ERP in the cloud

25 May 2018

Kathryn Butterfuss

Kathryn Butterfuss

Principal SAP S4 Consultant

ERP in the cloud is like death – it’s inevitable, so stop worrying about it. Kathryn Butterfuss explains...

As organizations move into the digital world, it has become more and more evident that enterprise resource planning (ERP), like everything else, will be in the cloud – it’s not a matter of if, but when. 

Enterprises spend dozens of years – and millions of dollars – building infrastructure and data centers to support very complex environments. But in the past decade, the world has changed. Many companies have realized that the way they invest in running their IT infrastructure isn’t the best spend for them.

As a result, many companies are moving to the cloud and, as shown below, they are reaping the rewards through cost savings from using the cloud – and those savings are growing. The chart below illustrates the estimated savings (%) from a survey of 256 respondents: 
With the technology of Google Cloud, Amazon Web Services and Microsoft Azure, organizations have become much more comfortable putting their information in a cloud environment. As of January 2018, 96 percent of enterprises that responded to the RightScale 2018 State of the Cloud survey are using some level of cloud integration:

What about ERP systems?

Because your ERP system holds information about your organization, it is right to be cautious about moving your data to a cloud environment. Security concerns are always present. However, despite several recent, well-publicized data breaches, most enterprises realize that the risk is worth the reward. As shown below, public cloud adoption in 2018 grew substantially from that of 2017.    

Moving ERP to the cloud is inevitable. The ERP solutions of the 1990s are no longer relevant in this digital world. The adolescence of ERP systems forced many organizations to become software development shops. They spent significant time and effort building specialty code into their packaged solutions. And as they found in the early 2000s, this creates problems. It’s difficult to properly update retrofitted packaged software, which means that many software fixes around security and overall effectiveness fell short.

Where are we going?

According to Panorama’s “2016 Report on ERP Systems and Enterprise Software”:
  • 81 percent of organizations have either implemented an ERP system ore are in the process. 
  • 14 percent of organizations are in the process of selecting software.
  • 5 percent are in the process of upgrading software.
  • 16 percent implemented ERP to replace old ERP or legacy systems – this was the most common reason.
Many of those companies are at least considering the cloud – and for good reason. The facts are simple: Moving to the cloud moves the overall expense of managing IT to another company. Enterprises will no longer have to provide the infrastructure required to run their ERP systems, or the people to support that infrastructure.

How will we get there?

Cloud ERP systems are scalable. Because they are built in a modular fashion, enterprises can implement them differently than traditional ERP solutions. You only pay for what you use, you get the latest innovations, and the core code is protected from being changed, preserving your data.

At the same time, you get the platform you need to create your competitive advantage – and get a quicker return on investment. Finally, consider this: software companies are going to start moving away from offering traditional ERP systems. It’s inevitable. Organizations will have no choice but to move their ERP systems to the cloud. 

Are you attending SAPPHIRE NOW and the ASUG Annual Conference this year and want to discuss SAP ERP solutions further? Come visit me on booth #385 or book a meeting in advance.
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About the author

Kathryn Butterfuss

Principal SAP S4 Consultant
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