With cloud computing now considered mainstream, more and more organizations are embracing cloud ERP (public and private) to drive enterprise-wide innovation to improve customer relationships while delivering operational efficiencies.
This trend is set to continue, with analysts predicting that cloud ERP adoption globally will continue to accelerate in all markets for the foreseeable future.
Cloud’s ascendancy in the enterprise is also being driven by its business relevance. Where once cloud was just another emerging technology, it has now become the key contributor and enabler of many of the current technology megatrends including hyper-connectivity, Internet of Things, Big Data, and social media.
It all starts with a strategy
Despite the continuing growth of adoption rates, most organizations still lack a coherent cloud application strategy on which to execute. Many are jumping head first into the cloud with little consideration for its broader business value, with the primary focus on introducing new business capability or only replacing applications reaching end of life. This approach has the potential to undermine the true business value, as opportunities for tangible savings can be realized only once a critical mass of applications and data have been moved to the cloud.
As such, a few key fundamental elements need to be clearly defined:
- A robust cloud strategy
- A supporting application and information strategy
- Establishment of a cloud-ready organization – people and process
These elements provide consistency in understanding the business drivers for cloud adoption, the architectural principles and framework relevant to the cloud, capabilities required both internal and external to the organization, approach to commission new and existing applications and how risks associated with migration will be managed.
Business case for cloud ERP
So, what criteria should be considered when determining which business applications and processes should move to the cloud? What other benefits support the move to cloud ERP?
- Adopt the latest application capabilities – Modernization of an application represents a real opportunity to increase its value. While simply re-hosting an application may seem the easiest option, it is not always the best. To achieve additional business value, refactoring the application’s architecture allows the organization to take advantage of new technologies including in-memory, IoT, machine learning, AI, etc., all of which hold tremendous value potential.
- Fit-to-standard process model – Fit to standard brings processes into alignment with the most effective and efficient core business processes based on industry best practice. Rather than building on an increasingly customized foundation, a focus on simplicity with a standardized core allows the organization move faster and deploy technologies that truly differentiate the organization from the competition.
- Operational predictability for performance, stability, and security – Cloud ERP provides seamless, secure user access to business applications, from anywhere, using any device. This significantly reduces the amount of redundancy and on-site security needed to support the business strategy. This provides increased confidence in the business systems, which run with greater internal consistency and predictability with fewer system outages and reduced operational complexity.
- Always the latest and greatest – It is typical for customized on-premise environments to trail the enhancement pack upgrade release cycle by years, if not decades. It can be cost prohibitive to maintain a continuous upgrade evaluation process. By contrast, cloud ERP can update multiple times per year providing immediate access to new capabilities based on the latest technologies, improving business agility and accelerating the time to value.
- Scalability based on real business demand – Maintaining and provisioning users and applications based on traditional ERP licensing models brings a great deal of labor and risk when business circumstances change. This can adversely impact organizations that have cyclical demand, requiring additional investment in hardware and software that can potentially remain heavily underutilized. Cloud ERP provides scalability to better manage these fluctuations.
Want to learn more about how cloud ERP can help drive greater business value in your organization? Please visit: Learn more about SAP and SAP S/4HANA Cloud.