By Varun Dhir, principal, Deloitte Consulting LLP
I’ve spent a lot of the last year helping clients in finance organizations think through how they should adjust after the dramatic upheaval of the pandemic. While initially there was a lot of trepidation about what is next, many teams adjusted their thinking using this point in time as an opportunity to think about the future.
Central to that future is a company’s ERP system. Recently, I joined Rondy Ng, senior vice president of applications development at Oracle, and David Linthicum, managing director and chief cloud strategy officer of Deloitte Consulting LLP, on Deloitte’s On Cloud podcast to talk about why an increasing number of companies are moving to cloud-based ERP systems—and how the pandemic has accelerated that trend.
In 2020, many businesses suddenly realized the ERP systems that they considered “good enough” simply weren’t. They needed systems that went beyond processing transactions and closing the books, ones capable of supporting new business models and operating environments.
“The ability for a company to adapt to change can be significantly slowed by a lack of agility in its traditional on-premises ERP—and that's why people go into the cloud,” Ng said during the podcast. “Along with that flexibility, companies suddenly needed to support remote workers, and that can be a big challenge for companies running on older systems.”
As a result, the pace of companies implementing Oracle Fusion Cloud ERP has increased significantly, he said.
Many of the finance leaders I work with have vivid memories of disruptive on-premises ERP migrations and updates. They would take on a major technology project every five to seven years, committing resources, taking people away from the business to implement and then stabilize the system—and then repeating that whole process again every time they needed new capabilities.
The thought of being on a cloud platform that is constantly and automatically infused with new innovations—in addition to having security updates and patches taken care of on every layer of the stack— is a very attractive idea. All of this increases the efficiency of the finance and IT departments, which no longer have to focus on mundane processes or system maintenance.
Ng said that in the last year alone, Oracle delivered approximately 1,700 new features to Oracle Cloud ERP customers through quarterly releases, and about half of the updates come from direct customer input.
“When customers have an idea, if they’re struggling with certain processes, or if we see that our customers are using certain capabilities heavily, we can invest more on those areas,” Ng said. “It’s a customer-driven roadmap.”
And that is one of the big differences with cloud: Constant availability of next gen software capabilities shifts the experience from a traditional one-time transaction to a long-term partnership.
A top priority for Ng’s team is leveraging technologies such as machine learning to automate more and more transactional activities and processes, make the ERP system increasingly touchless, and provide an up-to-date view of the business. They’re also exploring how to use integrated collaboration technologies and digital assistants to transform the user experience, which is even more important when so many employees are working remotely.
The decision to move finance to the cloud needs to be made jointly by the CFO and CIO. There has to be buy-in from both areas of the organization to live within the rules and tenets of a cloud-based operating model in the future; no customizations, business processes that align with best practices, and collaboration on the rollout of new capabilities. Gone are the days when a CIO will have to tap the shoulder of a developer to alter things overnight because a business unit or finance executive urgently asked for changes.
If the two organizations embrace these new principles, they can build a strong coalition that will put the move to cloud on sure footing.
But a big question for company leaders is how to make that transition.
At Deloitte, we often see clients start by getting their FP&A and core corporate accounting capabilities for the entire organization homogenized on the new cloud platform; it’s the right-size lift without disrupting all of the upstream processes, applications, and organizations. Then, companies expand upstream step by step into sub-ledger processes that support more end-to-end transactions, adopting incremental capabilities in smaller steps to capture value quickly without taking on too much risk.
Whatever the right path is for a company, Ng and I agreed that not moving to modern, cloud-based systems can leave a company further and further behind their competition.
“It’s not just about the value that cloud brings to an organization, but the risk of delaying the decision to start this journey,” Ng said. “We believe it’s not a matter of whether to move to the cloud. We believe a cloud-first, cloud-only mentality is the new standard. If you don’t start right now, think about what that means to your organization competitively as well as its ability to survive the new normal.”