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Making the decision to move core ERP to the cloud is difficult enough, but the real heavy lifting comes with mapping out a migration strategy for cloud ERP software, given that there's no single set of best practices or proven approach that will mitigate risk.
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Company size, scope of existing ERP implementation, business model and a specific industry's predisposition for risk are just some of the issues the C-suite and other business leaders need to contemplate as they create a transition plan for cloud ERP software.
Government contractors or companies in highly regulated industries will lean toward more conservative strategies for migrating to cloud ERP software due to restrictions on where data and applications can be located geographically, said Eric Kimberling, managing partner and founder of Denver-based Panorama Consulting Solutions LLC, an ERP consultancy. In contrast, manufacturers typically will have greater leeway in how aggressive they can be with transitioning ERP to the cloud, he said.
"There is no right or wrong answer on how to migrate ERP to the cloud that's applicable to everyone -- it really depends on the type of company," Kimberling said. "The main thing is to understand the risk tolerance of the organization you're working for, and then defining a strategy that fits that risk tolerance."
Organizations must also take stock of their entire global ERP portfolio, including related applications for business analytics, time and billing, and talent management, among others. Many of these so-called edge applications may already be running in the cloud, driven by smaller divisions or satellite offices that were ready to take the plunge, or by shadow IT efforts seeking more control over technology decisions to achieve greater flexibility and agility.
"In many companies, the edge or at least parts of ERP have already migrated to the cloud," said Joshua Greenbaum, principal of Enterprise Applications Consulting, based in Berkeley, Calif. "There's really an imperative to understand what is already there and what needs to get there. It's not just all on premise[s] or in the cloud: There's usually a mix, and with shadow IT operations, there's often a lot of unfortunate surprises."
A stepped migration to cloud ERP software
Increasingly, the big, monolithic ERP migration is falling out of favor, and organizations are instead choosing to pick off pieces of ERP to move into the cloud based on their specific requirements, according to Lisa Pope, senior vice president of cloud sales and strategy at Infor, based in New York.
Global manufacturers with dozens of sites may feel it's too risky to move all divisions and all ERP components to cloud ERP software at once. "Keep your core ERP in place for now and move core acquisitions or key divisions that have business agility issues into the cloud first," Pope advised. "Look for areas that need the quickest results and migrate them first. You don't have to do everything and everyone at once."
The requirement for specific functionality can also drive a cloud ERP software migration plan. For example, companies under pressure from suppliers or customers to operate in the digital economy and which have an existing on-premises ERP system that doesn't support new digital transactions and business processes should considering moving edge applications in areas like payment or procurement into the cloud first to address their deficiencies, according to Cindy Jutras, president of Mint Jutras, a research and advisory firm based in Windham, N.H.
Conversely, a company that is subject to some of the new revenue-recognition standards taking effect in 2018 might consider this a good time to move core financials into the cloud and take advantage of cloud ERP software's new functionality in that area, Jutras said. "It all comes down to where you are today and if you have the functionality that can support your business," she said. "If you do, then there's less pressure to move everything to the cloud."
CFOs need to be involved not just in planning the migration, but during the deployment phase, since configuration, not customization, is a critical factor to ensure the cloud ERP software meets the needs of the business. Migrating core ERP or even edge applications to the cloud also gives CFOs the opportunity to do things differently, Greenbaum said, which means not just replicating existing business processes, but using the migration to fine-tune financial management in ways that weren't possible before.
"Cloud ERP requires more business involvement than ever before, because you don't customize, you configure," Greenbaum said. "When you configure a system, you need a lot of business-owner input, and the CFO or controller really needs to be in the room to get this done right the first time."
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