Companies rely on enterprise resource planning (ERP) software to help them automate nearly every aspect of their businesses—from supply chain operations and procurement to risk management and financials.
But getting to this level of automation has come at a huge cost. According to a 2016 study conducted by Nucleus Research, the average expense for companies to set up their on-premises ERP systems—including software, hardware, consulting, personnel, and training—is about $8 million.
When compared against just $2.6 million to set up ERP apps in the cloud, most CEOs and CFOs would agree that the time to purge the on-premises data center is now.
Yet cost isn’t the only motivator. As Oracle CEO Mark Hurd put it at a recent Oracle event, cloud applications add new features more rapidly as part of the subscription “on the supplier’s dollar, not yours…Hence, the move to cloud is about a new business model.”
- Related: Oracle ERP Cloud Delivers More
Beyond cost savings and business model shifts, there are 10 new reasons to move your on-premises ERP into the cloud:
- Make more-precise (and more-profitable) decisions with built-in analytics and machine learning. Today’s cloud ERP apps have built-in analytics that help companies analyze historical data, measure current performance, and then make informed decisions about how to grow their organizations in the future. Using machine learning and adaptive intelligence algorithms that are embedded into new, cloud-based HR, finance, and supply chain applications, companies can also identify patterns in performance, such as which suppliers are paying on time and which ones need to be taken out of the network altogether.
- Eliminate nonvalue work and manual transaction processing. Using optical character recognition (OCR) and intelligent document recognition (IDR), finance personnel are no longer subject to hours of manual data entry and crosschecking and can instead focus on more-strategic activities involving data analysis, performance management, and decision making.
- Gain real-time insight into day-to-day operational performance and financial trends from any device. By using cloud-based software that replaces spreadsheets with graphics and visualization tools that are optimized for desktops, laptops, tablets, and smartphones, CFOs, line-level managers, accountants, controllers, and analysts can run custom reports, analyze and investigate account balances, and make performance-related decisions anytime, from anywhere, using their mobile devices.
- Get a faster month-end close by connecting to multiple data sources and using prebuilt reporting templates. New ERP cloud apps automate and standardize journal entries with direct integration between core finance applications, the general ledger, and other cloud-based and on-premises source systems—enabling finance personnel to easily create and share performance dashboards and analyze up-to-the-minute status on the company’s cash flow, balance sheet, and income statement.
- Adapt to changing compliance regulations and accounting standards, using revenue-management cloud services. New regulations for managing contracts with customers are expected to go into effect in 2018, requiring companies to follow complex rules for how they are selling products and receiving payments. Cloud-based ERP apps now have prebuilt tools that help companies not only comply with the new International Financial Reporting Standards (IFRS15) and the Accounting Standards Codification (ASC 606) but also enable finance teams to run reports to assess whether they are at risk of not meeting performance obligations or appropriately allocating transactions and recognizing revenue.
- Automate risk management with cloud-based governance, risk, and compliance (GRC) tools. Designing, mapping, and testing risk controls in traditional, on-premises ERP applications take a huge time commitment, requiring people to sift through lots of spreadsheets and years of records. As a result, most companies do what’s necessary to meet regulatory requirements but are reluctant to inventory all of their controls to ensure they align with internal policies and organizational structures. Without proper controls, companies are much more vulnerable to incidents of internal fraud and other finance policy violations. In contrast, cloud-based ERP tools have control templates already preconfigured, making it much easier to assign roles and segregate duties.
- Expand quickly into new markets at lower risk by automating foreign tax law compliance. Developed specifically for companies that have expanded their operations internationally, today’s cloud ERP applications have built-in localizations that address financials, taxes, and other local business requirements.
- Extract maximum value from existing IT investments and assets with infrastructure as a service (IaaS). Because many companies have invested a lot of money in on-premises systems that haven’t yet realized their full ROI potential, connecting to the cloud via IaaS is proving to be a practical way for businesses to get the benefits of greater flexibility at lower cost—without losing their existing IT investments. Using IaaS allows companies to simply slice out a set of functionality within their on-premises human capital management, enterprise resource management, or customer relationship management system, and then move it into a cloud environment where the data can be shared, managed, and analyzed.
- Speed up innovation using platform as a service (PaaS). Because PaaS helps companies clone both their software development and their production instances, developers can simultaneously test new applications or customizations in the cloud, without compromising live instances (whether in the cloud or on-premises) or suffering losses from taking their businesses offline.
- Monitor the entire business from a single cloud platform. While almost all ERP applications serve as the backbone of a company’s mission-critical business systems, only cloud ERP apps can be easily integrated with legacy on-premises systems, other cloud applications, third-party apps, mobile and social platforms, and the Internet of Things—turning every company, line of business, and department into an analytics powerhouse.
The net effect of all of these benefits, according to Steve Cox, vice president of ERP and EPM Cloud at Oracle, is that by moving ERP to the cloud, companies can create more value with fewer resources. “When companies replace operational efficiency with operational agility, it frees them up to do cool things with their data,” he says.
