Transforming Business: Moving ERP to the Cloud
2014 may be remembered as the “year of agility.” Pressures to rapidly innovate, cut costs and stay current with customers continue to drive enterprises to adopt technologies, such as cloud computing, that enable business agility. Besides moving customer-facing applications to the cloud, organizations are also discovering that by using the cloud for their back-office systems, they can gain even greater freedom.
A common system most in need of agility is enterprise resource planning (ERP), which runs key business management functions, ranging from human resources and service delivery to marketing and sales. Without agile ERP, enterprises have more difficulty supporting their products and keeping customers content.
Add the growing adoption of technologies such as mobility and big data analytics, and an enterprise’s need for agile ERP will gain even greater importance, which is why some pace-setting organizations have already moved their ERP systems to the cloud.
“Cloud-based ERP is faster and more responsive, so enterprises can handle business-driven change more nimbly than they can with traditional ERP systems,” says Jonathan Ebsworth, CSC global head of Enterprise Solutions & Systems Integration. “The cloud takes the inertia out of the equation so ERP can move with the business. For our clients, it’s an even bigger driver than cost.”
According to a Jan. 24, 2014, Gartner study, “Survey Analysis: Adoption of Cloud ERP, 2013 Through 2023,” by Nigel Rayner: “Including the 2 percent that already have core ERP in the cloud, a total of 47 percent of organizations surveyed plan to move their core ERP systems to the cloud within five years.”
Early adopters see results
The early adopters of cloud-based ERP cross industry sectors, often timing their transition based on a need to upgrade aging, high-maintenance infrastructure or the need to move to new operating systems or software releases.
While these are the early days of cloud-based ERP adoption, Ebsworth says that he is seeing a lot of dialogue and action happening from a range of sectors, including automotive, nuclear and manufacturing, as well as from public sectors such as defense.
“Some of the most security-sensitive enterprises seem to be the most ambitious movers to this platform,” he says.
One early adopter, Selex ES, an international leader in electronic and information technologies for the defense, aerospace and security market sector, needed to integrate three separate business entities that ran as independent, branded businesses and had separate IT infrastructures and systems. CSC implemented an integrated SAP ERP solution, Cloud IU (Infrastructure Utility), for Selex ES, using CSC’s private cloud Infrastructure as a Service, BizCloud, enabling integration to a single instance of SAP.
The move to the BizCloud enabled a rapid integration of systems and business process. The integration and future development programs benefited from the cloud services’ ability to reduce the time it takes to build a new collection of servers by 75 percent; to clone a specific collection, or landscape, of servers in 11 percent of the time it had taken before; and to develop an ERP application — from the beginning of the idea to its launch — two to 10 times faster than before the transformation. CSC also delivers management support services and uses its security framework to secure the Selex ES system.
Greater agility and lower cost
While agility remains a key motivator in moving to cloud-based ERP systems, the cost of maintaining older hardware or purchasing new hardware compared to using cloud-based infrastructure has been another key driver, as the move enables enterprises to switch from a significant capital expense to a less expensive, variable operating expense.
CSC helped another early cloud adopter, Golden State Foods (GSF), which is an international diversified supplier to the food-service industry. After deploying CSC CloudCompute, the company’s cloud infrastructure service, and centralizing GSF’s IT infrastructure, its time to market for new distribution centers shrank from months to weeks, application-deployment cycle time shortened, and the company no longer needed to spend IT-related capital as the company grew or added distribution centers, where ERP plays a key role.
“Traditional infrastructure that’s used to support in-house ERP systems is expensive,” says CSC’s Ebsworth. “Cloud-based infrastructure is at least 30 percent cheaper than the cost of ownership.”
ERP systems themselves also are expensive to maintain. Organizations can reduce expenses by adopting cloud-based infrastructure and services, and redirecting in-house IT staff from ERP-based infrastructure maintenance. By tapping the deep resources cloud-based ERP services organizations offer, and the systems management services they provide, enterprises can rely on having consistently stable operations, regardless of whether they continuously ramp resources up or down.
“If you spend $1 million on a new ERP system, you’ve made a significant bet that it will work,” says Randy Arthur, senior principal, Offering Management, Cloud, at CSC. “Enterprises want to get the most benefit they can from these systems, which means if they manage the systems themselves, they first need to operate and support them so they deliver reliable service. They also need architects who can engineer highly available systems, which is something we’ve done for decades.”
By depending on expertise from IT cloud and ERP specialists, enterprises can focus their in-house IT experts on speeding their response to competitive pressure and driving innovation, instead of focusing on whether their ERP systems have the horsepower to manage new or evolving services and products.
“Adopting ERP systems requires a large front-end commitment to the system, which means lots of capital and lots of expensive people,” Arthur says. “Cloud-based ERP services let enterprises focus on the business processes that are being driven by the SAP application; we take care of the rest.”
As more organizations transition to cloud-based ERP, CSC already has its eyes on the future. With a long legacy in ERP, including helping the U.S. Army modernize the world’s largest supply chain, the company is now exploring how companies can restack their architecture and applications to gain even greater efficiencies.
“As infrastructure becomes more of a commodity, the differentiator for organizations will become the middleware they use and how well they can program their applications to take even better advantage of the cloud’s agility,” says Arthur.
Jenny Mangelsdorf is a writer for CSC’s digital marketing team.