Enterprise resource planning (ERP) vendors are pushing client organizations to replace their on-premises ERP solutions with cloud-based digital operations platforms (DOPs). As a result, ERP discussions are filling up the agendas of CTOs and procurement officers. The increasing number of inquiries that we at Forrester receive is a clear signal that the market is moving, and the answers are not always that easy.
Make It Your Choice, Not The Vendor’s
Switching from on-premises ERP to cloud-based DOPs should not be driven by the vendor’s commercial agenda. Organizations can only do this once a clear strategy and set of business requirements are established to make the change. In some cases, vendors do know clients’ requirements, as they see similar challenges from other customers. In most cases, this is an incidental reason to make the switch. Forrester finds that many vendors’ ERP solution offerings don’t actually address the fundamental challenges plaguing customers’ current deployments. Here are some of the reasons we see from our customers on why they are looking to make the shift to cloud-based DOP:
- Outdated ERP solutions do not keep pace with the digital world’s speed. ERP solutions developed and deployed decades ago lack real-time update features. Furthermore, they are difficult to integrate with new solutions and platforms seamlessly and hold back digital transformation projects. For one oil and gas client we worked with, this endangered the transformation program focused on expanding the retail business.
- Continuous updates replace quarterly releases. DOP vendors make continuous improvements to clients’ cloud deployments as they are available, rather than waiting for the traditional quarterly updates. This represents an advantage compared to cumbersome and sometimes delayed releases from ERP solutions vendors for on-premises instances. Additionally, releases focus on fixing bugs rather than delivering innovation and improving solutions’ usability.
- DOPs are built with the user in mind. Business users have evolved. They are now digital-savvy. They expect from business and operations platforms at work the same level of user experience that they have with consumer platforms. Airbnb, Amazon, Apple, Netflix, and others have set a new standard for the platform experience. DOP vendors are better equipped to match this than they have previously.
Quantify The Business Value Delivered, And Communicate To The Wider Business
Upgrading to a cloud-based DOP is a highly complex and difficult endeavor. Business and technology stakeholders will find all sorts of reasons as to why it’s too hard and too risky to do. Once you have decided to make the change, it is vital to quantify the business value to justify the investment. ERP application professionals should:
- Quantify the business benefit in financial terms, not just the technical benefits. An ERP vendor has recently pushed an Italian media company to move the on-premises solution to the cloud with its new DOP offering. This move could have doubled the current spending. The media company has carefully evaluated whether tech benefits would overweight the financial effort and has eventually decided to stay on-prem.
- Establish the communication tempo and the pace at which the business can absorb the change. Not everyone in the firm is an ERP architect or a tech wizard. Furthermore, the move to DOP involves far more than the IT and procurement departments. As we have recently seen at a German insurer, the decision-making team may include finance, sales, marketing, and other actors. These were not traditionally involved in such a process in the past. This calls for a clearer communication plan and a longer time span to digest the change.
- Set a clear deployment plan and strategy for achieving the benefits. Many organizations plan a move to DOP because their competitors are doing so or because they feel that the market is pressuring them. We have recently helped an Austrian insurer put together a plan to reap actual benefits out of an already ongoing migration. This is not the way the move to DOP should happen.
Don’t Restrict Yourself To Your Current Provider
Competition in the DOP vendors’ world is fierce. Different vendors offer different capabilities, solutions, and services that can satisfy organizations in various verticals and across horizontals. When you consider migrating your ERP to a DOP provided by the incumbent vendor, ask yourself whether you’ve really looked at what else is out there:
- Be open to listening to what other new vendors in the market have to offer. Organizational inertia was recently pushing a client of ours to accept a costly renewal with the incumbent ERP solution vendor without major improvements to the product or service. The client decided to allow competitors to present their offerings and alternatives. As a result of the threat of competition, the incumbent provider lowered the price and the client managed to improve the service levels they receive.
- Remember that the one-stop shop ERP model is dead; look at the DOP vendor’s platforms and ecosystems approach. The DOP should not work well just in isolation, but it must integrate with other platforms and solutions from within and from outside the organization. Select a DOP vendor with a platform that uses standard languages. APIs should enable connections to modules, platforms, and solutions managed by third parties in the broader organization’s ecosystem.
For Forrester clients, you can find my related research here — Tackle Your Digital Operations Platform Modernization Challenges With Forrester’s Scenario Quick Start Cards. Book an inquiry with me to discuss your challenges further.