In an era of increasing competition and rising costs, manufacturers must find a competitive edge wherever possible. Moving their on-premises enterprise resource planning (ERP) solutions to the cloud represents an opportunity to modernize day-to-day operations and update technological capabilities. The upfront requirements of carrying out such a large- scale project have kept many from abandoning their current business processes. However, new benefits, such as increased access to the application and company data, now outweigh the costs of maintaining the status quo. Manufacturers will always face constant pressure to improve performance, and those who successfully leverage new cloud-enabled capabilities will distinguish themselves both now, and in the future.
OVERVIEW
As manufacturers face increasing competition and resource constraints, they need modern ERP systems that are secure, scalable and can improve organizational visibility. Companies are beginning to realize the value and importance of data and analytics for decision making. The data silos that often occur in legacy, on-premises deployments hinder both daily activities and high-level strategy objectives. As manufacturing operations grow in both size and complexity, ERP software must be able to extend and accommodate the changes that naturally occur with successful companies.
Other factors driving manufacturing ERP deployments to the cloud include rising software maintenance costs and burdensome maintenance processes that are necessary to keep on- premises deployments running. Cloud solutions have a lower total cost of ownership (TCO) when compared to similarly sized legacy ERP implementations that are internally managed (Nucleus Research s102 – The cloud benefits companies of any size, September 2018).
Moving to the cloud, and consolidating costs and services into a single package, forces customers to review their existing business processes and evaluate the usefulness they bring to their overall objectives.
WHY CLOUDER FOR MANUFACTURERS
From research conducted on manufacturing customers who migrated from on-premises ERP deployments to the cloud, Nucleus identified four areas that companies cited as key factors in the decision:
REDUCED IT COMPLEXITY
Simplifying technology setups was the most common reason for transitioning to cloud ERP solutions among manufacturing companies. Those who switched were able to consolidate many of their siloed processes into a single platform. Cloud migrations also enable companies to delegate application security and update management to the vendor.
Keeping up with update schedules for various systems often becomes overwhelming, and it’s all too easy for a company to end up with multiple versions behind the current update. The change allows the vendor to deliver performance and uptime improvements much more quickly, compared to legacy on-premises deployments. Companies who moved to the cloud were able to eliminate unnecessary solutions and redeploy IT resources to different value-add work because of their decreased administrative responsibilities.
INCREASED BUSINESS AGILITY
Cloud technology enables greater responsiveness and increases organizations’ ability to process and respond to changing business environments. As internet speed and connectivity have improved, highly visible and cross-functional ERP systems have democratized responsibilities that previously required specialized knowledge and experience. With new advancements in usability and real-time access to company data, cloud ERP users can react quickly to changes and see how the subsequent ripple effects will influence their business. Customers can also create new dashboards or reports natively without needing to draw in IT resources. As a result, users can ask questions and drill down into data for insights, resulting in more streamlined operations and decision-making processes.
INDUSTRY 4.0 CAPABILITIES
By migrating ERP deployments to the cloud, manufacturing customers can leverage new functionalities that don’t come as quickly to on-premises systems. New data configurations and sophisticated analytics are necessary for modern functionalities such as predictive analytics and improved security and are usually more widely available on cloud deployments. With ERP data in the cloud, manufacturing customers can supplement conventional analytics with machine learning to identify areas of weaker performance and provide contextual insights that can reduce costs and increase productivity. Functionalities such as predictive maintenance that rely on the Internet of Things (IoT) often require cloud frameworks in order to deliver value to customers, which can further entice manufacturers to leave their familiar on-premises ERP deployments.
KEY 2 BENEFITS
Despite the high upfront costs of transitioning from on-premises deployments, manufacturers still realized significant benefits from their cloud ERP implementations. Nucleus identified three key benefit areas from customers moving their on-premises ERP workloads to the cloud:
Reduced costs. By transitioning from an on-premises legacy system to a cloud solution, customers can reduce operational costs by eliminating equipment and related IT department resources. Reducing the burden of support for customers led to cost savings as the associated headcount was reduced or redeployed away from managing system updates and integrations.
Increased user productivity. Cloud ERP solutions enable users to access and leverage company data from anywhere with an Internet-enabled device. With readily available information, customers saved time on performing analysis and generating reports while redeploying resources to new value-add tasks that were made possible through cloud deployments. Many customers were able to automate repetitive accounting and reporting tasks to save time and increase the productivity of all of their ERP users.
Improved organizational visibility. Cloud ERP systems enable manufacturing organizations to improve access to data by breaking down information silos to provide interdepartmental visibility to customer data. On the cloud platform, finance and operations staff can collaborate to reduce friction between departments, resulting in more productive daily activities. Cloud ERP deployments can deliver value to organizations by helping them pinpoint inefficiencies and develop new workflows to improve performance.
LOOKING AHEAD
While many customers are not in a position to undertake a full cloud transition for their ERP deployments, the benefits of moving to the cloud are becoming too large to ignore.
Nucleus observed that eliminating the costs associated with maintaining an on-premises deployment helped customers identify areas in need of improvement and streamline their operations. The advancements to employee productivity and organizational visibility enabled customers to develop new use cases for their ERP software, despite the high costs of transitioning away from on-premises deployments.
Some manufacturing ERP customers are currently unable to move away from their on- premises ERP systems, but centralizing processes in the cloud and adopting a standardized data model are necessary steps towards long-term success. Nucleus expects that the growth of cloud deployments will accelerate as next-generation capabilities, such as predictive analytics, mature and become easier to adopt. The flexibility and extensibility of cloud ERP deployments will drive value for manufacturers as long as they are willing to forego their outdated legacy practices.
ANALYST: Andrew MacMillen
