It is a common myth that Enterprise Resource Planning (ERP) applications are monolithic, unchanging entities. However, this couldn’t be further from the truth. Much like changes in car design and manufacturing, changes to the chassis that greatly affect performance are hidden underneath familiar bodywork.
One of the changes we are currently seeing is ERP being delivered via the cloud. In fact, cloud seems to be the topic of 2011: but is cloud based ERP something organisations should be looking at?
When talking to our members (The UK & Ireland SAP User Group) it’s definitely been a topic of much debate. Members have noted that although cloud provides an interesting delivery method the key considerations need to be around the business process, specifically whether it makes sense for a business process to be supported by cloud-based applications.
The big question: What’s in it for me?
Using cloud-based ERP to support particular business processes can provide several benefits for an organisation. The first, and often most immediately attractive, is cost. This is especially true for organisations that have not yet deployed ERP or those that are looking to deliver it to branch offices.
Using the cloud can reduce management costs and for many organisations resolve the problem of having multiple ERP instances across the globe. Similarly, if implementing ERP in-house is a financial stretch for a business then opting for a cloud-based service can remove many of the up-front costs involved, as well as enabling organisations to “test the water” and try out modules such as CRM as and when needed.
Cloud-based ERP can also improve access: for example, it can be used to more easily mobilise business processes by allowing users to access ERP systems whilst on the move.
Organisations’ attitudes to the cloud show that they recognise these benefits. Indeed, in a survey 61% of organisations stated that they would be using SaaS or cloud computing to deliver business-critical applications by the end of 2011.
In step with these attitudes, ERP vendors are also producing an ever-increasing range of tools for providing ERP over the cloud. For example, SAP has seriously beefed up Business ByDesign and is starting to offer core business suite modules as on-demand services.
The second question: What’s the catch?
Although there are many benefits, there are also many arguments against moving ERP into the cloud. The central one revolves around loss of control. If all your business processes are supported by an ERP application in the cloud what happens if there is an outage? Of course, you could also suffer an outage in-house but in that scenario you remain in control of resolving it. With the cloud you are reliant on a service provider.
Businesses must ask themselves who is best equipped to deal with such a scenario. They must be honest in coming to conclusions: maybe a service provider actually is better equipped but then again, maybe they aren’t. There is also the issue of customisation: of course there are standard business processes which can easily be provided in the cloud but there also those that are unique to an organisation that provide competitive advantage.
Taking the plunge
This takes us right back to where we started: the business process. When thinking about moving applications into the cloud, organisations need to consider which business processes would benefit the most.
They need to consider whether the cloud poses too much of a risk for other business processes. They also need to consider whether they want their core business data in the cloud. In answering these questions organisations will be able to assess whether the cloud is right for them.
I suspect that for most it will be a hybrid of both cloud and on-premise ERP supporting business processes. Criticality, security and risk appetite will be the drivers when matched against the business opportunities.
Examining business processes for cloud suitability should be the first step in moving towards this hybrid model. This in itself provides a great opportunity to improve the overall effectiveness of your ERP application, by looking at how business processes are working and whether they can be made more efficient.
This is the kind of best practice approach that we are advocating at the UK & Ireland SAP User Group. Anybody looking to learn from others who are faced with making decisions about ERP in the cloud should get in touch and take the opportunity to network with their peers on one of the hottest topics in IT today.
Posted by Alan Bowling, Chairman of the UK & Ireland SAP User Group