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Cloud technology revolutionizes the possibilities for ERP systems and transforms business and IT

Tae Ho Shin
March 9, 2020

It is nothing new that companies must change their business in the course of digitalization. The digital transformation is causing companies to rethink not only their business model, but above all their technology strategy –  this includes questioning their often legacy-based ERP and back-office systems. In order to remain competitive, they are increasingly focusing on the use of state-of-the-art technology. However, they often lack the necessary skills to transform old IT landscapes. These are usually fragmented and give companies little insight into data, provide little transparency and offer no opportunity for centralized corporate steering. A harmonization of the systems is often not possible and the adaptation costs are immensely high. However, new sources of innovation are urgently needed to improve offer  and financial result of companies. As a result, new solutions such as SaaS and Cloud-enabled ERP software are  coming more and more into focus.

Cloud technology fundamentally changes ERP systems and creates new opportunities for business

With the help of Cloud-enabled ERP systems, companies can improve their decision-making, create room for innovation and thus increase their business results. The advantage of flexible SaaS or Cloud-enabled software is that it can be implemented and scaled quickly and is continuously updated by the respective provider. ERP SaaS solutions offer “ready-to-use” applications with standardized processes that require a minimum of implementation and little customization. If in rare cases extensions are required, the development process can be automated using PaaS. Cloud-enabled ERP systems drive business innovation by often integrating intelligent features such as machine learning, deep learning, speech processing and advanced analytics. Interesting examples in this area are smart assistants and chatbots.

Advantages of Cloud-enabled ERP systems

Advantages of Cloud-enabled ERP systems

Faster to the new ERP system with Cloud technology

The Cloud has made the process of ERP system selection and implementation much faster. Costly analyses and design phases with long implementations are a thing of the past. Instead of making many adjustments, a pilot based on standardized ERP vendor processes is quickly rolled out.

The selection phase has developed from a long RfP phase with extensive requirements gathering and detailed specification lists to a rapid selection process. The new selection process is based on a rough process model that covers the identified core problems and tests them using relevant use cases. With this new method, the selection of a suitable ERP provider can be reduced by up to four months. The situation is similar during implementation. Whereas the actual implementation used to be preceded by a long phase of drafting, today the best practice processes of the vendor are used. Only minor adjustments and necessary extensions are made. This eliminates the need for lengthy and expensive software adaptations and thus speeds up the implementation process considerably.

The professional implementation of a Cloud ERP project has long-term, positive effects

Our experience shows that, when implemented correctly, the introduction of a Cloud-enabled ERP system leads to an increase in the degree of automation in the company and an improvement in process quality. In addition, productivity and profitability gains are achieved and the focus can be shifted back to value adding activities such as continuous improvement or strategic activities. The decisive factor here, however, is the professional implementation of the ERP Cloud project. Companies often lack the experience and expertise to select the right use cases for evaluating providers and to carry out an RfP properly. However, if the relevant use cases are considered in the selection phase and the critical pain points are identified, mistakes in selecting the right provider can be avoided. It is also helpful to introduce an outside-in view to include the customer and industry perspective. Like this, business and innovation goals can be reconsidered.

If the introduction of the new system is carried out with care, no new personnel is required. Employees are rather relieved by the increased user-friendliness of the new system. These factors and the rapid availability of new functionalities can also lead to a high level of satisfaction in the company. However, the professionalism of the introduction also plays an important role. In our projects we oftentimes observe that aspects of change management are completely disregarded. In order to avoid rejection of the new system, employees need to be involved at an early stage through appropriate communication measures and user training. Not inconsiderable are, among other things, the process-related changes that result from the standardization of processes and often entail changes in the organization and roles.

If a maximum degree of standardization is achieved through the careful selection of the suitable system, costs for change requests will stay at a minimum. Also, the operating costs for the new system can be kept low. At the same time, the introduction of the new ERP system eliminates risks of legacy IT. However, this requires the existence of the corresponding expertise in the company, otherwise new software risks can even arise due to incorrect handling of the new system.

When implemented correctly, the introduction of a Cloud-enabled ERP system therefore has a positive impact on

  • strategic goals of the company
  • operations
  • and the IT

and turns out to be a future-proof investment.

It is important for the success of the transformation that the introduction of a Cloud-based ERP system is not seen as a pure IT transformation, but rather as a comprehensive business transformation. The Cloud ERP project must be set up and implemented accordingly so that the positive effects arise in the company.

If you would like to find out more about the decisive success factors from our project experience, please contact us.

This article is co-authored by Anna Baum.