To Cloud or Not to Cloud

Although it’s possible to standardize on another on-premise package for two-tier deployment, in the numerous locations where it will be used, most of the cost, time, risk, and agility problems will remain. Worse still, the systems will age, not track with change, and potentially pose the same challenges to corporate finance as the applications they replaced.

It’s important to evaluate any cloud vendor in terms of the feature and function set it can provide, its viability, and its approaches to security. But data management and flexibility, align remarkably well with the cost, time, agility, and risk problems possible with a large ERP strategy. In terms of speed, cloud software ERP enables businesses to get a standard systems infrastructure in place across multiple subsidiaries in multiple countries in a matter of weeks, not months or years. A company such as Groupon can’t begin to imagine a global rollout project for a big ERP system that could keep up with its aggressive international acquisition strategy. The company decided to implement in spring 2011 and quickly began rolling out cloud computing based ERP into its foreign subsidiaries. As of this writing, Groupon has 26 subsidiaries live and plans to have completed rollout in 46 countries within a year. That’s 46 overseas subsidiaries going from separate, individual, on-premise systems to a globally standardized, centrally managed and deployed system in less than a year. That’s a massive step up in global standardization, visibility, and economy at a pace that’s simply inconceivable with traditional on-premise systems. The ease and speed of deployment, along with the elimination of the need to purchase hardware and periphery software (operating systems, databases, etc.) for each deployment site, have a material impact on costs, with cloud solutions costing less than half of their onpremise counterparts. Combined, the speed of deployment and lower cost mean significantly less risk in

In addition to solving some of the big ERP deployment problems, cloud ERP can deliver some additional unique benefits:

- Browser-based access makes it much easier for a corporate headquarters to get instant visibility into subsidiary performance than when the desired data is locked away on servers in a remote office.With a cloud ERP system, rather than phoning the local CFO, the corporate finance team can simply log in if it wants to see current performance metrics or check on the status of the close.

- The centralized architecture SaaS ERP provides also means you’ll likely be able to achieve a level of data redundancy and security that would have been prohibitive for the local IT team.

- A centrally managed SaaS-based system not only allows for quicker and more standardized initial rollout, but it does a much better job of facilitating enterprisewide changes related to new processes or metrics.

- With SaaS vendors regularly upgrading the remote system to the newest version, a cloud-based second tier could mean the end of version lock for the subsidiaries.

SaaS or not, however, it’s critical to ensure that the second-tier ERP system can be customized to the needs of the business unit and easily connected back to the corporate ERP system. IT must be a close partner when a company is formulating any two-tier strategy and trying to understand the level of customization that’s possible and the connectors and integration tool sets that are available.