ERP in The Cloud
ERP in The Cloud
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a clear understanding of the near- and long-term impact the
migration can have on their organizations. Enterprises should
also acknowledge the potential challenges associated with
these projects, understand how to determine the right cloud
provider for their needs, and map out a two-phase plan for
incrementally moving too-critical-to-fail business systems
To realize the potential of combining to the cloud.
2 Harvard Business Review Analytic Services White Paper | Drive Agility and Innovation with ERP in the Cloud
Because these migrations
typically happen in multiple
steps over a handful of years,
the payoffs for businesses
come in phases.
executives hope to extend the integrations to select retail phases. The first phase focuses on the fundamental step of
partners so online customers can use those locations as migrating an on-premises ERP platform to a public cloud
pickup sites. service. IT leaders often use this opportunity to upgrade their
Other venerable enterprises are also using cloud ERP to existing ERP suite to the latest version to tap into new features
remain market leaders in highly volatile times. Headquartered and performance improvements. Moving to the cloud also
in the United Kingdom, Coats is a manufacturer of industrial relieves the internal IT staff of having to maintain all the
threads and specialty yarns that has been in business for two servers, storage arrays, and other assets needed to support
centuries and is now well into a multiyear plan for moving enterprise applications. Phase one’s other benefit is that it
ERP to the cloud. So far, the migration is bringing about creates a foundation for reaping more advanced capabilities
greater agility in the company’s supply-chain operations, in phase two. Even so, the first step can deliver a variety of
which executives there consider a key competitive advantage. relatively quick, high-value returns for enterprises, including:
The added flexibility came about after the company
consolidated the multiple on-premises ERP systems it had Increased systems uptime and availability.
been running into a single instance. That, in turn, enabled Because public cloud providers run data centers in multiple
Coats to centrally manage the global supply chains of 130 geographical locations, they protect against disruptions by
distribution and manufacturing facilities. “Moving to the cloud shifting workloads to facilities that deliver the best prevailing
and consolidating multiple [ERP] functions was the catalyst performance levels. “We are an apparel company, not a
that made that transformation possible,” says Hizmy Hassen, computing company,” Carhartt’s Masey says. “There’s no
Coats’ chief digital and technology officer. way we have the resources to create data centers that are as
reliable and available as the leading public cloud vendors.”
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A company may see a
permanent rise in IT demand
when the business grows at
unexpected rates, leaving IT
departments with on-premises
data centers struggling
to quickly implement the
necessary hardware, software,
and networking resources.
6,000 employees were sent home with their laptops,” says Phase Two Benefits of Cloud-
Tom McKee, Kennametal’s CIO. “That move has been fairly ERP Migrations
seamless, and I attribute much of that successful transition Once enterprises make the initial move to the cloud, they’re
to the investments we had made for moving to the cloud.” positioned to extend their ERP applications beyond what
Similarly, cloud ERP helped executives at Coats quickly was possible with on-premises implementations. Phase two
reduce IT service levels to match the decreased demand the involves integrating their ERP platforms with new capabilities
company was seeing after the pandemic struck. The dial-down, that leading cloud providers deliver to support higher levels of
in turn, significantly reduced IT-related expenses by utilizing agility and innovation. For example, some cloud companies
the consumption-based cost controls associated with cloud offer extensive data management and analytics services, as
hosting. “We’re seeing between a quarter and a half million well as support for IoT initiatives. These cloud services work
dollars in savings,” says Helge Brummer, vice president of closely with the core ERP platform to help organizations gain a
technology and operations at Coats. “That would have been better understanding of their markets, develop new business
impossible to do with a traditional data-center cost model and models, and respond to new challenges. Other benefits include:
the fixed-cost components.”
Enterprises that closely manage IT spending can also More detailed insights from data and analytics.
implement cost-avoidance measures during noncrisis periods. “We’re seeing companies make better use of data and
For example, IT managers frequently overprovision their consolidated information in the cloud for decisions around
on-premises data centers to prepare for demand spikes that supply-chain management, such as how to alleviate bottlenecks
may occur during holidays or other seasonal events. While or ramping up production when there’s a spike in demand,”
having extra capacity available is necessary during these says Eric Kimberling, CEO of Third Stage Consulting Group,
intense periods, the extra resources are underutilized during an independent ERP consulting company. “Companies can
nonpeak times, resulting in unnecessary costs. perform what-if scenarios to anticipate how well the supply
What’s more, a company may see a permanent rise in IT chain can handle a big spike in production needs in particular
demand when the business grows at unexpected rates, leaving areas of a company’s business.”
IT departments with on-premises data centers struggling to Opportunities in other areas of business may also arise.
quickly implement the necessary hardware, software, and Coats executives consolidated departmental data into a
networking resources. Adding additional capacity requires IT central data lake, a cloud-based information storehouse, and
managers to lobby senior executives for new funding and then are now mining it to improve business in the 50 countries
go through a lengthy procurement and installation process. where it does business. “The underlying data has always been
“That delay goes away with cloud” by enabling companies there, but it has never been fully visible,” Coats’ Hassen says.
to adjust processing power as needed, says Masey. “The time “Having a more complete view of our data strengthens our
to stand up services goes down exponentially with the cloud competitive advantage by, for example, revealing new ways to
compared to on-premises systems.” increase product quality,” says Hassen. “That’s been one of the
benefits of digital transformation up to this point. In addition,
Enhanced security and compliance. we’re using IoT data in the cloud to monitor and control our
“Cybersecurity risks do nothing but increase over time, and effluent discharge from the thread-dyeing process. Our ERP
that means more risk than many security teams can keep up integration of various cloud services has also been instrumental
with,” says Lisa Anderson, president of LMA Consulting Group, in underpinning the back-office transformation program.”
which specializes in supply-chain modernization. “It’s well
worth evaluating how a cloud partner can reduce the risks.” More complete analyses by integrating data from
Although Coats executives and its chief information security within and outside the ERP platform.
officer invest significant resources in security, they look to a Leading public cloud providers enable organizations to
cloud provider to extend their capabilities. “We are not able to connect information from other cloud services, including
maintain a team of security people and continuously train them the ERP vendor’s other cloud applications, and apply analytics
to fully defend against the ever-changing world of intrusion to the combined data sets. Integration also extends to an
and cybersecurity threats,” Coats’ Brummer says. organization’s existing productivity and collaboration tools,
Regulatory compliance, a close relative of cybersecurity, such as business automation suites, videoconferencing
demands similar resources for ensuring that requirements applications, and business intelligence programs.
are being met and to gather compliance documentation for By streaming data from production equipment on its factory
auditors. Because cloud providers take on that responsibility, floor and combining it with cloud-based analytics, Kennametal
“our risk is reduced and there’s a huge chunk of work that has gets a jump on emerging bottlenecks. “The alerts have been
now gone away from my daily life,” Brummer adds. real eye-openers for the business,” Kennametal’s McKee says.
White Paper | Drive Agility and Innovation with ERP in the Cloud Harvard Business Review Analytic Services 5
“If companies remove that barrier by adopting a newer ERP solution
and then running it in a modern cloud environment, they’ll gain a level
of agility that they’ve never had before,” says Cindu Jutras, president
of Mint Jutras.
“Instead of reacting to issues when someone submits a report integration, we realized the challenge was going to be much
at the end of a shift, factory workers at all levels are seeing in greater than we had initially analyzed.”
real time where the next trouble spot will be and responding As business and IT staffs learn how to fix problems, they’ll
before the problem becomes serious.” be more prepared to tackle ERP modules that directly support
daily business operations, such as shipping and logistics
Faster access to emerging technologies. activities or accounts receivable and payable.
After linking the IoT capabilities of its cloud provider with
its off-site ERP platform, Kennametal has the foundation in Update and refine business processes.
place to automate its factory processes with tools like robotic Next, the migration team should analyze the organization’s
process-automation and AI technology to create “smart” existing workflows and business processes to eliminate areas
factories that deliver real-time insights enabling improved of inefficiency and redundancy that have no place in the new
factory performance. In time, company leaders hope to cloud environment. Moving ERP to the cloud shouldn’t be a
directly connect information about customer demand with lift-and-shift exercise. “If companies simply move the same
production systems to react more quickly to changes in demand legacy applications they’ve been running for decades into
preferences. the cloud, they’re not likely to see any significant advantages
from the project,” says Cindy Jutras, president of Mint Jutras,
IT staffs shift from managing on-premises data a research and advisory firm that specializes in ERP systems.
centers to focusing more on business transformation. “However, if companies remove that barrier by adopting a
McKee says the automation strategy got a boost because newer ERP solution and then running it in a modern cloud
technology experts were able to devote less time to managing environment, they’ll gain a level of agility that they’ve never
data centers once IT resources moved to the cloud. “The IT had before. That should be a goal of everyone today, because
team is focusing on more innovative opportunities than server everything is changing so quickly, and the risk of disruption
management,” he explains. has never been higher.”
Upgrading to the latest version of an ERP platform and
migrating it to the cloud does deliver the biggest payback,
A Blueprint for Overcoming Cloud including creating a foundation for the phase two benefits
ERP Challenges cited earlier. But many of the phase one results also materialize
There is a wide range of potential benefits from moving ERP to just by moving an existing version of the software to the
the cloud, but IT executives and industry analysts say careful cloud. Thus, both options should be considered, along with
up-front planning and attention to possible roadblocks are an organization’s transformation timetable and available
needed to reduce the chance that migrations won’t live up resources.
to expectations.
Capitalize on new resources for data and analytics.
Begin with a gradual move to the cloud. Leading cloud providers offer capabilities for aggregating
Increasing the odds of success starts with mapping out a phased data from different sources and quickly analyzing it to better
migration plan. By gradually moving ERP applications to the understand volatile market conditions and optimization
cloud, organizations can learn about unexpected stumbling opportunities in internal operations. For example, Mars needed
blocks, such as inadequate integrations with data storehouses to increase the accuracy of demand planning to ensure that
that impair transactions or stymie trend analyses. “Problems suppliers could make timely deliveries of the products in the
with the integration and interconnectivity of systems that feed package sizes that customers preferred. “In the past, our ERP
into the main ERP platform are some of the major issues that solution didn’t give us end-to-end visibility and traceability, as
may arise if companies try to move everything to the cloud at products moved through different layers of the supply chain,”
once,” Masey warns. “When we started to do a deep dive into says Mars’ Moturu.
6 Harvard Business Review Analytic Services White Paper | Drive Agility and Innovation with ERP in the Cloud
To change that, Mars focused on the discrete sets of financial
and supply-chain data that were being stored in individual
departments. The company consolidated the information
within a cloud-based data lake that created a centralized
view of information. “We’re able to leverage all the data for
internal traceability, transparency, and financial reporting,”
“Running ERP in the cloud offers new
Mars’ Moturu says. “This is a huge value add compared to capabilities like microservices, which
where we were in the past.” means almost endless possibilities
Better use of data also improves decisions about extending
credit to customers. Business intelligence and AI technology
from an infrastructure perspective for
provided by Coats’ public cloud vendor quickly looks at better supporting the business and
the payment history and financial standing of companies its applications,” says Tim Masey,
submitting each purchase order. The credit staff, for example,
vice president of IT infrastructure and
might receive a recommendation to automatically approve
the order or to review it in more detail to address inherent risk security at Carhartt.
factors. Since the analytics became available, the number of
manual interventions has declined from 60% to only 15% of
all incoming orders, Hassen says.
The combination of ERP with IoT technology and analytics
from the cloud service provider is yielding improvements in Brummer is seeing IT staffs respond to the idea that they’re
product quality and helping Coats hone its competitive edge. no longer just providing a support function for the company.
The technology combination is dynamically analyzing various “Operations and technology are now intermingled in a DevOps
parameters of the manufacturing process to determine which model that joins them at the hip to do strategy planning and
production orders should be checked for quality. One result is provide direct input into operations,” he explains. “That sets
that the company is reducing the overall number of knots in free a lot of potential for IT to learn, adapt, and change the
its threads. “Before the move to cloud, we hadn’t been able thinking within the company. There’s an excitement in my
to visualize the data so well,” Hassen explains. department that you usually don’t find in companies that
haven’t adopted the cloud.”
Prepare workforces for working with ERP
in new ways.
Next up: develop a strategy for managing cultural change. Finding the Right Public Cloud Provider
The cloud-ERP transition team should anticipate resistance Once organizations create a multistep plan, update legacy
from people who are skeptical about having to perform processes, and work with staff members on transitioning
their duties differently. It’s important to note that because to the cloud, they must make the important decision about
cloud-ERP migrations impact each work group differently, which cloud provider is right for their enterprise. Narrowing
targeted messaging about the ultimate benefits, complete it down to the most suitable partner requires a close look at
with real-world examples, should be crafted for each group. several factors.
For example, business decision makers will likely capitalize on First, find cloud providers that have forged strategic
advanced analytics to identify new market trends and business partnerships with the vendor of the chosen ERP platform.
opportunities through cloud-based AI, machine learning, and Signs to look for include joint investments between the
business intelligence systems. service provider and software. Another important gauge is
Bringing the IT staff onboard with ERP migrations may whether the two companies use each other’s technology in
require communications that alleviate fears of lost jobs. Once their own operations. Each of these moves indicates a strong
data centers move to the cloud, key members of IT teams commitment from both companies to the success of the cloud-
will not only remain onboard; they will likely see new, more ERP initiative. That experience gives each vendor insights into
creative opportunities for helping their organizations become best practices and how to overcome common hurdles that may
more agile. arise when migrating ERP to the cloud. Equally important, a
“Our goal is for the IT staff to become innovation engineers close relationship enables ERP vendors and cloud providers
as opposed to traditional system engineers,” says Masey. to jointly develop new capabilities, such as solutions that
“Running ERP in the cloud offers new capabilities like address the specialized requirements of individual industries.
microservices, which means almost endless possibilities from Teamwork also provides integrated support services to answer
an infrastructure perspective for better supporting the business client questions about migration problems or integration
and its applications.” challenges.
White Paper | Drive Agility and Innovation with ERP in the Cloud Harvard Business Review Analytic Services 7
The key is not only devising a two-phase strategy, but also
capitalizing on new opportunities for streamlining and optimizing
ERP workflows in the new cloud infrastructure.
Decision makers should also look for cloud providers with nonexistent,” says McKee. “Especially since we’re a business
strong track records in serving organizations like theirs. For that operates 24/7 and serves customers in more than
example, companies with complex ERP needs should target 60 countries.”
cloud vendors with enterprise-level experience for mission-
critical ERP workloads.
Another criterion to look for in a cloud provider is the Expanding the Art of the Possible
ability to easily integrate the cloud-ERP solution with the The potential benefits of updating and then moving ERP
office productivity and end-user collaboration tools used platforms to the cloud span a variety of near-term and longer-
in the organization. These resources let work groups share range returns. In the first phase of these migrations, executives
information more effectively, which is critical for realizing report increased agility in responding to unexpected events,
the agility and innovation benefits possible with cloud- like the global Covid-19 crisis. Company leaders are also seeing
ERP implementations. In addition, leading cloud services higher uptime rates, stronger cybersecurity, more effective
offer business intelligence tools that create comprehensive and economical use of IT resources, deeper and more valuable
dashboards for real-time views into the performance of insights from data, and automations that improve product
business operations. quality. In the second phase, veterans of these projects say the
Similarly, the breadth of partner ecosystems offers a move can expand their goals for ongoing digital transformation
barometer of the overall strength of the cloud-ERP package. strategies.
Third-party partners can provide migration planning and The key is not only devising a two-phase strategy, but
optimization services, as well as ongoing consulting expertise. also capitalizing on new opportunities for streamlining and
Enterprises should also work closely with cloud candidates optimizing ERP workflows in the new cloud infrastructure.
to understand their security and compliance capabilities. Enterprises should also prepare for some common migration
The cloud service should not only demonstrate adherence challenges, including cultural change management. IT leaders
to industry-standard cybersecurity practices, but also say these foundational steps pay dividends once the migration
provide certifications for specific regulations important to is complete.
the enterprise, such as the European Union’s General Data “Being in the cloud is like opening a door and seeing new
Protection Regulation or the U.S.’s Health Insurance Portability things you didn’t know were inside,” says Hassen. “Once you
and Accountability Act, and the Federal Information Security take the step, you see opportunities for using these services
Management Act, among others. to expand the art of the possible. It makes strategizing and
After implementing cloud ERP, enterprises will need to innovating that much easier.”
continually monitor how well the implementation is meeting
service-level agreements (SLAs). System uptime and business
continuity, two important reasons for moving to cloud ERP
in the first place, are key metrics to consider. Unplanned
outages should be short term, rare, and well within the levels
defined in SLAs.
“It’s a strong testament to the value of our migration
that unplanned system outages have become practically
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