Taking ERP to the Cloud

The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.

Glen Savio Palmer, MBA 2015-17, Vinod Gupta School of Management, IIT Kharagpur

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Cloud computing is a method for enabling expedient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, apps, and services). The resources can be rapidly provisioned and released with minimal organizational effort or service provider interface.

Cloud computing has taken the world by storm. Globally, Businesses are increasingly moving their data and applications to the cloud, owing to the wide array of benefits it offers. However, an area of concern for most firms of today when it comes to migrating to the cloud is Enterprise Resource Planning.

Enterprise resource planning (ERP) is a category of business-management software—typically a suite of integrated applications—that an organization can use to collect, store, manage and interpret data from many business activities, including:

  • product planning, cost
  • manufacturing or service delivery
  • marketing and sales
  • inventory management
  • shipping and payment

When it comes to Enterprise Resource Planning (ERP) on the cloud, Cloud ERP is an approach to ERP that makes use of cloud computing platforms and services to provide a business with more flexible ways to collect, store, manage and interpret data.

As noted in a recent PwC report, global revenues from cloud-based Software as a Service solutions have already exceeded new license revenues from legacy ERP systems. Corporations of all sizes, from mid-size companies to global corporations, are making the switch.  They are either moving to a complete cloud-based model or to a hybrid model that can scale to meet new customer demands.

Advantages:

o    Access to latest features: Having applications on the cloud has the advantage of being able to access more standard features. Updates on the cloud are easier compared to upgrading an on premise ERP system.  Since it is easier to update the application, it ensures that you have access to the latest features on offer.

o    Moving away from legacy systems: According to Gartner, by 2016, heavily customized on -premise ERP implementations will be viewed as “legacy” applications, and by 2018 some 30% of companies surveyed will have moved their ERP applications to the cloud.  The pace of enhancements for Cloud applications will exceed those of larger on premise applications as the number of companies using on premise systems shrinks and application development naturally follows the customer dollar

o    Faster implementation: Since the infrastructure and the software are on the cloud, the effort is towards moving the data from legacy systems to the cloud-based. From that point on, the updates are faster and customizable as per business processes.

Disadvantages:

o    Limited customization: With every release, the cloud products are becoming more and more configurable.  This means that functionality that used to be considered customizations are now being offered as standard.  However, the fact remains that with companies requiring very heavy customizations, especially with some functional suites, on premise ERP applications are still the best option.

o    Limited Product Suites:  Most companies offering cloud solutions are focused on particular applications.  Very few providers are offering a single suite of products that meet most user requirements.  This means integrating existing on premise applications with newer cloud products.  This can potentially lead to additional costs, more complex process flows or lost functionality.

o    Cost considerations: Though, overall cloud solutions are quite cost effective, there are cost considerations to be looked into when talking about long-term costs for licenses and support.  When considering a move to a cloud application look at the long term cost of ownership.  The cost advantage of cloud product might not be as great as initially thought.

Ideally, some applications are best left as on premise systems and wherever possible, you can move the rest onto the cloud. For example, applications such as Revenue Management Cloud Service takes data from the Oracle e-Business Suite through pre-built integrations, and provides powerful revenue recognition capabilities not previously available.

Thus, businesses should start assessing aspects of their IT processes to see if it makes sense to move them to the cloud and begin taking advantage of the benefits the cloud provides.

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