White paper. Head in the Cloud: ERP solutions for an expanding enterprise. How Cloud Computing can drive growth for small-to-medium sized enterprises

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1 White paper Head in the Cloud: ERP solutions for an expanding enterprise How Cloud Computing can drive growth for small-to-medium sized enterprises April 2013 Sponsored by

2 Contents Introduction System challenges Get your head in the cloud Flexible friend: What Cloud/SaaS means to an SME Myth-busting: Debunking common misconceptions about Cloud/SaaS Do your research Conclusion About Claremont p3 p3 p4 p6 p6 p8 p9 p9 This document is property of Incisive Media. Reproduction and distribution of this publication in any form without prior written permission is forbidden. 2 FinancialDirector white paper sponsored by Claremont

3 Introduction Since the onset of the banking crisis of 2008, long-term strategy has shifted to one of survival. Many organisations have been forced to cut costs and look for operational efficiencies and cost-effective services; as a consequence there has been a tendency to focus on the software assets they have. As a result business managers have curtailed investment around Enterprise Resource Planning (ERP) systems. This is a common enough approach around 60% of small-tomidsized enterprises (SMEs) are running legacy systems made up of disparate components. When growth returns to the economy, businesses able to take advantage, grab market share and boost their bottom line will be those with systems and processes that are fit for purpose. A survey of Financial Director readers, in participation with professional services company Claremont, revealed that almost a third of businesses plan to invest in software services over the next 12 months. However, a higher proportion of respondents (44%) have no plans to allocate cap-ex to modernising their ERP systems. Similarly, finance directors are split about whether to consider Cloud or Software-as-a- Service (SaaS) based finance solution for their business. Roughly a third of respondents said they either would, would not or were unsure about considering such an option. The survey also revealed that, in many cases, outdated and legacy systems are holding the business back. About 47% of some 230 finance directors, group FDs and CFOs polled in the survey said the ability of their current software service to meet their company s needs was only fair or poor. When asked to describe the ability to meet the future needs of the business, this figure rises to 53%. This white paper looks at commonly cited system challenges, how ERP systems are changing, what a Cloud/SaaS based service means to your organisation and addresses some common misconceptions about Cloud-delivered ERP. System challenges There are a number of common themes which underpin system failures to support business processes and deliver business benefits. High cost of systems ownership in relation to the business value add delivered Complex systems landscapes characterised by hardwired integration of disparate systems Disconnected business processes supported by high manual intervention Challenges with providing meaningful and timely data to support business decision making Systems that cannot scale to support organisational growth Systems that do not align with business requirements and the current business environment sponsored by Claremont white paper FinancialDirector 3

4 How far would you agree with the following commonly cited system challenges to your organisation? Strongly disagree Strongly agree High cost of systems ownership in relation to the business value add delivered Complex systems landscapes characterised by hardwired integration of disparate systems Disconnected business processes supported by high manual intervention Challenges with providing meaningful and timely data to support business decision making Systems that cannot scale to support organisational growth Systems that do not align with business requirements and the current business environment Challenged by the high capital cost of replacement 0% 20% 40% 60% 80% 100% The finance function s increasingly crucial role in strategic decision making requires clear, comparable and timely data in order to provide forward-looking insights that facilitate growth whether organisational, geographical or in new product areas. No wonder then, that the most commonly cited challenge by respondents to the survey was providing meaningful and timely data to support business decision making. Almost a quarter (23%) of finance directors strongly agreed with this statement, while 43% agreed it was a problem. Another challenge rated highly by respondents is the level of manual intervention required to support disconnected business processes, with 63% agreeing or strongly agreeing this is an issue for their organisation. Indeed, the prevalence of disparate systems has hidden costs attached to it. Data can be prone to error, will require reworking within the organisation, can be inconsistent and will limit intelligent decision making. As a result, the survey revealed that 63% of finance directors take issue with the high cost of system ownership in relation to the business value add delivered. Get your head in the cloud Though systems and processes can be deeply entrenched, the delivery of ERP has been simplified in terms of its accessibility, ease of use and its ability to align with an organisation s requirements and the current business environment through the development of Cloud/SaaS based services. 4 FinancialDirector white paper sponsored by Claremont

5 Cloud is already well-established in the fields of HR or Customer Relationship Management, but remains less understood in its application in terms of ERP. Of the finance directors surveyed, 33% said they would not consider a Cloud/SaaS finance solution for their business, while 40% remained unsure. How aware are you of Cloud Computing or Software as a Service? 2.1% 4.8% I am not at all aware 38.1% I have heard of but know very little about 55% It has a good presence It is a market leading service Finance directors reticence in this area may be due, in part, to a knowledge gap as to what Cloud Computing means in detailed terms. It is a common enough phrase, yet the concept and its application appear to be understood at only a shallow level. According to the survey, over half of finance directors have heard of Cloud or SaaS but actually know very little about it, while 5% admitted to having never heard of it at all. Clearly there is work for finance functions and service providers to address this. So what is SaaS? It is best understood as a way of using business applications over the Internet, just as people use online banking or . What it means for business systems is a different purchase and deployment model that eradicates the need for expensive, capital-intensive hardware and infrastructure and time-consuming system support. In essence SaaS solutions are characterised by: Subscription licensing of applications rather than the traditional upfront capital acquisition of the software license The solution is hosted and operated by the provider on equipment owned and maintained by the provider All of your transactional and customer data is housed at the provider s data centre together with all of the hardware and infrastructure to run it All you need to access it and run your financials application is a Web browser The result is that a Cloud-based ERP can be more than 50% cheaper to run than its onpremise alternative. sponsored by Claremont white paper FinancialDirector 5

6 Flexible friend: What Cloud/SaaS means to an SME A Cloud-based ERP system is not just about reducing the cost of ownership of in terms of IT spend. Equally important is reallocating the budget from maintenance which according to Gartner accounts for up to 90% of IT spend to more value-add services and making sure that finance teams resources are being focused on business processes that are genuinely useful and delivering innovation to the business. Also, when a company s systems are disparate and fragmented, data can become siloed, leaving employees with outdated information and conflicting data. Without a single version of the truth, finance directors are left with budgets, forecasts and period-end reports that are not effective. Most notably, according to a finance effectiveness benchmark study conducted by PwC*, 80% of participants report that the accuracy of their forecasts is critical to the running of the business, but only 45% of these believe the outputs are reliable. The time taken to complete budgets and forecasts is often too slow to provide a valid basis for decision making. By working off a single platform, companies that have moved to Cloud-based ERP benefit from real-time accurate information. According to PwC, faster turnaround of key management information allow leading finance teams to deliver forecasts in half the time, prepare budgets 25% faster than typical functions. Off-site ERP systems provide a streamlined organisation-wide solution that can scale with the business. As a company grows and its system needs change, and end-to-end integrated product can adapt and flex with the demands of the business. By comparison, traditional on-premise systems will require bolt-ons and manual workarounds to provide tactical solutions that are costly, time consuming and prone to error. PwC puts it succinctly in its report: Ideally, the inputs for group MI should come from a streamlined organisation-wide ERP system, supported by centralised governance, wellmanaged data supply structures and a single reporting platform. Myth-busting: Debunking common conceptions around Cloud/SaaS Despite the growth of Cloud-based ERP systems, myths still exist about the level of data security, data ownership and the ability to customise. Equally, finance departments at SMEs remain under the misconception that Tier 1 SaaS products are the preserve of FTSE 350-sized businesses. Around 60% of businesses surveyed by Financial Director said that they perceive tier 1 software providers as not being relevant for their organisation, either because their company size is too small, products are too complex or maintenance and implementation costs being too great. * 6 FinancialDirector white paper sponsored by Claremont

7 Which of the following reasons makes them not relevant? 14.6% Company size too small 50.9% 10.9% 23.6% Maintenance costs too great Products too complex Implementation too cumbersome/ complex/expensive Cost has understandably been a concern for SMEs. But, to extend into the SME market, ERP software vendors are working towards simplified implementations and more agile, cost effective deployment models that still provide sophisticated support, which is just as important to an SME as to a multi-national. Manufacturing is a case in point. Day-to-day processes inventory holdings, delivering product orders on time and managing supply chains are not unique to large organisations. For instance, closing gaps between sales volumes and production forecasts are hampered by standalone systems and lack of standardisation and integration. Data security is by far the most oft cited concern about Cloud/SaaS-based ERP applications. However, the information is invariably more secure. Because a SaaS provider is providing the same service to many organisations, it is able to dedicate greater resources focused purely on security. What would be your PRIMARY concern? 8.8% 8.8% Data Security Systems managed off premise 14.7% 40.4% Do not own the application Reliability Ability to customise 10.3% 8.8% 8.1% No substantial concerns Other sponsored by Claremont white paper FinancialDirector 7

8 The state of the art for Internet security with Cloud applications is the use of banking-level 128-bit SSL security. This means that, when using a Cloud application, the information is more heavily encrypted than a traditional local area network (LAN)-based, pre-internet application. Respondents to the survey also raised concerns about data being store off-site (8%) and reliability (10%). However, a SaaS provider will typically warrant a service-level commitment to their users of 99.5% or better with penalties if meet that level. Consequently, there is a strong incentive to reduce any risks that might impact renewal. Do your research Before signing off a new software service it is important that the finance director asks some key questions and conducts relevant due diligence about the supplier, such as its provenance, background, service history and where the data is stored. What information do you need/want to support/sign off the implementation of a new software service? 84.6% 54.4% 41.2% 49.5% 65.9% 62.1% Detailed ROI information Cost implementation/ maintenance Case studies Testimonials Demonstration Support services The survey found that information about the cost of implementation/maintenance is the most important (85%), followed by a product demonstration (66%), support services (62%), detailed ROI information (54%), testimonials (50%) and case studies (41%). It is also useful to cover the following questions. What is the Providers on-going viability and track record? What are the SLA commitments, and is the availability transparent? What is the procedure for getting data out of the system? Does the vendor have key certifications? Will this be one more application silo, or is it a cross-departmental application? Can it be integrated and customised? 8 FinancialDirector white paper sponsored by Claremont

9 Conclusion It is clear that finance departments ERP processes are being constrained by disparate and fragmented systems but, in many cases, have yet to move to a streamlined and integrated Cloud-based solution. The benefits of adopting such an approach must be clearly articulated, while vendors have still to overcome some widely held misconceptions about the cost and viability of SaaS products for Small-to-Medium enterprises. If finance directors are provided with a detailed ROI and presented with a compelling case for implementing a new system, it is something they will be willing to consider. About Claremont Claremont is a professional services consultancy and Oracle Investment Partner that uses Oracle software to improve businesses processes and performance. Claremont is an Oracle Gold partner who has achieved an enviable reputation within the marketplace, through the provision of innovative solutions and delivery excellence. Boasting an impressive client base, Claremont is committed to adding value to any project undertaken and has a unique, flexible and collaborative approach to working with each of their clients. sponsored by Claremont white paper FinancialDirector 9