It’s estimated that 95 percent of polled businesses have been using cloud technology, according to Right Scale’s 2016 State of the Cloud Report. What makes the cloud so appealing to a growing number of companies? It’s because cloud computing enables them to consume computing resources as a utility, just like electricity, without the need to build and maintain computing infrastructure in-house.
Three powerful core features compel businesses to move from on-premise to cloud solutions. First, it’s fully customisable at any time, allowing users to manage and create their own systems for fast deployment. Second, it’s highly scalable, giving users the ability to adjust their needed resources based on how much the system is being used. And third, businesses pay for only what they use.
Large corporations are embracing the cloud because they need to move nimbly in today’s dynamic environment without being held down by an immovable and inflexible IT infrastructure. In fact, according to McKinsey, large companies will double their adoption of cloud services by 2018.
Small to medium enterprises (SMEs), on the other hand, are moving swiftly toward the cloud while also eyeing the promises of the lower cost and convenience of third parties managing their IT needs. Studies by Intuit and Emergent Research reveal that by 2020, 78 percent of these small businesses will complete their migration to cloud.
The big shift to the cloud
Cloud technology started in the early 2000s, when applications were written as software-as-a-service (SaaS) applications. Its popularity began to grow in the mid 2000s. By this time, many enterprises had moved their e-mail, document sharing, and customer relationship management solutions to the cloud.
Cloud computing solutions cover a gamut of applications, including enterprise resource planning (ERP). However, even as ERP can be migrated to the cloud, some companies still choose to have it on-premise. They see on-premise ERP as a capital expenditure, a one-time, upfront investment. Meanwhile, cloud-based ERP is increasingly viewed as an operating expenditure—one that is paid for on an ongoing basis.
On-premise ERP benefits include greater ability to customise the system and control over the implementation process. However, the price of these benefits is heavy upfront investment, the need to pay for associated hardware and IT costs, as well as risking data security that might not have optimised security protocols. These are further coupled with implementation delays that might come from ERP customisations.
Such disadvantages laid the groundwork for a business to shift from on-premise to cloud ERP. And for many organisations, the move to cloud was just irresistible. Why keep spending on IT when they could just “set it and forget it?”
The business benefits of cloud-based ERP solutions
Businesses big and small are embracing the on-premise ERP to cloud ERP shift, because the benefits are clear, and they point to cost efficiency. Even SMEs in Singapore have been adopting cloud solutions. According to International Data Corporation, by 2017, the cloud computing market in Singapore, one of the biggest adopters of cloud technology in Asia Pacific, will grow to US$1 billion.
Indeed, business owners and finance managers have been paying attention to cloud’s practical business benefits, which include:
- Lower costs. One advantage business owners find in the cloud is the lack of heavy maintenance required to keep their company running. Thanks to SaaS, enterprises can save on hardware infrastructure costs and do away with experienced IT experts required to manage and run the solution. Costs related to office space, utility, and manpower are reduced as well. The move to cloud technology also helps companies manage cash flow and business processes. Without the need for significant upfront costs, upgrades, or third-party licensing, users can enjoy predictable costs without being handcuffed to physical hardware. They also get to tailor the terms, such as the number of users and contract length to fit their business requirements.
- Convenience of automated updates and reliability. No more worries about slow processing, system downtime, and disaster recovery; these will be handled by the ERP provider.
- Better security. Entrepreneurs might wonder if the shift from an on-premise to cloud-based ERP solution will affect security. Cloud vendors typically provide a higher level of security than most companies could achieve on their own. In the cloud, essential integration between enterprise applications and supported data, processes, and user interfaces isn’t an issue.
- Fast, agile, and scalable operations. The marketplace is increasingly unpredictable. Through cloud-based ERP solutions, business owners and stakeholders can respond to the dynamic needs of their clients more quickly, giving them the edge to outmaneuver the competition.
Transitioning from on-premise to the cloud not only improves productivity, but it also helps save financial capital and ongoing manpower costs that might otherwise be needed.
The transition from on-premise to the cloud
Is the shift from on-premise to cloud-based ERP troublesome and difficult? As with any system overhaul, there is a learning curve, but it is an easy one if you choose the right partner.
When migrating to SME cloud-based ERP, you need to identify processes, inventory your systems, and define the integration points across the enterprise. Ask yourself these questions to prevent any negative impacts on your business:
- What cloud adoption strategies should you consider?
- Who is responsible for your cloud data?
- Which functions and data will you move to the cloud?
- What skills and organisational structures are required for cloud innovation?
- How should you measure your business value now you’re in the cloud?
- Which vendors will provide user training and testing to help ensure a smooth transition to the cloud?
- Who is accountable for damages when there are service interruptions?
- Are the terms in the small print of your cloud service level agreement agreeable?
- What are the grounds for terminating a cloud provider’s service?
A popular strategy is to use a hybrid approach that balances the use of local servers and the cloud. By utilising virtual servers on a local machine and selectively choosing the right applications to run in the cloud, businesses reap the benefits of simple management and efficient operation. The core servers and applications can be maintained locally while customer relationship management (CRM) and ERP systems are managed in the cloud.
Finding the right vendor that helps ensure a smooth small business migration can make the difference between a painless move and one that costs significant time and money.
The tools you need, at your fingetips
When moving to the cloud, it’s important that your ERP solution remains at top of every aspect of the business. Plus, standardisation and streamlined processes enable better decision-making across functional areas, such as accounting and finance, sales and customer management, purchasing operations, inventory and distribution, and reporting and administration. And because a cloud-based ERP solution is a software-as-a-service, businesses can deploy and extend functionality quickly. In turn, this brings a great advantage over the competition as reaction to changing market conditions accelerate.
Companies of all sizes can hasten growth, achieve competitive differentiation, and profit from cloud solutions. And as the business grows, decision-makers can easily adapt and respond to the ever-changing market landscape while overcoming workplace complexities.
Parts two and three of this on-premise to cloud migration series will highlight SAP Business by Design: cloud-based ERP for mid-market companies and subsidiaries as well as SAP S/4 HANA, an in-memory ERP suite that supports Big Data, real-time analytics, mobile, business networks, and more to act as the digital core of your entire enterprise.