[In the News]: Cloud ERP – The Rising Alternative to Hosting Your Own

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.”

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,’’ Michael Guay, research director of ERP strategy at Gartner.

 “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.

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 Ravi Ravishanker who is CIO at Wellesley College. “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.”

Read the full article at CIO.com.