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Is cloud ERP software ready for prime time?
While cloud-based enterprise resource planning applications are more widely adopted in the Asia-Pacific region, some companies are still hanging on to on-premise systems that remain core to their business
Like most of its startup peers, Singapore logistics company Ninja Van was born in the digital age and needed a way to grow quickly while focusing on what it does best.
The cloud is a no-brainer to many of these organisations, enabling them to gain access to business software on a subscription basis without incurring high upfront costs and the need to maintain a large IT team to support the software.
Indeed, that was the basis for Ninja Van’s decision to look to NetSuite, a supplier of cloud-based enterprise resource planning (ERP) systems, for its financial software.
“We don’t want the additional overheads of dealing with infrastructure and maintenance issues such as databases getting full,” says Shaun Chong, chief technology officer of Ninja Van. “We wanted to fully embrace cloud and push this work to the cloud provider instead.”
Since February 2017, Ninja Van has been using NetSuite to manage its finances across six markets in Southeast Asia.
With access to reports and dashboards, its finance team now closes the quarter in just one click, compared with over an hour previously, says Raymond Chia, Ninja Van’s finance director.
“Moving forward, we hope to see better analysis of our financial data than when we were analysing things using Excel,” he says.
More organisations considering cloud ERP systems
Yanna Dharmasthira, research director at Gartner, says more organisations like Ninja Van are considering cloud ERP systems, noting that many suppliers have also educated, marketed and sometimes aggressively sold and improved their offerings based on market requirements.
At present, the adoption rate of cloud-based ERP – which Gartner classifies as a software-as-a-service (SaaS) offering – in the Asia-Pacific (APAC) region is roughly half of that of mature regions such as North America and Western Europe.
This is largely by driven by emerging APAC economies, where the market for cloud-based ERP is expected to grow at a compound annual growth rate of 40% over the next five years.
“In our end user survey, in which respondents have already implemented SaaS or have plans to implement SaaS in the next two years, the majority say they have a cloud-first strategy,” says Dharmasthira.
Standardising on the cloud
To Kumar Govindarajan, CEO and chief architect at fast-growing IT services supplier Adita Technologies, moving to a cloud-based ERP was necessary for expansion of the business.
The Sydney-based firm, which is eyeing a public listing, was using different accounting systems across its operations in the US, India and Australia, but has since switched to SAP’s S/4 Hana Cloud ERP system to consolidate its financial applications.
“It was not suitable for us to run accounting systems in silos, so we decided to standardise on a cloud platform that supports multiple countries and regulations, and can be rolled out easily,” says Govindarajan.
Adita Technologies rolled out S/4 Hana Cloud in just 10 weeks in Australia and New Zealand, and is looking to implement the software in India in just four to six weeks.
Govindarajan attributes the speedy rollout to the implementation support provided by SAP, which offered a pre-configured system with standard processes, after which the company could decide if further configuration was needed.
“After we made some small changes in areas such as invoice templates, we did a test with users and went into production,” he says, adding that SAP had also provided automated test scripts to ensure nothing would be broken each time the system was upgraded.
While Adita had looked to replace its accounting systems with cloud-based ERP, such systems appear to be adopted more as “net new” applications in the APAC region.
According to Gartner’s survey, 66% of organisations in the region expect to run new applications in the cloud. Some 37% say they will replace traditional applications with SaaS alternatives.
“It will be more like adding new types of applications or new functionalities, rather than a full replacement,” he says. “For example, if organisations do not have talent management, they may consider purchasing talent management functionality that is offered as SaaS,” he adds.
Despite the growing popularity of cloud-based ERP systems in the region, it is likely that some organisations will continue to run their own on-premise systems to overcome a key drawback of such systems – limited customisation.
Ignatius Wong, director of SAP Practice at CenturyLink in APAC, says cloud-based ERP systems typically limit the level of customisation as they are built on a multi-tenanted model, making standardisation necessary for suppliers to reduce the level of maintenance and support.
“Some cloud ERP suppliers are providing private cloud deployment options to address the segment of larger enterprises which require a more customised solution to address their unique business requirements,” he says.
Read more about cloud ERP
- SAP is stepping up the public cloud delivery of its ERP system S/4 Hana and, in what it says is a related move, adding AI to S/4.
- User organisations have been advised to keep their heads while suppliers show signs of cloud intoxication.
- Infor is buying cloud analytics firm Birst in a move to bolster its cloud-first ERP orientation.
- Online retailer RedMart turned to cloud-based ERP when its existing system struggled to keep up with business growth.
Indeed, Ninja Van decided to run its core operational systems on-premise, so that it can have the flexibility it needs to route drivers and assign parcels on the fly.
“We’ve tried using algorithms in cloud-based solutions to do that, and while they worked for a while, our delivery routes started to get more complex,” says Chong. “It was then when we decided to build our own systems.”
That said, Chong, who oversees a team of 35 software engineers, admits that while some cloud-based ERP systems can be readily adopted, businesses with more complex processes could incur higher costs in hiring systems integrators and consultants to customise those systems.
“In our case, we decided our operational systems were way too core for us to outsource any customisation work,” he says, adding that working with third parties to implement the necessary changes on an iterative basis would also take too long.
Cost and security considerations
Such considerations should be on the minds of organisations when assessing the total cost of ownership (TCO) of cloud-based ERP systems.
“It should be noted that as businesses grow, there will likely be an increase in requirements, and the systems may grow to be more complicated, and hence the complexity of integration,” says Dharmasthira.
“TCO needs to be considered not only for a short term, but also in the mid-term of close to five years. Some companies in emerging countries may have business requirements that change and expand rapidly – this should be taken into account before deciding on a SaaS-based deployment model,” he says.
Another key consideration before moving to cloud-based ERP, or any cloud service for that matter, is data security and privacy.
David Hope, president of Workday in Asia-Pacific and Japan, says data privacy is always top of mind, so a cloud supplier must be prescriptive about its services, policies and adherence to the latest regulations in the region.
“But overall, I think we have seen a shift in the past five years or so, with leading chief information officers and chief technology officers stating that their data is actually much safer when maintained by a cloud supplier versus sitting in an on-site server,” he says.
That is certainly the case for Adita’s Govindarajan, who notes that SAP not only has local datacentres, but also meets industry security standards. “We only had to verify that those standards were met,” he says.
No one-size-fits-all solution
CenturyLink’s Wong believes there is still a place for a hybrid IT strategy as there is no one-size-fits-all solution.
He says such deployments make sense, especially when considering the “mission criticality” of the application along with data security and privacy requirements.
“For example, a client can adopt a hybrid IT strategy, where sandbox or non-production systems are hosted on public cloud platforms, while production systems are deployed on a hosted model either on-premise or on a private cloud,” says Wong.
Deciding between cloud-based and on-premise ERP
David Hope, president of Workday in Asia-Pacific and Japan, shares some tips on what organisations need to know when deciding on the deployment model for their enterprise resource planning (ERP) systems.
Give more weight to functionality than cost
System functionality is more important than keeping costs low. Any company investing in a business management system isn’t investing for the short term, but for years to come. so a cheap tool purchased today may cost much more in the long term if the supplier doesn’t provide appropriate support.
Ask yourself what your business goals are for the next five to 10 years. Most finance and HR systems have basic functionality, but it’s the specific features that make a system best for one’s business. Write the list of features required to support the goals of the business over the next five years. Are they available?
Maintain control of your data
Keeping control of proprietary data is a key concern for many organisations, and funds should be reserved for transferring databases when you switch to a new platform.
Get the network infrastructure ready
Ask yourself if the existing network infrastructure is solid enough to handle finance and HR in the cloud. Is the staff knowledgeable about cloud networking requirements? Other network-related issues include compliance, security and ensuring adequate bandwidth and internet access.
Know the customisation requirements
Cloud systems are best suited for enterprises that understand the strength in configuration versus a high degree of customisation.
Deployment speed and implementation partner
If quick deployment is a high priority, a cloud system could be a better option than an on-premise ERP. But if the system is not implemented properly by your implementation partner, you will not get all the benefits.