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Cloud Computing

How to Implement Cloud ERP in a Legacy Environment

Follow these best practices to avoid common mistakes.

by Harshad Khatri

August 2015

Early enterprise resource planning adopters—typically large enterprises—are finding that their once cutting-edge systems aren’t nimble enough for today’s business environment, owing to decades of customizations to support complex internal processes.

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These organizations, facing new pressures on their business models from global entrants and market disrupters, now demand lower costs, more modern functionality, and more process flexibility from their enterprise resource planning systems. Additionally, senior management is embarking on an analytics binge to drive improved data-driven decision-making.

The answer for most of these organizations: Move to the cloud. But buyer beware. Cloud ERP services, which are still in their infancy and evolving rapidly, will have to co-exist with legacy ERP platforms, at least in the short term.

The Oracle Insight team recently assisted an organization that was oversold on the cloud’s hype and embarked on implementing no less than six cloud services simultaneously, on top of a customized legacy ERP platform. While the cloud is a viable solution, in this case too many disparate clouds proved to be a storm—too many tails wagging the dog!

The best cloud ERP implementations have hands-on executive sponsors, arealigned with key business goals, and accommodate the latest (andfuture) technology innovations.”

The business case that justified this cloud ERP boondoggle was a collection of disparate individual business cases. The sum of the six cloud services cost more than the existing software, mostly because of internal training, multiple data cleanups, complex integrations, and the need to manage different vendors and technologies.

While the value of cloud ERP is very real, we routinely come across companies that miss out on its benefits because of several strategic mistakes.

Vision and Business Justification

Many organizations focus excessively on up-front costs and speed to activation, while missing out on the long-term value that cloud ERP can create. Such business decisions typically focus on current needs and individual projects, and often they’re made without testing the marketing hype. Another fatal mistake is assuming that technology needs and products are static.

Organizational leaders also tend to have unrealistic assumptions about the scalability of cloud ERP capabilities. And they can scope projects inappropriately—planning for too little or for too much functionality.

Another common mistake is inadequate planning for the integration with, and decommissioning of, the legacy environment. As a result, those companies live with the legacy modules for too short or too long a time.

Keys to Success

The best cloud ERP implementations have hands-on executive sponsors, arealigned with key business goals, and accommodate the latest (andfuture) technology innovations.

It’s critical to develop a long-term roadmap and maintain a focus on the end goal, while following follow an iterative path to meet goals along the way. In this way, companies can change course as the business or technology landscape continues to evolve.

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Harshad Khatri, Oracle Insight

Select the cloud service based on features, ability to meet functional and regulatory needs, integration both with systems within the organization and those of suppliers and partners, and ability to scale up and down. It’s worth re-emphasizing the importance of keeping process owners and end users closely involved.

Finally, ensure business alignment by focusing on reporting and analytics from the start. Senior management must get regular, timely, and accurate data feeds to improve their decision-making.

Cloud ERP services clearly are here to stay, co-existing with legacy systems that will take some time to phase out. Historically, ERP investments have failed to deliver their promised business value, so follow these best practices or your hybrid environment could go down a similar path.

Photography by Shutterstock