Cloud ERP Implementation: The Ultimate Guide

Writer

Randi Sherman

Cloud ERP Implementation: The Ultimate Guide

 

Enterprise resource planning (ERP) is transformational technology streamlining core business processes, removing data silos, reducing costs, and enabling unparalleled visibility into company systems. Cloud-based ERP reduces costs even further as infrastructure is managed online. 

While a cloud ERP implementation delivers excellent ROI, the deployment process is complex, time-consuming, and costly. Unexpected costs and delays can delay time-to-value, but with good planning, you might avoid some of the challenges and help you get up and running faster and with less risk. 

This cloud ERP implementation guide answers common questions related to the process and offers a step-by-step guide to ensure success. 

 

What is a Cloud ERP?

Cloud ERP differs from on-premise ERP in that all infrastructure is managed by a third-party vendor in the cloud. The vendor manages the technology and is responsible for keeping it updated and patched as required. Clients are provided with a user interface and data platform from which they can access core business applications anytime from any device over the internet. 

In a cloud environment, the platform is provided “as a service,” meaning that clients do not own the software and pay a monthly or annual subscription fee to use it. Because the technology is cloud-based, there is no hardware to manage for the client and no upfront costs, significantly reducing IT time and resources. 

 

What Are the Benefits of a Cloud ERP?

 

  • Cost reduction. Cloud ERP delivers cost benefits from multiple standpoints, including reduced IT cost and complexity as there is no hardware to purchase or manage.
  • Optimize human effort. Process automation streamlines manual workflows reduces errors, and allows employees to focus on higher-value tasks.
  • Visibility. Cloud ERP collects and consolidates all company data into a single source of truth, ensuring decision-makers have real-time insights to inform operations. 
  • Scalability. Growth often happens quickly. A cloud ERP ensures clients can scale seamlessly when needed. 
  • Integration. Cloud ERP integrates with existing company systems, reducing disruption and downtime during and after implementation. 
  • Security. Cloud systems typically have some of the best security features available. Since systems are connected, there are fewer endpoint vulnerabilities than one might expect in a multi-vendor environment. 
  • Connectivity. Cloud ERP is configured to accommodate the latest technologies in IoT, machine learning, AI, and robotic process automation (RPA). 
  • Accessibility. Employees and other stakeholders can access the cloud system from any location on any device, enabling remote and field workers with the tools they need to do their jobs. 
  • Fast deployment. Cloud ERP can be configured and deployed in a fraction of the time compared to a hardware-based system.

 

What are the Drawbacks of a Cloud ERP?

Implementing a cloud ERP can be highly advantageous to companies, but weighing the good and the bad is critical to ensure it’s the right choice. 

Some of the potential drawbacks of a cloud ERP include:

  • Connectivity issues. Since the system is internet-dependent, a connection is required to ensure uptime. Should the internet fail for any reason, clients would not have access to their critical systems.
  • No direct control over updates. Productivity issues may ensue if updates to the interface or features cause disruption. 
  • Integration limitations. Some vendors may be unable to accommodate the apps or products you use, which would require a revamp of workflows. 
  • Lack of customization features. Companies may be limited in how much they can customize the system, templates, etc.
  • Ongoing expense. Monthly costs may rise dramatically if the company scales. 

All that being said, there are ways to avoid some of these issues. Research cloud systems carefully and select those that meet your needs as precisely as possible. Think about your non-negotiables; which of these drawbacks can you live with? How would it impact your business in the short and long term? 

How Much Does a Cloud ERP Cost?
Current indications estimate a cloud ERP implementation costs about $9,000 per user over five years. The final cost depends on how many users you have, the number of software licenses required, company size, cost of implementation, training, support, and maintenance. 

With all relevant costs taken into account, the total cost of ownership for an SME would be in the range of $150,000 to $750,000.

Determining value and ROI is a critical first step as it will help you understand the long-term cost benefit. 

 

What Should I Do Before Implementing a Cloud ERP?

A new cloud ERP implementation is a massive endeavor and one that should be considered carefully to ensure it’s the right solution for your business needs. Careful planning will help to ensure a smooth process and that the project has value for all users, stakeholders, and business leaders. 

Here are a few key steps to take before you begin:

  • Understand why a cloud ERP is needed. You won’t be able to gauge success unless you know what problems you’re trying to solve. Start by detailing the current state of the enterprise. Map key processes, identify problems, and define the ideal future state to quantify improvements introduced by the ERP. 
  • Evaluate the vendor landscape. The right vendor has a direct bearing on the success of your implementation and ROI. Research potential vendors and choose one that aligns with your business model, feature needs, projected future requirements, and budget. Read reviews and case studies to determine vendor reliability and customer service. Request detailed vendor proposals to have a point of comparison. 
  • Do a cost analysis. Quantify the total cost of ownership, including subscription fees, software licenses, support and maintenance, and implementation costs. 
  • Consider how current apps will integrate with the new system. Evaluate existing systems to ensure viability and interoperability with the new system. Some companies may keep some core systems but decommission and replace other apps that aren’t serving their needs. Cloud ERP is all about modernization, but you may not have to replace everything. The systems you do keep may also impact total cost, so it’s important to consider the implications where maintenance and updates are concerned.
  • Ensure the cloud ERP meets security and compliance needs. Ensure your new Cloud ERP meets your industry’s regulatory and data security needs and the general frameworks. Cloud ERPs are typically packaged with built-in managed security, but your business may have unique considerations that must be met. Aim for the lowest possible customization scenario to reduce complexities and mitigate risk. 
  • Choose your implementation team. Everyone on your implementation team must be aligned and understand their role in the process, what they’re responsible for, who they’re accountable to, and how their input correlates to the project’s success and the overall business goals. 
  • Develop a step-by-step plan. It will take a significant amount of time to get your new system up and running. Meticulous planning and preparation help you avoid delays and ensure your teams are ready for what comes next. It’s estimated that 95% of ERP implementation failures resulted partly from inadequate training and support, insufficient funding, and poor planning. 
  • Develop a change management strategy. Ideally, you’ll want to complete your implementation in stages to minimize disruption. A detailed checklist and schedule of each component will ensure you don’t miss any opportunities. Communication and user training must happen before data migration begins to ensure all stakeholders are on-side for what comes next. Teams and leaders should have plenty of training to understand each stage of the process.

Schedule Free Consultation

 

How to Implement a Cloud ERP: A Step-by-Step Guide

Implementing cloud ERP is a complex process. While the timeframe may differ from company to company, the stages are generally consistent. To ensure the best possible results, each step must be completed fully before moving on to the next. 

Assuming you’ve already completed the planning process and vendor selection, we’ll start with installation and move forward from there. 

 

Installation and integration

Since cloud ERP is a subscription service, it does not require additional hardware installation, significantly shortening the completion timelines. Most of the work will involve integrating existing applications and software components and customizing and configuring the system to fit workflow requirements. 

During this phase, the ERP solution evolves into a customized tool seamlessly aligned with organizational processes. Before undertaking this process, it is assumed that business processes, workflows, and specific needs are understood so that the result delivers maximum value. 

The more customized the system is, the longer this process will take. Customizations typically require additional coding to modify the system beyond its standard capabilities. Configuration is more straightforward as you’ll use standard variations and setting preferences vs. writing new code. In most cases, the less customization you have to do, the better, but this goes back to the selection process. An ERP solution that closely fits your needs out of the box will require less heavy lifting during installation. 

Successful integration ensures your new ERP communicates with existing applications and that application data is harmonized with the ERP. Challenges here often involve marrying disparate data structures and APIs and may require a middleware system to bridge the communication gap. Using standardized data formats is preferable and will reduce complexity and error potential. 

The goal, ultimately, is to create a cohesive, interconnected digital ecosystem that shares data from each asset. 

 

Data cleaning and migration

Data migration is a critical step involving transferring existing data systems to the new platform. Meticulous planning ensures a smooth transition and can be approached in various ways, depending on what’s appropriate for the organization. 

Ensuring data quality during migration is essential but can be challenging. Inaccurate or inconsistent data from existing systems may result in poor data quality or issues following the migration. Data cleansing is a rigorous process that involves identifying, correcting, or removing incomplete, corrupted, or irrelevant data before the transfer. 

The goal is to create a standardized, reliable dataset that delivers accurate results. Tasks involve:

  • Removing duplicates
  • Rectifying missing values (replacing or deleting code)
  • Converting/correcting data type errors
  • Enforcing standardized formats
  • Identifying and correcting outliers

Data migration comes next and may bleed into the stages that follow. Examples include basic records, master files, general ledgers, accounts, inventory databases, employee records, etc. Some organizations choose to migrate, train, test, and validate data simultaneously to ensure everything ends up where it’s supposed to be, while others will treat each process component as a separate entity. 

 

Training

Ideally, you’ll want to choose members of each core team (IT, finance, HR, etc.) to be trained as experts in the new ERP. These stakeholders will then be responsible for supporting their teams during training and become the go-to people when there are questions. Individual users must be trained on workflows within the scope of the ERP and understand how new features and functions will make their jobs easier. 

In best practice, hands-on training should be offered and ongoing before the go-live phase, as it will ease adoption and reduce support requests. Training can be provided through online modules, instructor-led sessions, group training for teams, or self-paced learning. 

Solicit feedback and provide adequate support to address all questions and concerns as the implementation proceeds. 

 

Testing

Testing the ERP is essential to ensure all modules and features function as intended before the system goes live. 

Testing reduces the risk of ERP implementation failure and will involve:

  • Component testing drills down on the functionality of individual units
  • Integration testing validates software and data connections
  • Functional testing ensures the system performs as expected
  • End-user testing validates whether the ERP meets user needs
  • Data migration testing confirms data transfer from the old platform
  • Regression testing ensures new features do not negatively impact existing workflows and functionalities

 

Go live

Organizations may choose between one of three “go-live” strategies:

  • Big Bang: the new system is activated, and the old system is immediately decommissioned. 
  • Phased: ERP is activated in stages to minimize disruption and mitigate errors.
  • Parallel: old and new systems run simultaneously until the new ERP is 100% validated.

 

Collect feedback and iterate 

Even after the new system is live, improvements and iterations continue. As users become more comfortable with the system, they will likely have feedback to improve workflows or ideas to inform future feature sets. Choosing a cloud ERP that can evolve with your changing needs is essential as it will support your growth. 

Continue to collect feedback and iterate as needed. End users are the best resource here as they can tell you what’s working and what’s not. 

 

Final Thoughts

Cloud ERP is a transformational technology that helps businesses adapt and scale quickly to respond to changing needs. Though the process can be complex and challenging, the benefits resonate throughout the organization. Planning is essential to ensure success, as is taking a strategic, step-by-step approach to the implementation. 

 

Need help with this?
Schedule Free Consultation