Transforming the Enterprise to the Cloud
Organizations face challenges when moving their businesses forward in this era of digital transformation. Cloud-based technologies offer the enablers and differentiators needed to deliver the agility required to meet the market's changing demands while staying ahead of the competition.
However, selecting and implementing the right technologies and approach to a cloud deployment model can be a daunting project. Below, Roddy Martin, vice president of SCM cloud product marketing at Oracle, outlines best practices for transitioning to the cloud, navigating some of the existing challenges, and planning for what's next in ERP support for supply chain transformation.
1. What's the difference between an on-site ERP and a cloud-based ERP? On-site ERP is transactional and data-based. Processes, technology, data and systems must be technically integrated with skilled resources and consultants. The core emphasis is cross-functional integration of key supply-focused business processes and data. Time to value and change is slow. This often involves massive harmonization and standardization efforts because of the different vendor systems and even deployment consultants that are involved in the process.
When multiple ERPs must be integrated, processes must be standardized where they were not previously, and the data that needs to be harmonized for the transformation effort is significant. This is complex, resource-intensive, expensive, slow and often leads to overall less agility and flexibility across the end-to-end business. And the treadmill of continuous change will not slow down for you.
In the cloud, an overarching, end-to-end supply chain process with one infrastructure-based architecture can span the entire business, leveraging data from each business unit in a standard, cross-enterprise way. This enables new operating models for the business and the ability to pivot from inside-out, supply-driven capabilities to outside-in, market-driven ones.
The cloud-enabled supply chain operating model enables faster deployment and change, it's more business-focused than traditional on-premise and data integration technology, and it's cheaper. Most importantly, it's more flexible and agile, which lets businesses manage change much more easily.
As social media and the internet of things converge into supply chain processes, it can be a challenge to hardwire them into existing technology and data aggregation infrastructures and consolidation platforms that exist in on-premise, heterogeneous architectures (from multiple systems, consultants and vendors). It is easier to connect these devices and data into one cloud-based analytics architecture.
2. What are the advantages of switching to a cloud-based ERP over an on-site system? What are the challenges? Essentially, the flexibility provided by one overarching cloud-based ERP and SCM architecture allows the business to adapt and flex with market and customer change. This is a key differentiator compared to technology-focused, integration-intensive change projects that are characteristic of complex, multi-instance on-premise architectures. A large factor is that non-standard data and processes are seldom harmonized.
For any business moving to the cloud, the challenge is defining the path, which involves managing a hybrid architecture and prioritizing what to take first and what to take next. This must be done based on business priorities; the reality is that all the necessary functionality may not be immediately available in the cloud, so a company may have to live with elements of on-premise software until they are.
3. Are there security risks associated with cloud-based ERP systems? There are always security risks when deploying IT-based business systems. However, the risk is higher in complex heterogeneous architectures in which multiple vendors, technologies, and applications are applied and integrated. A cloud-based environment could exist as one stack of technologies and applications, ensuring an engineered approach to architecture, data and process and risk management.
4. What are the biggest concerns you hear from companies making the switch? Companies are concerned about defining and mapping the path to the cloud (often a hybrid architecture, as noted earlier), and managing the transformation. Companies should start their journeys with smaller, logical projects so they can learn and develop a deployment approach to support the end-to-end operating model of the business. However, they often don't know what functionality and processes are available to support the business priorities.
A further challenge is that cloud-based infrastructure and applications require new technical skills, organization and talent. A company must prioritize the sourcing, recruitment and development of (typically) younger, tech-savvy resources who are intuitively comfortable with new digital technologies and analytics. That even applies to new consultants, who often have different skills and experience.
5. When is a cloud-based system not right for a company? It's only "not right" if the business isn't ready to trust cloud-based technology, applications and deployment. The journey must start at the business-leader and business-value level. Leaders must understand what will be expected of them in this new deployment model, because the selling and alignment work is different compared to traditional on-premise systems. This requires critical alignment and communication between process owners, vendors, IT and business leaders. A clear set of business priorities is a place to start.
6. What does the future of ERP look like? What innovative technologies or advancements are helping supply chain transformation? The reality is that a harmonized ERP foundation with end-to-end visibility is essential to reduce complexity and enable demand-driven transformation of the business operating model. The end state is an overarching cloud-based model with ERP as the core foundation supporting the supply chain. A stable ERP becomes the foundational infrastructure (not unlike the plumbing) to support core business processes such as finance, HR and planning. This is far more agile than traditional on-premise architectures.
The future lies in developing a single, integrated end-to-end cloud SCM and ERP architecture that supports new business models. The innovation will come through full visibility, advanced analytics, and execution capabilities delivered in one cloud-based architecture — platforms that can mine and analyze social media, IoT and advanced planning algorithms to deliver optimal business results.
About the author
Roderick "Roddy" Martin joined Oracle in June 2016 as vice president of supply chain management cloud product marketing. He leads the SCM cloud go-to-market plan development, thought leadership, and message and content creation.