By Pat Phelan, VP of Market Research, Rimini Street
CIOs consider the cloud for a variety of reasons, many of which are forcing them to rethink their application strategies. You are not alone if you are feeling pressure to migrate applications and infrastructure to the cloud. But which cloud moves are the right ones?
One of the most important reasons to move to the cloud is to enable innovation that drives competitive advantage. Some cloud strategies accelerate innovation while others delay or inhibit it. For example, moving infrastructure to the cloud can increase an enterprise’s ability to change (flexibility) and enable IT to change more quickly (agility). Adopting software-as-a-service technology where the enterprise interacts with customers or users can increase competitive advantage. Examples of this include using Qlik to provide associative business intelligence or using Salesforce to improve the customer experience. Alternatively, transitioning ERP to the cloud as SaaS is not a good move for most enterprises because it doesn’t create a meaningful improvement to the business, and it consumes resources that could be used to deliver innovation.
Choosing the right cloud strategy is complicated by the fast-paced introduction of new cloud technologies into market. As CIOs make cloud decisions, they should choose cloud technologies that accelerate innovation and enable digitalization rather than moving capability to the cloud just for the sake of “being in the cloud”. Move capabilities to the cloud in order to support business goals such as growth and improving competitive advantage. Avoid moving core ERP capabilities such as manufacturing, transportation, financials to SaaS unless there is value to be gained.
Following are common cloud strategies that can hinder or help accelerate your innovation roadmap.
Avoid These Cloud Strategies That Can Hinder Innovation
Following the vendor’s roadmap can cause you to miss out on innovation opportunities. License trade-in programs are an example of this. Trading existing application licenses to avoid an audit or to get a price break might look attractive on the surface but it can lock customers in to the vendor’s cloud strategy even though analysis hasn’t been done to confirm that it is the right cloud strategy. The ERP vendors’ cloud products were developed to fit the broadest common denominator of requirements, which means that they may not be the best choice for industry-specific or customized business needs compared to best-in-class alternatives. In another attempt to lock existing customers to their cloud roadmaps, the ERP vendors are encouraging customers to take an initial step of migrating to the vendors’ proprietary cloud infrastructure. Beware! ERP vendor SaaS products only operate on the vendor’s cloud infrastructure/IaaS, which can lock licensees in to a technology platform that hinders the enterprise’s ability to support business goals. Once contractually committed to the vendor’s roadmap, it is very difficult financially and contractually to change or reverse course.
Also, don’t move applications to the cloud “for cost’s sake”. It is a generally perceived myth that moving applications to the cloud will result in cost savings. The migration itself isn’t cheap, particularly when customizations and integrations must be rebuilt. The ongoing subscription fees can cost up to 2-3X more than existing license and maintenance fees.
Cloud application projects should only be a part of your cloud strategy if they contribute to business objectives such as growth, create competitive advantage, or deliver innovative capabilities. When adding an application into your cloud roadmap, ask whether there is improvement that will offset the higher cost.
Use These Cloud Strategies to Accelerate Innovation
If you are like most CIOs, IT dollars are precious. It is critical to allocate the IT budget to cloud investments that will make the most difference to the business. Your cloud strategy should support innovation that enables growth and creates competitive advantage. In other words, your cloud strategy should follow a business-driven roadmap where business goals are the metrics that all IT investments must meet in order to be included on the roadmap. Today, more than ever before, the business is demanding innovation faster than IT can deliver solutions. CIOs must find ways to use their cloud strategy to accelerate innovation. Specific innovation accelerators include:
When ERP is not consuming precious IT resources, the focus can be shifted to systems that support customer/user engagement. These types of systems typically attach to- or sit outside of ERP. They are more loosely coupled than ERP, making them less expensive and time-consuming to deploy in the cloud. They can quickly improve the customer/user experience, enable business growth, and create competitive advantage. Although there are a few scenarios where ERP in the cloud makes sense (small to midsize organizations or those with minimal complexity), most enterprises are keeping core ERP systems operational while they innovate with cloud around the edges via SOEs.
If the new technology is on the critical path to innovation, it may be perceived as a hindrance since it initially slows the roadmap down. However, putting the new technology in place up front, can result in downstream acceleration since it opens the door to using solutions that are best-fit for the business and that can more rapidly and effectively adopted.
When built properly, putting the business first rather than moving to the cloud for cloud’s sake, your cloud strategy can accelerate growth and innovation. However, actions such as migrating ERP to the cloud may not be the right strategy. Moving your internally deployed ERP to an open, vendor-agnostic cloud infrastructure as IaaS can yield better return, at a lower cost, and with less disruption. In the meantime, innovate now with other cloud technologies, particularly customer- or user-facing systems that improve the customer experience. This is a great way to let what the business needs drive your cloud moves to accelerate innovation.