The trend began with customer data a decade ago followed by human capital management undergoing a transformation. Now in 2017, cloud adoption is knocking on the doors of finance as businesses the world over are moving their enterprise systems off the premises and into the cloud. According to the estimates reported by KPMG in February of 2016, about 20 percent of ERP systems have been migrated to the cloud and predict that the number will only grow significantly in the future
CFOs across companies have been reporting the benefits of standardization after implementing ERP finance on the cloud. Cloud platforms drive uniformity throughout the business and it helps executives avoid the complexity of configuring on-premise systems. The cloud also helps companies get more innovative and invest faster because the cloud vendors keep updating their software more quickly when compared to the traditional ERPs. Most importantly, cloud ERPs charge based on the user adoption so scaling up and down becomes easier for businesses. With all these benefits, the total cost of ownership decreases for businesses while growth and profit increase.
Most companies that use cloud ERP finance systems today operate a hybrid model involving both the cloud and on-premise options. This model is likely to dominate for the next decade per industry experts. Enterprises where the finance processes are deeply integrated with supply chain and manufacturing processes are more likely to persist with this model. Businesses which are already experimenting with their ERP are more likely to move to a cloud platform faster. Migration to cloud isn’t easy for any business though and has its own sets of challenges and obstacles which deters most CFOs from embracing the change.
Opportunities and Pitfalls:
Data security and protection being offered by cloud vendors is superior compared to the on-premise ERP because the economy of scale allows cloud ERP providers to spend more on security. Cloud ERP finance vendors are also guarded about their reputation and security breaches can harm their brand image. CFOs are eager to move to the cloud to take advantage of the enhanced security solutions offered by these vendors.
Customization is another issue for most businesses when considering ERP adoption. Cloud ERP providers have invested in making the code configurable and that has been heartily embraced by finance companies across the industry.
Companies have the luxury to use bespoke processes from cloud ERP vendors if the standard processes are not supporting their business processes. Companies easily configure their own code and upgrade regularly without running into a lot of trouble which has been another great benefit of cloud ERPs.
Integrating Finance Data in the Cloud with Data on Premise:
The responsibilities of the IT department in a company with an on-premise ERP and a company with a cloud ERP differ significantly. With companies that use an on-premise solution, the IT team usually manages the servers, updates the infrastructure, releases patches and maintains documentation. When a business moves to the cloud, the IT department has greater opportunity to test the new software and manage the integration in a hybrid environment. IT also gets exposure to the per-user subscription model rather than a licensed software model.
The biggest pitfall for finance companies while moving from their legacy system to the cloud would be treating the exercise as a simple exchange of technology. The cloud provides a tremendous opportunity to rethink the finance operating model from the bottom up and companies should use this opportunity to see if they can improve their own business function.