Traditionally acknowledged as an on-premise software application, in recent years Enterprise Resource Planning (ERP) has begun to follow other business applications to the cloud. The move to the cloud has been mainly associated with start-ups and SMEs which are largely taking a ‘cloud-first’ approach to their business applications, including ERP.
Cloud certainly makes sense for smaller organisations as they do not have the vast legacy systems of larger organisations to be replaced and/or integrated with. But a recent survey commissioned by Hitachi Solutions Europe suggests that large organisations are beginning to consider whether ERP in the cloud could also work for them.
Responses from larger organisations (over 500 employees) revealed that 27% of them said they have already moved all or parts of their ERP to the Cloud, or are in the process of moving.
Looking at responses from smaller organisations, 33% have moved all or part of their ERP to the cloud, or are in the process of moving – just a 6% difference.
While it seems that larger organisations are beginning to embrace ERP in the cloud, they are taking a more cautious approach than their smaller counterparts. Larger organisations are much more likely to move part (78%) rather than all (22%) of their ERP to the cloud.
This suggests that they are currently dipping their toe in the water and testing how the shift will impact their organisation. Clearly moving part rather than all of their ERP is less complex and disruptive for an organisation.
For example by moving important ERP functions such as accounting or business intelligence to the Cloud, larger organisations can feel the benefits of cloud without the headache of a full-scale ERP implementation.
In comparison, 51% of small organisations said that all of their ERP sat in the Cloud vs 49% who said they had a blend of cloud and on-premise. For smaller organisations this could well be the first time they have ever had an ERP system so it makes much more sense for them to put all of their ERP in the cloud from the start.
Risks associated with moving ERP to the cloud
There are various risks traditionally associated with moving ERP to the Cloud but interestingly the main concerns were the same for organisations large and small. Both were most concerned about the data security/privacy risk, followed by connectivity/dependency on a third party.
62% of large organisations rank data privacy as the main risk, followed by connectivity/dependency on a third party (44%). This was similar in smaller organisations who also ranked data privacy as the main risk (52%) followed by connectivity/dependency (41%).
Other pertinent risks flagged by larger organisations included the logistical effort of switching and difficulty integrating with existing on-premise system, which helps to explain why they were more likely to move parts of their ERP to the cloud, as opposed to all of it.
Benefits of moving ERP to cloud
The benefits of moving ERP to the cloud are again similar for both large and small organisations. Large organisations ranked increased ERP performance (50%) as the main benefit, likely as a result of ERP in the cloud replacing legacy systems which may have been slow and nearing end of life.
This was followed by easier access to information (39%) and reduced operating costs (33%).
In comparison, smaller organisations ranked easier access to information (49%) as the main benefit, followed by reduced operating costs (38%) and increased information security (34%).
The fact that smaller organisations feel that increased information security is a benefit of ERP in the cloud, is probably due to them not having the same level of security systems in place that a larger organisation would have.
> See also: Five reasons to avoid an ERP 'frankencloud'
Data security/privacy risk was one of the main concerns for smaller organisations so it is interesting to note that increased security is one of the main benefits perceived by large organisations of moving ERP to the cloud.
In the past many would have seen ERP as too business critical for the cloud – but we are beginning to see this change as people become more comfortable with the idea of moving away from on-premise.
For larger organisations in particular, the approach is a cautious one, and concerns remain around how they are going to mitigate some of the risks.
For organisations of any size, working with a trusted implementation partner on a project of this magnitude is vital. Implementation partners should be able to help you decide if ERP in the cloud is right for your organisation and support you on your cloud journey.
Sourced from Steve French, Executive Vice President, Hitachi Solutions Europe
