Adapting quickly to the changes in the business environment is crucial to ensuring that your business is always ahead of competition. Implementing cloud ERP is one of the ways to achieve this. Cloud ERP systems offer numerous benefits, such as scalability, costeffectiveness and real-time data access. However, migrating to a cloud ERP requires careful planning and vendor selection.
Ready for Cloud ERP?
There are eight factors that indicate your organization is ready to move away from your on-premise deployment model:
- Application Readiness
Consider moving to a cloud-ready enterprise if your application environment has become too complex for upgrades. This can occur for several reasons, including:
- The software has "aged-out" and updates are longer supported by the ERP vendor.
- Your business outgrows the limitations of the system. What once was an ideal solution
for your operations processes and business goals can no longer be configured to meet current needs.
Cloud-based solutions can streamline your business processes by aligning them with predefined best practices, reducing the need for point-to-point integrations.
- Security
The current business environment has mounting pressures and challenges regarding protection of operations data. To meet Health Insurance Portability and Accountability Act (HIPPA) regulations, Personal Confidential Information regulations, Payment Card Interface (PCI) compliance and other data protection standards, moving sensitive data to an environment built to provide data security is the critical first step.
The cloud provides your business with a secure, cost-effective solution that prioritizes data security.
- Cost/ROI
Over time, your business evolves, whether through growth, acquisition, or market changes. These changes may indicate a need to re-evaluate the ROI you realize from your current ERP system.
For example, as your business transitions from single-country operations to multinational entities, you will encounter changing business models that necessitate a recalculation of your Return on Investment (ROI). Cloud deployment models offer greater flexibility and dynamism, making them well-suited for adapting to these changes. Factors driving this shift include a more complex supply chain, evolving transportation and logistics needs, a transition from pure manufacturing to value-added services, mergers and acquisitions and expansion from a single location to multiple sites.
Furthermore, if your business is expanding from single-country operations to multinational entities, the challenge of adapting IT infrastructure to accommodate new applications, processes, technologies and integrations arises. The cost and complexity of expanding an existing on-premises system must be weighed against the one-time expense of transitioning to the cloud. Cloud-based solutions offer greater flexibility and scalability, allowing your business to easily adjust your IT resources as your needs evolve.
Cloud-based solutions often involve web-based training and implementation support, conducted in manageable chunks and at mutually convenient times for users and software vendors. While this may not necessarily shorten the implementation timeline or directly reduce training costs, it contributes to overall cost savings by minimizing productivity disruptions and travel expenses. Additionally, cloud-based solutions eliminate the need for upfront investments in perpetual license and maintenance fees, which are common with on-premises solutions.
Research indicates that the total cost of ownership (TCO) for cloud-based solutions is generally favorable, particularly when considering the flexibility to adapt to business and model changes.
- Culture
Transforming an organization's IT infrastructure to the cloud requires a comprehensive cultural shift. This involves aligning the CIO, IT department, executive team and other business units around a shared vision and commitment to cloud adoption. Embracing cloud-based solutions requires a forward-looking approach that aligns IT, business units and shared services to capitalize on the increased flexibility and opportunities offered by cloud deployment.
- Internal Priorities
Organizations often face multiple investment opportunities across different lines of business, shared services and IT departments. To make informed decisions, a well-defined selection process is essential, carefully weighing risks against potential rewards.
- Internal Priorities (cont'd)
Cloud-based ERP systems, with their centralized database collecting thousands of data points into dashboards with easily interpretable graphs and charts, bring out the science of decision-making. For this reason, a cloud ERP stands out as a project with clear ROI and a comprehensive risk management plan that addresses existing risks while acknowledging potential unknowns.
- Organizational Readiness
When considering a transition from on-premises to a cloud-based ERP system, consider these questions:
- Is your team capable of supporting an aging ERP, installing updates, or programming
workarounds to port new software components to the existing legacy ERP?
- Can your existing ERP meet the challenge of conforming to future growth and new
processes in your operation?
If the answer to either of these is "no," then your organization lacks the readiness required to provide ongoing upkeep to your legacy environment. It is time to start looking at a cloud-based ERP solution.
- Integration and Technology Capability
Older on-premise ERP systems often become heavily customized, with Excel spreadsheets serving as an unofficial "source of truth." This reliance on Excel, Access and custom code can make it difficult to keep up with regular upgrades, effectively trapping organizations in their current state. If you identify with this situation, it's time to re-evaluate your existing ERP solution.
- Ongoing Support
As your internal IT support staff ages, retires or leaves, consider transitioning to cloud ERP. Relying on older technology often means holding onto a dwindling support base, leading to higher costs for salaries, benefits, recruitment and replacement, as fewer workers possess the skills—or desire—to maintain legacy systems. Cloud ERP systems mitigate staffing risks and attract new talent seeking to work with your forward-thinking organization.
A Phased Approach to the Cloud
The decision of how best to move multiple applications to the cloud depends on both your business' needs and the complexity of the applications themselves. While moving all applications at once may seem like the most efficient approach, it's often more practical to start with the core ERP application first. This simplifies integrations with other applications and reduces the risk of disruptions to critical business processes. Self-contained applications can be moved sooner as they require fewer dependencies and integrations.
If there are ancillary systems with integration to the ERP, consider migrating enterprise applications one at a time, starting with those that have limited integrations and high value, leaving complex and highly integrated applications for later phases.
How Should Cloud ERP Vendors Be Evaluated?
After completing the Business Process Improvement (BPI) phase, your team can start evaluating vendors. During the BPI phase, there should have been minimal contact with vendors. A long list of five to eight vendors is typically created based on your requirements, industry and company size. The long list is reviewed and narrowed down to a short list of three to four vendors who are invited to demonstrate their ability to support your organization's future state business processes. Finally, two vendors are selected to compete for the project.
Throughout this process, your team should evaluate vendors based on the five critical factors for successful ERP selection.
Five Factors for Cloud ERP Selection
- Features & Functions
When choosing cloud ERP software, it is crucial to verify that it can meet the specific functional needs of your organization. Dedicate a significant amount of time to this step, ensuring that the software adequately covers your unique business requirements.
The questions to ask:
- What does each company offer?
- How is each vendor positioned to serve our industry/vertical?
- What are some of the key features and functions for our industry/vertical?
- How would the software align with our operations processes?
- Will the software scale with our company's growth and future needs?
- Cost & Contracts
Due to the substantial capital and resource investment required for an ERP system, investing considerable time in comprehending and negotiating costs and contracts is crucial. This includes examining both direct and indirect costs associated with software, training, implementation and services.
Just as it makes sense to enlist the services of an experienced realtor when purchasing valuable property, your company should enlist the services of an experienced ERP consulting firm. The amount of money they can save you at this stage of the process typically outweighs the cost for their consulting services, which saves your company valuable time and resources and shorten time-to-value.
- Company Risk
Know the ERP vendor you are buying from. Ask: How many years have they been in business, and how many years has the application been sold in the market? What are the sales last year of each product they represent, in dollars and numbers? How much money is invested in R&D? What are their prospects long term? Are they positioned to be purchased or will they purchase another vendor?
- Technology & Platform Risk
Before investing in an ERP system, it's crucial to understand the vendor's technology foundation, including the database structure and delivery model. Inquire about their longterm technology roadmap, commitment to staying current and cloud offerings. Evaluate performance in several key areas such as user interface, role centers, workflow and business intelligence.
- Implementation & Support Risk
Before selecting an ERP vendor, it's important to determine whether the implementation will be managed directly by the vendor or through a partner. Ask about industry expertise, support during implementation and post-implementation support. Carefully evaluate their suitability as a partner.
For cloud-based ERP solutions, technology and implementation factors may differ, but the other three vendor evaluation factors remain the same. While pricing models may vary, apples-to-apples comparisons are still essential. Remember, exceptional software at a competitive price may not overcome a flawed implementation.
Cloud ERP and Technology
When evaluating cloud-based ERP solutions, additional considerations arise beyond those of on-premise ERP systems. These include:
Upgrades Integrations with "other" applications Inquire about the frequency and Since not all enterprise applications reside methodology of cloud ERP software within the ERP system, it's crucial to inquire updates. Determine if you have the option about the cloud ERP provider's approach to accept or decline these updates, or if you to integrating its database with external are obligated to implement them all without applications, including cloud-based CRM, discretion. forecasting, MES and WMS solutions.
Customizations and Enhancements Response Time Understand the flexibility and limitations The response time of a cloud ERP of customizing the software. Inquire about application can vary depending on your the process for making enhancements, business location and the vendor's data modifying screen layouts and the potential center infrastructure. It's essential to impact of these changes on future evaluate the response time of different upgrades. vendors to ensure optimal performance for your specific needs. Reporting Up Time Understand the capabilities for report customization and business intelligence Evaluate the vendor's guaranteed uptime for (BI) implementation. Investigate potential the cloud ERP software and compare it to data privacy concerns in multi-tenant actual performance history. Understand how environments. the system seamlessly transitions between data centers to ensure uninterrupted operations. Security Worldwide Assess the security measures implemented Evaluate the global availability of the cloud at the vendor's data centers. Inquire about ERP application, including response times, specialized data centers that meet your uptime and security measures. Ensure that industry-specific requirements, such as the vendor's infrastructure and support can those for the Department of Defense effectively support your business operations (DOD), food and drug industries, worldwide. pharmaceuticals or non-US locations. Data Accessibility Data Clarify the process for extracting your data Inquire about the data recovery process from the cloud ERP system in case you in case of an incident. Understand the data decide to switch back to an on-premise backup procedures and the potential for solution or another cloud provider in the unauthorized data access through future. Understand the data portability reporting tools. options, data extraction fees and any potential limitations or restrictions associated with data migration.
Implementation and Support Many cloud ERP vendors prioritize online training and remote support over traditional on-site implementation services with full-time project managers. When evaluating implementation services, carefully assess the breakdown of hours allocated to on-site and remote support, as well as the specific activities covered, such as project management, classroom training and hands-on consulting, both functional and technical.
About Ultra Consultants Ultra Consultants is an independent consulting firm serving the manufacturing and distribution industries. Organizations turn to the Ultra team for ROI-driven ERP technology expertise and business process management that improves revenue and customer satisfaction, enhances financial management and real-time decision making, improves productivity and reduces time to market.
The world's middle market companies make up the Ultra Consultants' client roster, including aerospace and defense, automotive, chemical, consumer goods, distribution, electronics, food and beverage, industrial equipment, medical device, metal fabrication and plastics manufacturers. Ultra Consultants offers deep experience in manufacturing and distribution process optimization. The team averages over 20 years manufacturing and process experience with professional certifications in APICS, Lean manufacturing, Six Sigma Green and Black Belt and Project Management.
For more information and additional resources on how to bring our expertise right to your doorstep, visit us at ultraconsultants.com.