Over the past decade, companies have started to make a leap in their digital transformation by switching from an on-premise ERP setup to a cloud-based ERP solution. Today, with reinforcement from industry visionaries like Gartner, the trend toward cloud technology is accelerating at an unbelievable pace. To those still operating on legacy systems, this migration to the cloud may appear as organizations simply following suit. However, as we see more and more concrete benefits of cloud technology emerge, it’s clear that cloud solutions, in a lot of cases, help organizations avoid the one thing they dread the most: failure.
So what is ERP failure? How can you identify it and how can the cloud help you avoid it? Let’s review these questions and explore how the latest cloud technologies are adapting to fit ERP needs.
What is ERP Failure?
There is no universal definition of ERP failure — every organization has different goals and different strategies to achieve those goals. Because of this, failure has many opportunities to manifest.
For most organizations, ERP failure can be identified by some type of disruption, whether it be in regards to your product or service, your accounting, or your internal workflows. When an ERP implementation goes over budget, your supply chain gets lost, or certain milestones along the way are delayed, the domino effect begins and can often lead to ERP failure.
ERP failure is not a coincidence — that is to say, the reason a project fails isn’t random. A common reason a digital transformation falls flat is due to the implementation team failing to plan correctly and mitigate risk or control the scope. But it is possible to avoid risk from the outset.
Many key reasons can be before the project or program even starts: The strategic, goals and objectives are not clear, therefore ERP selection was probably not thorough, so the organization’s needs are not met AND/OR no benefits are accrued. So, even if the project succeeds, then the overall result still could be a business failure.
Developing Your Digital Strategy
Failure to identify and address risk is the most common element of ERP failure. Ironically, a big part of ERP failure is focusing on failure, rather than pursuing success. Here’s how a cloud-based ERP strategy can help organizations reduce common organizational risks and thus, reduce their chances of failure.
Many on-premise solutions are perfectly adequate within their own closed systems, but the world has reached the tipping point of cloud adoption. With recent world events pushing workforces remote and consumers online, cloud-based ERP systems are unique in their ability to further help organizations stay connected. They allow employees to access the system from anywhere, as long as they have an internet connection. There is something to be said about the ease of access to the system that will support team productivity while employees work remotely.
- Getting up and running
Cloud deployments offer rapid design and configuration, usually via templates, to implement standard rules, standard integrations, and standard data migrations. With that, clients can be up and running with core modules in less time. While this limits flexibility in customizing the ERP functionalities to fit your company, it allows organizations to reap benefits earlier than what might be possible with legacy, on-premise solutions. This, of course, depends on the organizational complexity and current technology footprint, but it addresses the delays in achieving milestones throughout the transformation.
Cloud ERP software allows for real-time business processes to be synced from anywhere, with the ability to garner real-time budgeting, modeling, and summary analytics to help an organization optimize its business processes. By saving time with these key functionalities and getting a better look inside of your business processes with analytics, organizations can stay on top of their ERP system, instead of falling behind.
- Remaining safe
With on-premise solutions, you’re left to your own devices when it comes to security. This means that, in order to avoid costly breaches and protect data, companies must divert resources to IT. This can delay implementation, make projects go over budget, and generally overload human resources. Luckily, as ERP moves to the cloud, it’s constantly becoming faster, smarter, and more secure. With cloud-based ERP, the software you depend on is under the constant supervision of dedicated teams of IT professionals who can devote their time to fraud monitoring, patching vulnerable software, and updating products. This means you may be able to scale back the size of your internal IT teams for large organizations.
With a cloud-based ERP, organizations don’t have to figure out how to set up hardware, upgrade the software or maintain services, which saves a lot of time. This is especially beneficial to smaller businesses that have small IT teams, or companies that do not have a dedicated cybersecurity team. One downside is that you are less likely to be in control of the upgrade timings, depending on the Vendor.
- Meeting cost expectations
A cloud strategy may offer a better ROI with different pricing models, but careful consideration is needed to assess the cost savings and optimization of the software selection. Cloud ERP offers a way for smaller businesses to get a traditional software experience without the hefty, up-front implementation cost. Due to the fact that a cloud-based ERP is charged via a monthly fee, it can still be less expensive than implementing an on-premise system. With that said, it’s important to consider the cost of a subscription-based model per user over time, and determine where the breakeven point would be relative to a similar on-premise solution in order to make the best decision.
Conclusion and Additional Considerations
While it’s true that cloud-based ERP solutions provide many unique benefits to organizations, there are fundamental digital transformation strategies to consider regardless of your chosen ERP system. Mitigating or avoiding risk is critical in order to avoid ERP failure. While risk comes in different forms for different organizations, breaking it down and understanding the role of organizational change management go a long way to not only help you avoid failure but to stay focused on success. At the end of the day, technology is only as good as the team, strategy, and implementation behind it.
If you have any questions or feedback regarding this blog or any digital transformation based content – please feel free to reach out to me directly.