Why are so many companies moving to a Cloud ERP?

Our recent survey into cloud ERP providers discovered that over 60% of organizations are already on the road to digital transformation. But why the rush, and how can those still considering the move take the next step? And what’s driving the move to the cloud?

Cloud ERP providers

With everything that’s happened over recent years, the industry is changing now more than ever. We wanted to understand how companies are coping and dig into what steps they are taking for the future.

The starting point for our research was to establish how enterprises currently run their ERP systems. We found up to 50% of organizations are still running some, or all, elements of their ERP applications on-premise. But for most, over 60%, in fact, they're in the process of updating these and embracing cloud ERP adoption as a solution. So we wanted to know why and how those still considering moving to the cloud could remove any barriers to take the next step.

Removing barriers to cloud ERP adoption and implementation

Our research found that companies using cloud ERPs had clear benefits in cost reduction, boosting agility, and improving performance and productivity. So why are so many organizations waiting to implement a solution that offers so many benefits?

The biggest reasons we uncovered for why organizations still tie themselves to on-premises infrastructures were: 

• Migration complexity 37%
• Cost 34%
• Security 32%

Though these weren't the only reasons for not moving to a cloud ERP. To see the complete range of barriers to cloud adoption, read the full report here.

This told us that the nature of ERP and the migration difficulties they can come with was a big concern for many organizations. Often organizations existing ERP applications are old and bespoke, and many have been customized. The outcome is many enterprises believe their ERPs have become a monster. 

They believe the cost (the second biggest concern), time, and risk involved in re-architecting these applications for a cloud environment would be too much. This is the usual thinking behind continuing to use cumbersome and inflexible on-premises data-centers on life support. 

But do they have a point?

The benefits of cloud ERP

To some extent, yes. This complexity of existing on-premise ERPs indeed makes a "lift and shift" approach unlikely. However, it's also true that aging on-premise infrastructures are incompatible with newer ERP applications and require progressively greater computing power and storage capacity. And simply not adding new features and functionality to your ERP isn't an option when enterprise agility is a defining factor of commercial success. This is when adding any new functionality or capacity to your on-premise solution begins to become relatively more expensive than starting over in the cloud.

Yes, migrations are complex and need tight planning and management, but, ultimately, the cost of migrating to a cloud ERP will always be lower than retaining the status quo. Cloud ERPs let your business switch direction, add features and functionality, and scale at speed for a relatively low cost. Making you more flexible and letting you retain and grow your share of the digital economy.

What are the four most prominent drivers for choosing a cloud ERP platform?

So, if the ERP software is the same, why does the cloud matter??

Holger Mueller of Constellation Research has written a paper on how Unit4 pushes the ERP Platform to the next level.

In recent years, the use of cloud ERPs has exploded due to just how different it is from the traditional on-premise model. And the four most prominent drivers behind this growth are pretty exciting for organizations looking to prepare their ERP solutions for the future.

According to Holger Mueller of Constellation Research, these drivers are:

1. Improved People Experience

“People have a better user experience (UX) as consumers than as employees, and that difference is leading to an engagement gap between work and private life UX. Enterprises need to enable better people experiences by adopting the same platform that powers the consumer experience.”

2. Faster Innovation Cycles

For most, on-premise solutions demand cost, time, and resources, needing teams in-house to manage and monitor them continually. Which also makes updating them a big deal, slowing innovation and development.

Cloud ERPs remove many of these barriers to innovation, meaning you no longer need on-site management or teams and will always be on the latest version. Letting you refocus that time, resource, and spend to boost innovation cycles. The cloud ERP’s speed, adaptability, and scalability help you achieve this.

3. Better Elasticity

With cloud ERP solutions, you only need to pay for what you use. And usage can be instantly scaled up and down. 

This is becoming increasingly important as demands from capabilities like AI and machine learning grow. With cloud platforms, managing fluctuations in demand and data come without the sizable levels of planning needed to do the same for on-premise.

4. Higher Resilience

Modern consumers’ demands are evolving, and they want organizations to be available 24x7. The problem is many older, on-premise ERPs are not built for this. Regular updates and maintenance mean they struggle to achieve the "always on, never down" capabilities now required.

Cloud ERPs, by their very nature, are built to do this. Giving you full access to all systems all the time from anywhere at any time. And they provide this constant operations resiliency at a lower cost than on-premise can.

The Real-world benefits of moving to the cloud

In my experience, Enterprise Resource Planning (ERP) applications will benefit as much, if not more, from the cloud as any other enterprise workflow or system. But why?

Fact or fiction?

We needed to base our findings on more than opinions or experience to highlight the real-world benefits. So we worked with Computing research to survey 150 people involved in cloud strategy and implementation at their organizations to discover the real-world benefits of a cloud ERP and how you can get them.

Where are we?

The first question we wanted to ask was to help set the scene of what is happening out there.

To know who is benefiting, we needed to know at what stage our 150 organizations were in their ERP cloud migration journeys. And where did they expect to be two years from now?

Interestingly, only 16% of organizations have fully migrated their ERPs to the cloud so far. However, 39% are in the process of rolling out cloud-based deployments, with 10% incubating or trialing and another 19% in the planning stages.

We also found that almost half of these organizations plan to have fully implemented their ERP to the cloud in just two years, with most of the remainder not far behind.

This leaves 16% with no current plans – though most are interested in migrating. The big question this raises is, where does this leave these outliers once cloud-based ERP becomes near universal if they don't begin their journeys soon?

Cloud or …?

We also wanted to know where people are hosting their ERP applications if they’re not in the cloud?

For most organizations, cloud-based solutions across public and private clouds and SaaS solutions are now in the majority. Interestingly, this is particularly the case across ERPs for HR, Customer relationship management, and help desks.

However, our study found that many areas with direct commercial links like accounting, risk management and compliance, procurement, supply chain management, and finance are lagging behind.

What's the benefit of cloud-based ERPs, really?

Our research then dug into the real-world benefits and experiences these organizations were having with cloud ERPs. Looking directly at the benefits those that have either 'fully implemented' or are 'rolling-out' cloud-based ERP are seeing.

We were fascinated to find that “Easier remote working” leads the way, with an average score of 7.7 out of 10. This score, in our experience, makes a lot of sense in the context of the Covid-19 pandemic, with social distancing and lockdowns. The cloud simply lets people do their jobs anywhere, anytime.

The other significant benefit we found was the cloud's 'Ease of scaling.' This is primarily due to the cloud's ability to let organizations scale up and down almost instantly, without the hassle of rethinking business processes and services.

Responses also mentioned other traditional cloud benefits such as increased productivity, ability to adapt quickly, reduced operating costs, easy updates to the latest innovations, and better user experience.

Watch our recent webinar recording, where we take you through the findings in more detail to explain what they mean for ERPs in the future. Alternatively, you can download the full research.

What does this mean for your organization?

The metaphorical expiration or sell-by dates matter because keeping up with newer product versions becomes more expensive quickly. Each organization has its own balancing act to perform. However, over a pretty short period, the costs and risks of migration will become significantly less than the costs and risks of maintaining old applications that may no longer be supported. This all makes the transition to cloud ERP inevitable, and all that varies is the timescale. 

To find out more about overcoming the barriers to cloud ERP and the benefits of doing this, read our What COVID-19 can teach us about crises and cloud-based ERP report here.

FAQs

Why is cloud ERP better than on-premise?

ERPs do the same whether they're in the cloud or on-premise, don’t they? The answer might not be what you expect; here's why…

In one sense, you're right; there is no difference. With the right ERP software, your organization can do all the same things. It's merely a choice in where you manage that system.

The difference between the two actually comes from looking a little deeper at the platforms themselves.

ERPs using a cloud platform are transforming organizations. Revolutionizing people experiences (both for staff and consumers), boosting engagement and innovation, and giving you more flexible, accessible, usable, and available systems than ever before.

All while offering the same functionality you've come to expect from your on-premise ERP. 

What's more, the right Cloud ERPs come with these benefits as standard. You don't have to spend time and money developing them. Giving you immediate access to them from the moment you start using the software. 

Our exclusive research established that the most significant barrier holding back more widespread use of cloud ERP is the use of bespoke legacy ERPs and their fragile state. What's critical to remember is that the costs and risks of rearchitecting these mission-critical applications rather than keeping them going long past their sell-by dates are very different. 

Is cloud migration really inevitable?

This research shows that the other major thing we need to consider is, yes, there are benefits but are they worth the investment? Does the reality of cloud ERP live up to expectations?

On average, organizations were satisfied, with over half giving a response of 7 and above. And just 15% scored 4 and below.

However, we’re still looking at a market in transition, with many still planning to move to the cloud from existing on-premise solutions. This will be where things become more challenging because, for many, these solutions have done the job just fine until now but are now beginning to hold them back.

So surely now it must become a question of 'when,' not 'if' they will migrate their ERPs to the cloud.

How secure is cloud data for organizations?

Security concerns were also featured heavily in our survey. Since its inception, people have debated confidential data security in the public cloud, and that's not stopping any time soon. And, in fairness, to those with concerns, the stakes are higher than ever.

However, while the shared security model where both cloud providers and customers are responsible for security is always a concern, that's not always a problem for cloud ERPs. This is because ERP vendors typically provide more robust security controls and can guarantee a level of resilience that you could never replicate in-house. Remember, their reputations are on the line in the event of a breach. 

Though you can take measures to reduce your exposure further to risk for those who still have concerns. The easiest way to do this is to deploy the security measures your cloud ERP vendor provides. Combining these with other measures like Identity and Access Management and Universal Endpoint Management reduces risk to a manageable extent. 

It’s also worth noting that a cloud ERP can also improve your remote users’ security. This is because data is not stored locally on laptops or phones, so the theft or loss of a particular device is less worrying from a security perspective than it otherwise would be.

Have more questions about cloud ERP adoption? Then head over to our recent article answering all your cloud ERP implementations questions. Or you can uncover everything you need to consider to make your cloud ERP migration a success here.