Cloud migration! Cloud Implementation! Cloud Transformation! Cloud Strategy! Is there a company where one or more of these ideas are not discussed? Many new-age companies were ‘born on the cloud’, e.g. Uber and know no other model. However, what are the cloud experiences of companies that had invested heavily, over many years, in on-premises ERP systems? This, first of a 2-part, post looks at key learnings.
1. Develop a thorough Business Case
Some companies leverage the “Infrastructure as a Service” to move their on-premise ERP systems to the cloud. This provides organisational savings in terms of server infrastructure, hardware maintenance, facilities management and lesser need for IT personnel. However, the end-user sees no change except perhaps an enhanced availability of the IT systems. The recurring costs continue in applying maintenance patches and product upgrades.
The “Software as a Service” ERP model comes in a plethora of pay-as-you-go and subscription models. While the initial up-front costs appear low, many companies are discovering nuances in licensing agreements. Companies should understand in detail the case of Diageo which (allowed its sales personnel, using an ipad to access the cloud based salesforce.com which integrated with the SAP application) incurred potentially heavy costs.
In addition, companies would do well to model some expected business scenarios of mergers and acquisitions and the implications on the operating costs of a cloud based ERP system.
2. Prepare for the complexity of Cloud
Cloud is not necessarily simpler. Consider these two statements from big service providers
a. SAP on Oracle Database on AWS is now supported by SAP.
b. Connecting Azure and Oracle Cloud …. enables new and innovative scenarios like running Oracle E-Business Suite or Oracle JD Edwards on Azure against an Oracle Autonomous Database running on Exadata infrastructure in the Oracle Cloud.
Navigating the vendor and partner eco-system is probably more complex in the cloud world than it was yesterday
3. Plan for increased investments on Data Security and Privacy
The AICPA.org has developed SOC2 reports on controls at a service organization relevant to security, availability, processing integrity, confidentiality or privacy. All leading services providers provide extensive details on their approach e.g. Workday.
However, the final compliance posture rests with the company using the system. Consider the example of a pharmaceutical company doing Active Pharmaceutical Ingredient (API) manufacturing in Singapore, pharma formulation in India and selling the final product to customers in Europe, India and Singapore. Navigating Europe’s GDPR along with the data localisation postures of India and Singapore would be a significant challenge.
4. Do minimum data migration
It is a reasonable user requirement to migrate historical data for compliance purposes. e.g. 6 years worth of all sales, procurement, accounting transactions in the United Kingdom. However, many Cloud ERP solutions have new architectures and data structures that bear no resemblance to their on-premise ancestors. It would cost a lot of resources and effort to do the migration, sometimes not possible at all. It is good practice to migrate only open balances, open transactions and master data. Some companies have decided to keep the legacy ERP system on a read-only mode while others have invested in a data mart for statutorily needed information.
5. Remember the Surround Systems
Rolling stones may gather no moss but running ERP systems spawn many connections to “Surround” systems with static /dynamic/API based interfaces. Many of these would have survived generations of upgrades to the on-premises system. As noted earlier, the architecture of cloud based ERP systems is different and would make these interfaces fail. It is critical to rationalise these “Surround” systems prior to the movement to the cloud.
Summary
Organisations considering Cloud based ERP solutions should,
1. Develop a thorough Business Case
2. Prepare for the Complexity of Cloud
3. Plan for Increased Investments on Data Security and Privacy
4. Do minimum data migration
5. Remember the “Surround” systems.
The next part of this article will discuss another five learnings.
