It’s well known that enterprise IT wants and deserves to play a more strategic role in company business operations and planning. That means becoming more proactive than reactive, aligning IT with your company’s strategic objectives, and finding new ways to put IT innovation to work in building your company’s competitive advantage.
The problem is, you can’t do all these things without greatly expanding your budget or substantially cutting costs.
Five years ago this problem might have been unsolvable. Today, not so – or at least not necessarily so. The reason: today you’ve got more options for making changes to your organization’s single most strategic business application, your ERP software.
Problems with Earthbound ERP
If you’re a large enterprise, chances the fundamentals of your ERP system were designed years ago – before the Web, before iPhones and iPads, and certainly before cloud computing. Since then you’ve patched and fixed it, upgraded and added servers and server software, added IT staff and outside consultants – and possibly even end up with more ERP systems from acquisitions. The last time your ERP actually got a substantial upgrade is likely years ago.
One of the reasons for this is your maintenance costs could be running as high as 90 percent of your total IT budget, according to industry analysts, stifling the ability for IT to meet the needs of the business.
If, on the other hand, your enterprise is considering bringing in new ERP software from SAP or Oracle, your implementation cost will likely be in the millions, and then you’ll face similar maintenance-cost issues as your deployment grows older.
You’ll be faced with a constant need to upgrade software and hardware, and these upgrades will become more costly and time-consuming as you add customizations over time to try and stay aligned with the changing needs of your company. Your deployment will gradually become version-locked – unable to practically upgrade further because of the complexity, cost and risk of migrating customizations.
If so, you’re ripe for losing business to younger, more nimble and more innovative competitors.
Cutting Maintenance Costs with Cloud ERP
Why? Because your younger competitors are already changing their budget allocations, minimizing maintenance and expanding their opportunities to innovate with IT. They’re using the cost savings from cloud ERP to support innovations such as creating cross-functional workflows and reporting processes, adding sales channels for new online storefronts, enter new markets and geographic regions, and improve connectedness between suppliers and customers.
Perhaps most important, their IT management participates in strategic planning meetings as a full member, rather than an order-taker. IT is able to take the lead on making recommendations, such as mobilizing the workforce and piloting new business processes.
An example of how cloud ERP can boost innovation comes from Commco, a Kansas City, Missouri-based manufacturer and distributor of moulding and millwork products.
Spun off nine years ago, Commco found itself maintaining a costly and aging SAP R/3 ERP system. Tired of making changes that cost thousands of dollars per request and facing a six-month, $1 million upgrade to the next SAP version, Commco decided to realign their ERP and IT cost structure to benefit the business.
To do that, Commco wanted to get off the upgrade treadmill and get automatic upgrades as a means of lowering their ongoing IT costs and freeing up resources to improve business efficiency. Commco also wanted to make the new software more accessible to more employees so they could perform analytics and self-service customizations – difficult, if not impossible, with the old software. With NetSuite’s cloud ERP software, Commco was able to cut IT costs, eliminate expensive upgrades and lower training costs. At the same time, the company innovated improvements in core business processes such as sales order management, stock picking, and others.