Remember that old song by The Clash, in which Mick Jones laments, “If I go there will be trouble, and if I stay it will be double”? It’s tough to walk away from a long-standing relationship, especially one in which you’ve invested a lot of time, energy, and (very likely) money. That’s the dilemma companies face when trying to answer the question: Should I break up with my ERP system?
Enterprise resource planning, whether you love it or hate it, remains the most important business system of our time. We love it because it connects the business with common data and processes. We hate it because it stifles innovation and business agility.
In this new era of digital transformation and cloud technologies, ERP users are at a crossroads. They face tough decisions about when they should move to the cloud. Simply put, the question is: “Should I stay or do I go now?”
Do we stay the course and look for incremental innovation through best-in-class extensions? Or do we start to re-architect our core operations for the digital world? These non-trivial choices will have massive economic and competitive implications on every company.
So how do you choose a path? The choice depends on a variety of factors, but one stands high above the rest: speed of change—both your company’s and that of the industry you’re in.
If your industry or company’s ambitions require rapid change to your operating model, then the choice is clear: re-architecting must start now. If your business is stable and your primary need is operational efficiency, then you can stay the course.
The ERP Cloud Adoption Model below frames the four core strategies based on the rate of industry change and your ability to change:
In industries such as media, banking, hospitality, healthcare, education, technology, and retail, which are being roiled by disruptive digital innovation, companies must change quickly. Success (half full) or survival (half empty) requires complete and fundamental change, to support new buyers, channels, experiences, services, billing models, processes, KPIs, and skills. Current systems, skills, and processes are an obstacle to progress.
The mandate for change is not always driven by external factors; some are internal mandates to attack existing business models and move into adjacent industries (for example, telecoms that are moving into home security via home monitoring). In such situations, we see two choices: either renovation of an ERP system within a new or existing division—divisional ERP modernization, in the model above—or pursuit of broad based-transformation of the business model, processes, and systems—in other words, a complete ERP renovation.
The better path really comes down to your company’s ability to change. If your culture and leaders are adept at change, then you should drive it at the core, as that is the fastest path to accelerating transformation at scale. If change at your company is difficult, you may need to start with a semi-autonomous division empowered to rewrite the rules.
On the other hand, if your industry is relatively stable—the utilities, chemicals, public sector, and manufacturing sectors come to mind—and you can manage the rate of change through steady, incremental improvements, then the path for ERP evolution is simpler. You may either optimize your investments through targeted cost reductions (operational excellence, in the model above) or deliver business improvements through best-in-class extensions (innovate at the edge). Or, in many cases, do both. The strategy here is to bleed the asset and drive steady incremental gain in cost reduction or agility.
For Oracle’s customers that take the path of complete renovation, our ERP cloud offering provides one unified platform for agility, fast deployment, significant gains in usability, lower costs, and dramatically better reporting and analytics. In our experience, the best approach is to move current processes to the cloud step by step, in a rapid, 90-day sequence.
For customers on the incremental path, we can extend the core on-premises ERP with high-value extensions such as advanced reporting, planning and budgeting, sourcing, talent management and applications covering the entire customer experience. Using this hybrid model, we can also help you achieve the lowest cost of ownership through managed cloud services and converged infrastructure.
Whichever path is right for your business, the key is having a multiyear strategy. Change is not coming; it’s already here.
Rod Johnson is global vice president of go-to-market strategy for Oracle Cloud applications. He will be a featured speaker at the upcoming Modern Finance Experience conference along with Oracle CEO Safra Catz.