrey, vice president of information technology and operations at the tourism authority.

At the same time, Sauerbrey was tasked with eliminating US$200,000 from her operating budget. After looking at systems from a few vendors, the tourism authority opted to migrate to Oracle Cloud. “Between servers and hosting, it was much cheaper [to go to the cloud] than what I had,’’ she says. “So it really was a financial benefit to us.”

The tourism authority was using Sitecore for its website, which was integrated with its Simpleview CRM system, and IT had also done some customizations. The system was hosted by a third-party managed services provider because they didn’t have the infrastructure to manage it internally, she says.

“We decided everything finance-related we’d move to the cloud and integrate data between the website or the CRM system with the Oracle ERP system, using Oracle APIs,” she says. At the same time, IT did a major cleanup. “After 10 years you have a lot of stuff you think you need but don’t, and we were able to simplify a lot of processes,’’ says Sauerbrey. “It was a big project. The [move to the] cloud was probably the easiest part.”

The hard part was figuring out what data to get rid of and dismantling a massive website in an effort to simplify it by keeping only the most important components, she says. “We cut a lot of the customizations we do that were on the website, and CRM features.”

The migration process took between five and six months, and Sauerbrey says there were no surprises along the way. “I didn’t know what to expect, but to be honest, it went better than I expected. I was concerned about Oracle Financials for the cloud being a pretty new product for us.”

But Sauerbrey soon found the system to be user-friendly and says it was easy to get staff transitioned. “I spent a lot of time with the users to make sure they were comfortable and listened to them and made sure all their requirements were met, so by the time we went live they were pretty familiar with the product.”

The ability to eliminate some of the licenses and outside services IT was using helped Sauerbrey reach her $200,000 in budget cuts. System upgrades are free, she says, which is something the tourism authority couldn’t do before. “It’s a big thing for us because now I have faster access to new features,’’ she says.

Freeing up valuable IT resources

Access to the latest and greatest technology also held appeal for Wellesley College, which is using Workday Financial Management, Workday HCM, and Workday Student.

When Ravi Ravishanker, CIO and associate provost, came to the college over six years ago, “the technology landscape was not up to snuff,’’ he recalls. “One of major recurring themes from constituents was the need for something new.” Wellesley College was using Ellucian Banner’s student information system, which “was perceived as not serving the community.” Getting access to data was “cumbersome” because of the way the system was originally configured – some 25 years ago. “It wasn’t the fault of the software,” he notes.

Consequently, various departments were going out and purchasing new systems on their own and not thinking about the data security implications, Ravishanker says.

When the time came to upgrade, “The choices you have in ERP are limited whether in the cloud or on-premises for higher ed,” he notes. The major players, he says, are PeopleSoft, Jenzabar, Banner and Workday. Ravishanker felt the first three were not able to satisfy Wellesley’s needs when he started looking, because one of his main strategic goals was to move to the cloud “as aggressively as we can.”

The reason, he says, was simple. “I believe that [IT’s] contribution to the institution is in educating my clientele on how to use the technology to improve teaching, learning and research and the administrative functions — and not run a small technology company. I don’t see value in running a data center and servers.”

Wellesley College chose Workday in January 2016. “If you take Banner or PeopleSoft, their origins are 30 years ago or slightly more recent than that, and it’s hard to take old, humongous software and radically change it to adapt to the cloud,” he explains. By contrast, Workday evolved in the cloud.

Migrating meant offloading the responsibility of upgrades, maintaining infrastructure, uptime and network security. “I don’t have to offer that high-level of babysitting that these systems require,’’ he says. “We have a small staff and … keeping up with all the changes in terms of data security is becoming harder and harder.”

That sentiment is echoed by Rodney Nobles, chief information officer and chief security officer at Waukesha County Technical College, who has migrated the school’s Banner ERP system. “We no longer have to worry about our staff keeping the college’s most critical systems up and running, backups, problems or downtime.’’ While Nobles still worries about outages, it’s in “a different way. Now I have a wealth of talent at my fingertips who possess a wide range of knowledge that I do not have to keep inhouse, nor do I have the financial resources to hire.”

Wellesley College’s HR, payroll and benefits systems went live in Workday on Jan. 1, 2017, and the finance system went live on July 1. The third stage, the student module, will be migrated soon.

Between six and eight IT staff and a consultant have been involved in this “very big, once in a lifetime undertaking,” he says. So far there is “high satisfaction among faculty, staff and students.”

There haven’t been any issues with the migration; in fact, Ravishanker says users have been “pleasantly surprised by what they could do now,” such as submitting expense reports from a mobile device.

How to know whether cloud ERP is right for you

For those contemplating whether to move keep their ERP systems on-premises or move them to the cloud, the IT leaders all suggest figuring out what you’re looking to accomplish, understand your processes and listen to users.

Goals vary from organization to organization, “and far more important than technology is the notion of change management ... because no matter what you do, not everyone in the institution is going to be happy,’’ says Ravishanker. “So you have to really understand your culture and work with the people who are excited about the migration, but don’t forget about people who are worried and anxious.”

CIOs need to do their homework and take the time to really understand what the vendors offer, adds Doria. “Many of the large providers that have been strong players in the enterprise space are still not fully mature in their cloud service offers,’’ he says. “Often, there is not full-feature parity between their legacy enterprise solutions and the new implementations in the public cloud.”

Many of the capabilities promoted by sales teams are still wish-list items, he says, and some platforms may have geographic limitations, so what is available in North America might not be in Europe.

Doria says it’s also critical to learn about providers’ disaster recovery and business continuity plans, and understand what they really mean when they talk about uptime and availability, their service level agreements and the type of data centers they utilize.

“As a CIO, you have to make a conscious decision on whether you want to be in the data services business and create what the large players are doing, or focus your time and attention and scarce resources on what’s strategic to the business,’’ Doria says. To continue operating their own infrastructure would consume more time and resources than would be “reasonable” and would distract from tactical and strategic initiatives IT needs to do to advance the business, he says.

“The initial thought about moving to the cloud is its cost savings,’’ he says. “The reality is, it’s not cost that drove me to look at cloud, but the scalability and agility that comes with it, and the ability to take advantage of mature architecture that is ISO compliant, and that would satisfy my business continuity and security needs.”

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