This blog tackles the issue of organizations choosing to move away from On-Premise ERP systems to a Public cloud ERP subscription model. Traditionally and over the past 25+ years, companies from different industries have implemented some form of an ERP system specific to their industry. As times, markets and industries changed, those companies had to programmatically customize their ERP systems in order to accommodate specific core business processes, adapt to market changes or to simply provide desired features to users. Not only were those customizations costly to implement and resource consuming but also could depending on the number and complexity of customizations bring business agility and growth potential to a halt.
Furthermore, numerous companies have not been able to upgrade they ERP system and stayed on their 10+ or 20+ years old ERP system due to the complexities that all the customizations have introduced to the business and IT which in turn made upgrading ERP systems cumbersome, costly and time consuming. Therefore, those companies have missed on growth opportunities that would have been available to exploit had they leveraged new capabilities and innovations provided by newer versions of their ERP systems. Consequently, these companies are not able to invade the digital market, create new revenue streams or successfully implement their growth strategy.
Let’s take a look at the top 6 dimensions that a typical organization considers when it evaluates a cloud ERP versus on premise systems.
- Security has been a major concern for organizations considering cloud based ERP or BI systems and companies with strict security and compliance regulations had initially opted out of the Cloud. However, with evolving technologies the Cloud is solidifying its position as a secured platform.
- Cost although infrastructure and bare metal servers are no longer price prohibitive, the biggest cost portion of an on premise ERP system is the labor. Based on an IDC study, it typically take 2.6 IT resources per 100 business users. So for a large implementation labor could have a huge price tag with the on premise deployment. Therefore, the public cloud deployment offers roughly a 30% – 35% lower total cost of ownership.
- Business/IT alignment with traditional systems, IT staff are typically in control of selecting, implementing and customizing IT systems including ERPs and therefore, it’s common to find that IT organizations and business users are typically not aligned and therefore IT systems do not typically serve a business need. With intuitive user interface, embedded analytics and machine learning capabilities, Cloud ERP systems such as S/4HANA Cloud are put in the hands of the business stakeholders to enable granular and realtime visibility into the business leading to improved business decision making and increase efficiency.
- Strategy alignment Over the past decade we have experienced unpredicted market changes, digital disruption in different market and a strong need for business agility in order to survive and be competitive. Therefore, businesses are realizing that their current capabilities are no longer a solid foundation for sustainable growth. With a cloud ERP, new capabilities are bring released based on best practices and readily made available for customers to leverage in implementing their business strategy.
- Integration This has been a crucial issue with cloud implementations where business processes are streamlined due to lack of integration with other relevant systems to provide end to end integration. S/4HANA Cloud provide native integration to third party systems through whitelisted APIs.
- Time to market typically organizations run on a 15+ year ERP implementation to avoid the cost, effort and lengthy implementation cycle of a new ERP implementation. With the Public cloud option, S/4HANA Cloud could be implemented in roughly 3 months.
In summary, the SAP S/4HANA Cloud ERP provides organizations with an integrated business platform that provides organizations with new business capabilities and improvements on their current capabilities on quarterly based on best practices to help them leverage disruptive technologies and achieve competitive advantage in their industry. With the new user experience and embedded analytics capabilities, business users can now transform data into critical information necessary to make crucial business decisions.