ERP in Cloud – Likely Pitfalls

By Chandran R, December 1, 2017

In this ever-changing universe, the deployment of computer application keeps changing at a fast pace. Traditional computing is slowly being overridden by cloud computing, artificial intelligence, etc. With the enhanced advantages of cloud computing, it is natural for businesses to look at moving their ERP applications to the cloud and this movement to the mainstream seems to be global. In the last few years, we have seen widespread adoption of ERP on the cloud – whether it’s Microsoft Dynamics / Navision, Oracle or SAP HANA / ECC on HANA.

In fact, many organizations have already moved their ‘less mission-critical’ web-centric applications into the cloud. It makes great sense for their ERP to be moved to the cloud to minimize latency between applications, improve analytics, reporting, leverage common security protocols, and drive greater cost and performance efficiencies.

Dynamics of ERP – The growth challenges of an Organization

Every organization is different, but the themes that start the ERP conversation are:

  • Data visibility
  • Control & governance
  • Business process
  • Risk management
  • IT cost and speed
  • Growing complexity within the business

Critical success factors to meet these challenges

Analytics available across all functional areas of the business for intelligent decision making:

  • Real-time connections to data, customers, partners, and suppliers
  • Technology that scales with the business and provides a competitive advantage
  • Software that is easy to learn, quick to implement, easy to use, simple to support
  • A mobile-connected , empowered workforce that can make fast decisions

Advantages of Cloud-Based ERP in Delivering on these Success Factors

  • Process Standardization: Cloud based ERP involves a wholesale adoption of your Cloud ERP provider’s processes and systems. This brings in the benefits of operational agility, cost efficiencies and technology access
  • A Stronger, More Credible CSP: With a stronger, more reliable, compliant, high performance and vendor-supported CSP infrastructure, organizations have started migrating mission-critical applications like ERP into the Cloud.
  • Increased Usability: We have the ability to store our data over a network and then access it through a web-based browser or mobile app, to access the system from anywhere, anytime.
  • Manageability: Since the systems are stored on servers at a remote location, they are managed by a Cloud provider, effectively accommodated by best-practices of an ERP and with satisfactory uptime guarantee.
  • Cost: Besides drastically reducing the operations and maintenance costs of infrastructure, the costs are also predictable in terms of monthly fees.
  • Security: Being hosted at a hardened facility, the corporate data is safe at the Cloud hosting center being handled by security experts.
  • Scalability / Elasticity: Easily scale up or down depending on your current usage requirements
  • Automation: Your cloud providers are responsible for server maintenance and take care of any system updates so the process is transparent for you.
  • Disaster Recovery: Ideal for a DRP site where you do not need additional infrastructure for Disaster Recovery.

Pitfalls While Operating in Cloud

  • Security & Privacy: Upon switching over to cloud, the organization literally hands over their data to a Third Party which brings with it the risk of data being access by unauthorized users. In addition security and reliability issues of the cloud are more prominent among decision-makers of large companies, making them reject the option to move their mission-critical application and data to the cloud.
  • Dependency: With Cloud systems, one is essentially fully dependent on the provider. If they are not on top of their game, we run the risk that the systems not running properly as well as a feeling of ‘loss of control’.
  • Decreased Flexibility: The Cloud Service Provider will perform system and software upgrades on their schedule which the customer has to adapt.
  • Integration: There can be trouble associated with syncing data on the Cloud with the on-premise systems or with other service providers.
  • Cost: Cloud-based ERP could not make financial sense to large companies, as large numbers of ERP users could result in expensive subscription fees, which could prove in the long run to be more costly than implementing and maintaining an on-premise ERP system.
  • Customization: Cloud ERP limits customizability, and this was found to afflict large companies that are more likely to use ‘heavy’ ERP modules, such as manufacturing or supply chain management, which usually demand customized, narrow industry-specific functionality and real-time integration with machinery and other complex legacy systems.
  • Change Management: Need for customization would require huge change management, which in turn could make potential migration to a cloud-based system an extremely time consuming, costly and dangerous task.
  • Downtime: This may be one of the worst disadvantages of cloud computing. No cloud provider, even the very best, would claim immunity to service outages.

Conclusion

The decision on what’s right for your organization requires an honest assessment of your current state of play considering the advantages / pitfalls. It is inevitable to move towards cloud with evolving technology trends by adopting best practices to handle legal, security, change management and standard business process to be successful at optimum costs.

(This article was published in the CIO Review Magazine, December 2017 – https://www.cioreviewindia.com/magazines/pos-special-december-2017/)

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Chandran R

Having professional experience spanning over 33 years, Mr. Chandran (fondly called as Chandy) plays the key role of BCT’s CIO (Chief Information Officer) and CDO, ( Chief Delivery Officer) working towards streamlining, strengthening and formulating processes and strategies on using technologies for information availability and accessibility. Mr. Chandy has spent 17+ years in building Enterprise Applications Services Practice across organizations. Mr. Chandy is a regular speaker in Chennai NASSCOM Chapter and NASSCOM Engineering Summits on Cloud Computing, ERP Implementations and the changing role of IT department. He is also a Panel member for CIO Magazine, Chennai CII chapter.

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