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Australian businesses embracing cloud ERP amid compliance concerns

The appetite for cloud-based ERP systems is growing in Australia, but some organisations are holding back due to data sovereignty and security concerns

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Like most businesses, Plaut IT wanted to focus on what it was good at and grow the business rather than spend time and effort managing its IT systems.

The irony is that Plaut IT is good at deploying SAP systems. But as its CEO Sebastian Moore says, it wanted to deploy those systems, not run them.

By adopting SAP S4/Hana Cloud, a cloud-based enterprise resource planning (ERP) system, Moore and his team were freed to focus on their customers rather than their computers.

From his vantage point as an expert in rolling out ERP systems, Moore says there is a growing appetite for cloud-based ERP, particularly among medium-sized organisations.

Large enterprises, however, tend to use cloud ERP for satellite businesses or newly acquired operations, often because many have made large investments in on-premise systems supporting complex processes for which their ERP has been customised.

Typically, these enterprises don’t race to a cloud alternative because there might not be an out-of-the-box equivalent, says Moore, who sees many organisations running a mix of on-premise and cloud ERP systems.

Sabhari Bala, senior research manager at IDC Australia, says the complex process flows involved in these systems can potentially give rise to integration challenges, which in turn lead to additional cost.

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That said, Bala notes that cloud ERP is being more widely embraced – although the concern around data residency, sovereignty and security is still is an inhibitor for some companies when it comes to core back-office systems.

That is certainly the case for ME Bank. Although it has adopted Workday’s cloud-based human resources (HR) software, replacing a largely-manual HR process, it has no plans to put other more sensitive information on the cloud any time soon.

According to Samantha Macleod, ME Bank’s general manager of cyber security, moving HR processes to the cloud has taken away systems maintenance challenges – and all performance targets have been met.

But she says the fact Workday’s datacentres are offshore will be a deal breaker for the movement of more “material data” into a cloud ERP system.

“Material systems of record have to be examined closely with regard to data sovereignty and compliance with the privacy principles,” she says.

Preference for local hosting

Property management company Dexus does not face the same regulatory burden as a bank, but it also prefers locally-hosted services such as Microsoft’s Australia-hosted Azure cloud and software as a service.

CIO Mark Hansen says notwithstanding the sovereignty issue, the company has experienced performance bottlenecks. “It’s not a problem but it is noticeable. We have a preference for local hosting for performance, latency, security and sovereignty,” he says.

Rob Wells, Workday’s managing director for Australia and New Zealand, says data sovereignty is less of an issue today than it was five years ago, adding that the company has European datacentres which offer high levels of security and privacy.

But he acknowledges data sovereignty remains a bugbear for some organisations, particularly those in the public sector.

A preference for cloud-based services

In a position paper released in June 2017, Australia’s federal department of finance stated its preference for cloud-based services, noting that data should be kept in Australia unless agencies secured a written agreement for it to be held offshore.

IDC’s Bala says that apart from data sovereignty concerns, another major challenge facing cloud ERP suppliers is the lack of customisation.

Most cloud ERP systems feature a high degree of configurability – but not the level of customisation that traditional on-premise ERP users may have indulged in.

Wells says Workday is configurable rather than customisable. “The problem with customisation was that it sent organisations down deep dark alleyways where they couldn’t take advantage of future developments,” he says. Workday claims to deliver up to 1,000 new features each year.

Not limited by the cloud

For the last six years, renewable energy company Flex (formerly Energy Matters) has been running its Australian business using NetSuite’s cloud-based ERP system.

Flex CEO Wilf Johnston says the entire company is run on NetSuite, from customer enquiries and sales opportunities, through to warehouse management and invoices. Now a division of Oracle, NetSuite was born in the cloud and its systems operate from offshore datacentres.

Data sovereignty was not a concern for Johnston. Nor was the possibility of latency any more than the Australian internet in general, he jokes.

What was key, though, was finding a system that could support Flex’s company discipline which Johnston describes as “can we do it faster?” Moving to a cloud-based ERP system meant that it could.

“We treat it as a solid database and we can tweak the interface,” he says. “If we want to something out of the box, we can. Or we create our own forms. We don’t feel limited.”

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