Moving Enterprise Resource Planning (ERP) to the cloud. Five Key Considerations for Every Enterprise.

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1 White Paper Moving Enterprise Resource Planning (ERP) to the cloud. Five Key Considerations for Every Enterprise. In business for people.

2 Moving Enterprise Resource Planning (ERP) to the cloud There is no question that the cloud will be the future deployment method of choice for enterprise applications for many organizations. From reduced complexity, reduced internal IT support costs and unlimited scalability to capacity on demand and CapEx savings, it promises a great deal. There are still some unanswered questions about cloud computing, particularly when it comes to enterprise applications, but many businesses are reaping the rewards already. The majority are at least weighing their options, if for no other reason than that they want to maintain a technological edge over their competitors. When considering moving ERP into the cloud, one very important saving that often gets overlooked is the cost of expertise needed to manage such a comprehensive application on-premise. In fact, this cost is often much larger than the obvious CapEx cost, but the only difference is that it is much harder to quantify. IT hardware and licenses can be discounted heavily these days and IT departments can find them for cheap (or sometimes free in the case of not for profits and charities), but what is expensive and only rising in cost is the human capital required to run ERPtype applications. Think training time, reading up on volumes of technical notes, trial and error, making mistakes and re-doing things. This training and expertise is easy to acquire for plain vanilla, best-of-breed applications such as Customer Relationship Management (CRM), programs and so on, but a comprehensive ERP system requires dedicated and highly skilled expertise. The question organizations must ask themselves is: How efficient is it to invest in on-premise solutions versus moving the application and support to the cloud, where this expertise is often available as part of the on-going package? What the cloud does not negate, however, is the cost of managing business change. If a system (cloud or on-premise) is not designed to respond easily to business change post-implementation, you will still need to invest in expensive internal and external consulting resources to make the necessary adjustments so that it continues to meet your needs. Service-oriented architecture (SOA) technology delivers its real value in allowing the market s best-of-breed solutions to integrate effectively into strong and agile architectures like Unit4 s People Platform. For any company moving its ERP to a cloud deployment model, a good project plan and testing methodology is necessary. This can help overcome any problems with data migration and organizational workflow once a successful business case has been made. Established businesses looking to move their ERP to the cloud should consider the five points below in detail. 2 Moving Enterprise Resource Planning (ERP) to the cloud.

3 1. Decide on the scope of the move to the cloud Do you want to move all your systems in one fell swoop or start with non-core business components before migrating your ERP? A hybrid approach to cloud is often ideal for organizations that use highly configurable systems which have been customized and designed to meet their specific needs. For those organizations, movement to the cloud will likely be a gradual one. When considering the value of each application to your business, use criteria such as: Which IT application will deliver the most value by moving it to the cloud? What will a move do to your competitiveness and your ability to differentiate? If an application is only used by a few people and costs little to manage in-house, will a move deliver much benefit? Perhaps not; however, an application like ERP is usually one of the biggest in an IT portfolio in terms of infrastructure, upgrades, maintenance and the expertise required to manage it. Done correctly, the savings and benefit gains could be significant. How hard would it be to move this application to a new platform? Are there specific performance requirements, privacy or compliance issues? What are the hardware and software requirements and will application re-writes be needed? It s also important to consider the type of cloud deployment that will offer the most flexibility. There are many options available including true multi-tenant, where a single instance of the software runs on a server, serving multiple client organizations. This delivers the benefit of scalability, but you should consider any restrictions that could impact your competitiveness. Other options include single tenant and pure hosted, where you maintain full control of the

4 applications. Not every option is right for everyone or fits all IT applications especially core operational systems with the complexity and reach of enterprise ERP systems. Moving ERP to the cloud requires the same consideration as with any software purchase, regardless of delivery model. It s important to understand which business processes will be automated, how each process may change as a result of the move over time and what business benefits are required from the move. Considering the long-term impact on the enterprise is vital. 2. Does your current system meet your requirements for independence? Two key considerations for any technology decision are cost control and the ability to satisfy the requirements associated with business change. Traditional on-premise ERP systems are not always the most suitable to move to a cloud deployment model, as the architecture may be prohibitive no matter how it is deployed. Many SaaS vendors talk about cost effectiveness and flexibility based on a multitenant model. In this case, all customers use the same release of the product, which will make program-level modifications impossible, so make sure that the system is flexible enough to respond to business restructuring and other change that will occur over the years to achieve your goals and ambitions. The right functionality and business process support is just the tip of the iceberg. Everything will be wonderful at go-live, but how will it respond when the first business change pressures come along in terms of your ability to act quickly enough, the impact on your running costs and the cost and impact of the disruption it causes? The average cost of managing business systems for mid-sized organizations is calculated at $1.2 million per year. More than $800K of that is related to the internal and external resources to make the required changes to meet the new requirements. IDC has calculated the effects in terms of disruption cost and concluded that those costs effectively dwarf the cost of change mentioned above. A SaaS-based single tenant solution, where only the IT infrastructure is shared to provide economy-of-scale, allows unique product releases and a dedicated database for each customer, so changes can be made as required. Trying to assess the IT impact of major corporate change is difficult, so it s important that organizations can continue to respond quickly to change without having to manage the problems associated with rigid computing infrastructure. In addition, cloud offerings that provide the means to easily re-deploy back to private cloud or on-premise should it be required in the future are few and far between, but it s an important consideration. An organization may face a change of IT policy or a significant reorganization or change in business requirements that necessitates at least a partial move back to on premises. Residency in the cloud does not need to be permanent. 3. Prioritize which data to move Do you need to move all historical data or can you pare it down to the data that s vital for running the organization today? There are no hard and fast rules. Many companies assume they should retain mission critical data in their own on-premise data center, thinking it will be safer there. This is often a mistake. Serviced cloud data centers are highly secure with all the state-of-the-art systems and controls required for them to be competitive and they compete on reliability, security and performance. Cloud providers will devote more time, resources, and dedicated expertise to maintaining the integrity of their data center than most organizations can to their own IT environment. It is recognized that on average, only 10 per cent of an organization s data can be deemed critical (where a file is accessed or changed frequently). This can be classed as data that would be critical to continued operations if faced with a disaster scenario. It s important to protect the remaining 90 per cent too but this can be a sound approach to data prioritization. This way, an organization can decide how many weeks/months of data they would require from each critical business system to get their business back up and running. This then assumes that the rest of the data could be restored later without significant impact on productivity and profit. 4 Moving Enterprise Resource Planning (ERP) to the cloud.

5 4. Service and security considerations Whatever the promises of cloud computing, it s important that you know what s happening in the cloud, how your applications are being delivered, and how traffic is being controlled and directed. By considering the merits of your own internal IT operations and procedures and its ability to secure your mission critical data, you can start to decide how and when to move to the cloud. By evaluating the cloud provider s security capabilities, reliability history and privacy clauses including their back-up and recovery programs and service level agreements, you should quickly be able to make this comparison. Service providers should openly share the results of internal or external security audits, as well as statistics on security incidents (e.g., data breaches or downtime) and security certifications. Competitive cloud service providers focus on scale to meet service level agreements and to deliver the highest level of quality. The physical security of the IT operations center itself, including anti-virus and anti- spam measures are important, but the best centers also provide physical security via manned security and security cameras, including strict admission policies. Back-up tapes should be kept off-site and should be AES 256 encrypted. In reviewing data security, there are a number of levels that should be considered including firewall security, network, system, application and data level security as well as encryption and strong authentication. Many cloud providers use the latest, specialist security solutions to ensure they remain at the forefront of security standards. Customers should also ensure their proposed cloud or hosting provider is certified. ISO27001 is recognized as the certification providers should have but it is important to ensure the provider has this certification for the establishment, operation and maintenance of an information security management system. It should cover equipment and processes in the data center and management team processes. SSAE16 type II compliance is also important. 5. Disaster Recovery (DR) In the highly unlikely event of a major catastrophe such as floods, hurricanes, tornadoes, earthquake or terrorism, a major consideration is the disaster recovery plan of your cloud provider in order to provide continuous availability, ensure business continuity for your organization and insure against the loss of critical ERP related IT infrastructure and data. Service level

6 agreements describing guarantees and warranties for uptime and security (including response plan for security issues and the way they are handled) should be offered by all service providers. Procedures and documentation to protect your intellectual property are also vital. You should know when data is moved to another data center, and be kept abreast of uptime, and physical location of data storage. Conclusion There are many benefits to moving applications and data to the cloud, but there are important considerations to make along the way, and most enterprises have already started weighing up the pros and cons. Compared to applications like CRM, ERP is a complex system often consisting of hundreds of thousands of interdependent database tables, with millions of lines of code. Replicating business change in these systems is generally a complex process, and can be time consuming and costly with some of the traditional big ERP packages because code-level changes are required. In order to move these systems to the cloud effectively, it s these change pressures and the way they can be managed that should be an important part of the evaluation. The architectural structure of an ERP system is the important factor in relation to dealing with business change, whether cloud based or on-premise. If the system cannot be adapted to meet change requirements, the organization is putting itself at risk of multi-milliondollar costs related to business disruption and the cost of change over time. A one-size-fits-all cloud offering will not wash with customers who may be used to sophisticated, highly configurable on-premise solutions. About Unit4 Unit4 is a leading provider of enterprise application empowering people in service organizations. With annual revenue north of $530M USD and more than 4,000 employees world-wide, Unit4 delivers ERP, industryfocused and best-in-class applications. Thousands of organizations from sectors including professional services, education, public sector, non-profit, real estate, wholesale, and financial services benefit from Unit4 solutions. Unit4 is in business for people. unit4.com Chatterton Way Victoria, BC V8X 5J2, Canada T B blog.unit4software.com E info@unit4software.com 1000 Elm Street, Suite 801 Manchester, NH 03101, USA T B blog.unit4software.com E info@unit4software.com Copyright Unit4 Business Software All rights reserved. The information contained in this document is intended for general information only, as it is summary in nature and subject to change. Any third-party brand names and/or trademarks referenced are either registered or unregistered trademarks of their respective owners. WP150423NA-5545 In business for people.