1. As a technology infrastructure, cloud has
gone from being a new concept right
through to maturity, and is now sufficiently
robust and secure for business-critical use.
The reality is that more and more
enterprises are adopting cloud services
Cloud ERP
Emerging as
Replacement to
On-Premise
Today, businesses
of all sizes,
right across the
spectrum of
industry sectors,
are accessing
core enterprise
applications via
the cloud.
for important applications, or at least using
them alongside their on-premise systems
in a hybrid manner. Meanwhile, software
suppliers are making an increasing array
of sophisticated, on-demand software
available to corporate users.
Nevertheless, some businesses are
still grappling with issues of security,
service quality, usability and trust, and
are therefore still wary of adopting cloud-
based Enterprise Resource Planning
(ERP) in particular.
ERP represents the most important suite
of software applications for the majority of
businesses, carrying out functions such
as purchase and procurement, supply
chain and inventory management, order
and billing management, service delivery
and product planning.
Keeping in mind that cloud brings to the
table more cost-effective IT, greater IT and
process flexibility, unparalleled scalability
and so on, surely it’s time that more
businesses moved their ERP to the cloud?
CIO, in conjunction with Sage, carried
out a survey of 100 CIOs and senior IT
decision-makers to find out about their
cloud usage and views on cloud-based
business software. We also garnered
the best advice from the ones who have
been using enterprise cloud applications
for several years.
We discovered that a huge majority of
our respondents (71 percent) are using
business-critical cloud applications,
with most of them praising cloud for its
efficiencies and return on investment. (90
percent of the respondents say they have
had a return on investment from cloud
implementation.)
Of the respondents who use business-
critical cloud applications, 54 percent
say they invested in them less than
two years ago. A significant chunk, 46
percent, have been operating business
cloud apps for more than two years, and
a tenth of them for more than five years,
indicating a reasonably high level of
maturity among organisations.
Sage X3 White Paper: Cloud ERP Emerging as Replacement to On-Premise

2. 90%
of our respondents are
using business-critical cloud
applications; with most of them
praising cloud for its efficiencies
and return on investment
of the respondents
say they feel they
have got return on
investment from cloud
implementation.
of the
respondents say
they have invested
in cloud-based
CRM
52%71%
Interestingly though, the most frequently
used cloud business application is still
Customer Relationship Management
(CRM), as it has been for many years.
(52 percent of our respondents say
they have invested in cloud-based CRM.)
It is also one of the oldest cloud
business offerings.
Cloud-based CRM has been around
since 1999 and is therefore the most
likely ERP module to be adopted by
businesses. For many companies, it
paves the way to a full cloud-based
ERP implementation.
The next two most popular cloud
business applications – for around a third
of our respondents, respectively – are
expense management and HR. Again,
these are some of the most mature SaaS
applications on the market and have
reached a high degree of maturity.
Other applications that featured in the
survey were: payroll and procurement;
with email, productivity and collaboration
likely to be among the ‘other’ business-
critical cloud services to which 42 percent
of respondents alluded.
Cloud ERP was, however, low on the
list for the majority of enterprises, with
three quarters saying they have not yet
invested in the technology. This, perhaps,
suggests an old-fashioned view; one that
has not kept up with the times.
Cloud versus legacy ERP
In many ways, having a ‘legacy’ view of
ERP is perfectly understandable, as ERP
platforms can be costly and complex
to set up, configure and maintain, so
few businesses want the change-
management headache of moving it all
to the cloud.
That said, traditional ERP has gained a
reputation for being costly: both in terms
of time and money. Across the years,
the IT press has reported on major ERP
deployments, in both public and private
sectors, that have been time-consuming,
late running and overly complex, and
required significant amounts of tailoring
and maintenance.
In addition, employees of traditional
on-premise ERP systems have
complained about outdated and non-
intuitive user interfaces, with systems
being inflexible and requiring operators
to bend themselves around the software
instead of the other way around.
Another problem has come in the form of
excessive customisation of on-premise
ERP systems. Customisation is important
for everyone from manufacturing to
financial services to get the best out
of their investments, but it often leads
to IT complexity and inefficient ERP
implementations.
Cloud-based ERP comes as a refreshing
alternative to traditional ERP. Although by
no means a panacea to every business
and IT ailment, it has now been proven
to deliver the reliability, speed and data
control that companies require from such
a crucial system, and this has tended to
be the major concern in the past.
IT analysts agree that cloud-based
business software is the future. Research
firm Gartner has predicted that at least 30
percent of service-oriented businesses
will move the majority of their ERP
applications to the cloud by 2018, and
other industries will follow.
It also expects that over the next decade
and beyond, the ERP norm will switch
from on-premise to cloud. Gartner adds
that heavily-customised, on-premise ERP
deployments will be commonly thought of
as ‘legacy ERP’ from this year onwards.
Another respected pundit, Paul D.
Hamerman, Forrester Research Principal
Analyst, argues that businesses could be
missing out on more cost-effective and
flexible cloud-based ERP operations.
He says, “ERP systems are a critical
transactional support system for most
enterprises, supporting core financial
accounting functions, procurement,
inventory, order processing, sales and
a variety of other functions.
“As more companies adopt a business
technology strategy focused on
customer outcomes, some functions
Sage X3 White Paper: Cloud ERP Emerging as Replacement to On-Premise

3. “The brave new world
of business application
software is rapidly
transforming how
corporate IT departments
source and implement all
kinds of critical systems”
(sales, marketing, customer service,
e-commerce and talent management)
tend to be decoupled from the ERP
footprint and pushed to the cloud, but
the need for core ERP transactional
support, at a minimum, remains. With
the rampant digital disruption of cloud
software, ERP is now moving to SaaS
more aggressively.”
Hamerman says that some of the drivers
behind the move from on-premise to
cloud ERP are: the cost of ownership
(hardware acquisition and maintenance
and software licensing) and upgrade
challenges of current on-premise
systems on the one hand; and on
the other, “digital and business
imperatives for customer-centricity, better
usability, rapid configuration in lieu of
code-level customisation and real-time
business insight.”
He adds, “As a consequence, the
demand for cloud-based ERP solutions is
growing rapidly, and this demand extends
to large enterprises exploring options for
their current systems.”
Other arguments in favour of cloud ERP
are that by moving critical systems to
the cloud and integrating them together,
businesses can benefit from having
pervasive information across
the organisation, while future-proofing
their business.
Hamerman highlights software versioning
as the bane of IT managers’ lives, “who
can rarely justify the effort and resources
to keep ERP systems on the most
current software release,” and adds,
“with SaaS ERP, it becomes the software
vendor’s job to keep its customers
on the latest releases, minimising the
upgrade headaches that lead to systems’
obsolescence.”
Business or IT?
Consistent software versioning is just one
IT benefit that cloud business software
can offer, but our survey found that
enterprises expect to receive many more
specifically IT-related advantages from
their cloud implementations.
The most expected ones were: increased
agility and scalability; reduction of
in-house IT support; and delivering 24x7
service to employees, customers and
stakeholders. (Incidentally, respondents
confirmed that they realised these three
benefits after implementation; indicating
that their cloud investments matched their
expectations.)
Cloud ERP, along with other types of
SaaS, certainly delivers a range of
IT benefits, one of which is speedy
implementation. Applications built for the
cloud tend to be quicker to deploy and
easier to configure, accelerating the time
it takes to get value from them, which
means that companies can grow faster.
This has been one of the attractions for
small businesses, along with cloud’s
pay-as-you-go pricing and the fact
that someone else is operating and
maintaining the software.
According to respondents, the business
benefits of cloud systems were less
important than the technical ones,
perhaps because our respondents were
IT-focused professionals. However,
it’s worth noting that cloud-based
applications can also help to address a
range of business issues.
One of these is workflow efficiency, which
can be achieved through increased
internal collaboration. It can be argued
that a more connected workforce, using
their device of choice and working flexibly
in terms of time and location, is able to
collaborate more effectively.
Cloud-based unified communications
systems enable individuals to move
quickly between email, instant messaging,
calls and videoconferencing, to quickly
find the right expert, get an answer,
find out some information or make a
decision. In addition, today’s web-based
collaboration allows teams of people
to develop documents together, share
resources and communicate more closely.
Another benefit of cloud-based business
systems is increased agility and
responsiveness to customer interactions
and business events. Furthermore,
Sage X3 White Paper: Cloud ERP Emerging as Replacement to On-Premise

4. in terms of responding to business,
customer and market trends, today’s
cloud applications offer more advanced
analytics than the on-premise systems
built a decade or more ago, with real-time
reporting being particularly helpful.
By their nature, cloud systems support
business growth as they are more
scalable than traditional ones, and they
can also provide geographical reach
across regions and countries. This is
helpful for multi-site ERP support, which
has been a challenge for legacy ERP
providers in the past.
Mobilising the workforce
Another area in which cloud business
systems have the edge on traditional
ones is they can help to create a mobile
workforce or gain efficiencies in an
already mobile one.
Mobile apps have helped to eradicate
paper-based processes and reduce
errors from manual data input. They
enable on-the-go productivity and let
field workers capture data in a timely
manner. Through features such as
always-on communication, web-based
input and mobile alerts, mobile devices
are becoming incredibly effective and
versatile business tools.
Cloud mobile business applications can
also harness mobile-specific features
such as GPS location data and speech or
camera input, which gives rise to greater
functionality in mobile apps and means that
mobile workers can capture and transmit
relevant, accurate and detailed information.
Mobile customer services is a particularly
exciting growth area, where customers
can view products and services and
make purchases; and business data gets
captured immediately and transmitted to
the back office.
Overall, the arrival of web-based
and mobile ERP is no less than
transformational for many businesses
across the board.
Consultancy PwC puts it this way, in its
report Beyond ERP: New technology,
new options: “The brave new world
of business application software is
rapidly transforming how corporate IT
departments source and implement all
kinds of critical systems.
“Perhaps nowhere is this truer than in the
realm of ERP systems, the software that
runs virtually every large company in the
world. CIOs are rethinking their approach
to ERP, thanks to modular, cloud-based
business applications that offer viable
alternatives to the unwieldy, inflexible
and expensive systems that have long
dominated the sector.”
Sage’s X3 ERP solution is an example
of a mature cloud ERP platform that
gives enterprises powerful, flexible and
scalable tools.
Like other cloud-based business
applications, Sage X3 does not have the
complexity and cost of typical enterprise
systems. It simplifies the management
of operations from financials, sales
and marketing, to distribution and
manufacturing. But at the same time, the
software has the same functionality as its
on-premise equivalent, which is unusual.
Developed for midsized to enterprise
companies, it uses a collaborative
approach across all business units
and departments, and fully supports
mobile users, mobile security and
multiple device types.
Expert advice
Whether you have already implemented
cloud business applications or are
considering it, there are many helpful
lessons to be learned from the current
generation of cloud users, according to
our survey.
When it comes to choosing a cloud
service provider, several of our survey
respondents advised businesses to
choose carefully and shop around, with
one warning prospective cloud users
to “get water tight service contacts and
flexibility to switch vendor”.
Sage X3 does not have
the complexity and cost
of typical enterprise
systems; and simplifies the
management of operations
from financials, sales and
marketing, to distribution and
manufacturing.
Sage X3 White Paper: Cloud ERP Emerging as Replacement to On-Premise

5. Many cloud users urged cloud adopters
to understand their contract, read
the small print, and recognise shared
responsibility with the service provider.
One comments that it is “critical the
supplier has the capability and agility”.
Another indicates that they had
experienced problems depending on
“poorly performing network providers for
initial access to cloud services”.
The greatest number of comments were
about planning and preparation. The
advice from our cloud users included
developing a good business case
for enterprise cloud; planning which
benefits to measure; training staff early
and making sure implementation prep is
well mile-stoned.
“Time spent in planning is crucial,”
argues one respondent. Another
comments, “Planning, planning,
planning.” Another IT leader says,
“You need to fully understand the
requirements of your users prior to
deploying SaaS.”
Correctly configuring internal systems
is also important. One IT professional
candidly reveals, “We should have
changed our setup when we went onto
the cloud. To get the benefits from the
cloud, you need to make sure your
setup is compatible with the cloud if you
want to get the flexibility of using the
cloud for your database.”
Others suggest that to get the best from
the cloud, it is important to improve
internal networks, “and invest in the
internal resources up front”. Another
respondent says, “It takes a lot of internal
resource, much more than we expected.”
In fact, approximately 50 percent of
our respondents say, if they could do it
all again, they would put more internal
resources into implementation.
Other comments include: “start small”;
“start from the workload down” and
“scale up slowly”, recognising that “there
can be integration problems with
on-premise systems”.
Security and governance were also big
areas of discussion, presenting a barrier
for some organisations to investing in
cloud their critical business applications.
“Be aware of security,” argues one IT
leader, with another urging caution over
data protection. Another comments:
“Security and Governance is key, don’t
underestimate it....”
However, others offered reassurance.
“If the requirements are set up correctly
and completely and the security issues
addressed from the start, it becomes a
very pragmatic solution, which works
well and provides more flexibility
with the reduced cost,” explains one
business cloud user.
“The hype around risk and security
should not put you off or slow you
down,” concludes another.
The journey to cloud ERP
A clear picture is emerging: more
and more businesses are relying on
the cloud for their business critical
applications with ERP finally emerging
as a promising growth area. 71
percent of our respondents have
invested in cloud for business critical
applications, with 90 percent of them
saying they have received ROI on their
implementations.
Of the remainder of businesses that
have not yet invested in cloud, 62
percent are planning to use cloud in
the next 12 months to two years for a
core business system, with CRM, HR,
expense management and ERP being
the most likely.
In his report, Cloud ERP Implementation
Practices for High-Growth Businesses,
Chris Chute, vice president, SMB Cloud
and Mobility Practice at analyst firm
IDC, summarises the current state of
play. “IDC predicts that cloud ERP will
join with CRM software and serve as a
make-or-break business transformation
capability. The future of a high-growth
company will rest on both how well and
how quickly it can deploy ERP with
minimum delay and how quickly it can
derive insights from the platform.”
Written by Arif Mohamed
Sage X3 White Paper: Cloud ERP Emerging as Replacement to On-Premise