Many more CFOs and their teams are considering moving their company’s core financial systems to the cloud, according to Gartner’s 2018 Magic Quadrant report on the segment. If you’re one of those companies evaluating its cloud ERP (enterprise resource planning) options, make sure you’re asking the following six questions before selecting a platform.
1) Is It a True Cloud?
Business processes today are different from those managed by on-premises software systems developed a decade or more ago. When moving all or part of your company’s ERP system to the cloud, make sure that it takes full advantage of cloud capabilities.
“Legacy ERP vendors that are making a transition into the cloud often resort to hosting their solutions in the cloud rather than taking the effort to completely rewrite them for the cloud,” says Juergen Lindner, vice president of cross-SaaS product marketing at Oracle. “While that’s one way to become a cloud vendor, it’s not going to be the future-proof type of platform that companies will need, because those applications simply won’t be able to keep up with the pace of change.”
2) Is the Vendor Financially Stable?
If your cloud ERP vendor goes out of business, what happens to all of your critical financial data? And if your vendor’s product includes components from third parties, what happens if one of those vendors goes belly up?
Of course, if your cloud ERP vendor is a publicly traded company, its financial statements are readily available for inspection. “Not so if the company is owned by a private equity firm, which may be more interested in -propping up- the company for a potential sale than investing in R&D,” Lindner says.
3) What’s the Product Roadmap?
To the point in question #2, if your cloud ERP vendor doesn’t invest sufficiently in product R&D in this era of continuous digital innovation, it will leave you and other customers “further and further behind as time goes on,” Lindner says. “The technology gap will widen exponentially.”
This is a particular concern about ERP vendors that have acquired other companies to boost their market share rather than bolster their core product line. What is the roadmap for those components?
“Public companies have well-articulated roadmaps so that customers can see the company’s vision and if it aligns with their strategy, and public companies report on their R&D investments,” Lindner says. “But private companies don’t have that transparency.”
4) Are the Vendor’s ERP and Other Components Integrated?
Another potential issue if a vendor’s ERP and other related enterprise services comprise technologies from acquired companies: The customer could be stuck doing the heavy lifting of integrating incompatible technology stacks and dealing with disjointed upgrade cycles. Important connection points include enterprise performance management (EPM), human capital management (HCM), supply chain management (SCM), and customer experience (CX) cloud services.
“If the components of your ERP and EPM cloud are not integrated, or if you have multiple platforms, you’ll likely have issues with data consistency,” Lindner says. “And further, if your ERP and EPM systems are not seamlessly connected to your HCM, supply chain, and CX systems, your company runs the risk of data fragmentation, costly integrations, and security risks—and it will likely have to use data warehousing to bridge those systems.”
5) Will We Need to Integrate Third-Party Applications?
For companies looking to complement their cloud ERP with EPM financial planning, close, and reporting capabilities, there’s another pitfall: Beware of thin EPM solutions that must be supplemented by third-party offerings.
“A planning solution that doesn’t include financial consolidation, financial reporting, profitability management, and other critical areas of EPM will require you to add those capabilities separately and do the work to integrate them into your ERP,” warns Hari Sankar, Oracle group vice president of product management.
6) Does the Cloud ERP Product Scale Sufficiently?
For most enterprises, financial planning extends well beyond a small, centralized finance team to line-of-business users across the company. So it’s critical that your financial planning service can scale to support those users, Sankar says.
“The most important input into the financial plan of a typical business is the sales forecast,” he notes. “If you don’t have ongoing participation from sales leaders and sales operations in the planning process, that plan will not be aligned with the reality of the business.”
Even small and midsize businesses need to be able to manage their financial plans dynamically, Sankar says, requiring ongoing input from people across the company who have insights into what’s happening.
