cloud erp migration

Why are so many companies moving to a Cloud ERP?

In our latest survey into cloud ERP, we discovered that over 60% of organizations are already on the road to digital transformation in 2020. But why the rush, and how can those still considering the move take the next step?

Cloud ERP in 2020

With everything that’s happened so far in 2020, we wanted to understand how companies were coping and what steps they were taking for the future.

The starting point for our research was to establish how enterprises currently run their ERP systems. We found up to 50% of organizations are still running some, or all, elements of their ERP applications on-premise. But for most, over 60%, in fact, they're in the process of updating these to a cloud ERP solution. So we wanted to know why and how those still considering moving to the cloud could remove any barriers to take the next step.

Removing barriers to cloud ERP implementation

Our research found that for companies using cloud ERPs, there were clear benefits in cost reduction, boosting agility, and improving performance and productivity. So why are so many organizations waiting to implement a solution that offers so many benefits?

The biggest reasons we uncovered for why organizations are still tied to on-premises infrastructures were: 

  • Migration complexity 37%
  • Cost 34%
  • Security 32%

Though these weren't the only reasons for not moving to a cloud ERP. To see the complete range of barriers to cloud adoption, read the full report here.

This told us that the nature of ERP and the migration difficulties they can come with was a big concern for many organizations. Often organizations existing ERP applications are old and bespoke, and many and have been customized. The outcome is many enterprises believe their ERPs have become a monster. 

They believe the cost (the second biggest concern), time, and risk involved in rearchitecting these applications for a cloud environment would be too much. This is the usual thinking behind continuing to use cumbersome and inflexible on-premises data-centers on life support. 

But do they have a point?

The real benefits of cloud ERP

To some extent, yes. This complexity of existing on-premise ERPs indeed makes a "lift and shift" approach unlikely. However, it's also true that aging on-premise infrastructures are incompatible with newer ERP applications and require progressively greater computing power and storage capacity. And simply not adding new features and functionality to your ERP isn't an option when enterprise agility is a defining factor of commercial success. This is when adding any new functionality or capacity to your on-premise solution begins to become relatively more expensive than starting over in the cloud.

Yes, migrations are complex and must be planned and managed tightly but, ultimately, the cost of migrating to a cloud ERP will always be lower than retaining the status quo. Cloud ERPs let your business switch direction, add features and functionality, and scale at speed for a relatively low cost. Making you more flexible and letting you retain and grow your share of the digital economy.

Staying safe in a cloud ERP

Security concerns were also featured heavily in our survey. Since its inception, people have debated confidential data security in the public cloud, and that's not stopping any time soon. And, in fairness, to those with concerns, the stakes are higher than ever.

However, while the shared security model where both cloud providers and customers are responsible for security is always a concern, that's not always a problem for cloud ERPs. This is because ERP vendors typically provide more robust security controls and can guarantee a level of resilience that you could never replicate in-house. Remember, their reputations are on the line in the event of a breach. 

Though you can take measures to further reduce your exposure to risk for those who still have concerns. The easiest way to do this is to deploy the security measures your cloud ERP vendor provides. If you combine these with other measures like Identity and Access Management and Universal Endpoint Management, it reduces risk to a manageable extent. 

It's also worth noting that your remote users' security can also be improved by a cloud ERP because data is not stored locally on laptops or phones, so the theft or loss of a particular device is less worrying from a security perspective than it otherwise would be.

In summary

Our exclusive research established that the most significant barrier holding back more widespread use of cloud ERP is the use of bespoke legacy ERPs and their fragile state. What's critical to remember is that the costs and risks of rearchitecting these mission-critical applications rather than keeping them going long past their sell-by dates are very different. 

The metaphorical expiration or sell-by dates matter because keeping up with newer product versions quickly becomes more expensive. Each organization has its own balancing act, but over a pretty short period, the costs and risks of migration will become significantly less than the costs and risks of maintaining old applications that may no longer be supported. All making the transition to cloud ERP inevitable, all that varies is the timescale. 

To find out more about overcoming the barriers to cloud ERP and the benefits of doing this, read our ‘What COVID-19 can teach us about crises and cloud-based ERP’ report here.

Anders Holm Jørgensen -VP and Global Head of Customer Cloud Migration at Unit4

Anders Holm Jørgensen

Anders Holm Jørgensen is the Global Head of GTM Operations. He joined Unit4 in 2015, starting out as the Head of Delivery building up a Professional Services organization in the Danish market, followed-up by helping our customers migrate to the cloud.