For decades we have believed that our business processes were the horse and the system was the cart. Now, CEOs are being urged to switch that long held belief and embrace a new way of working that puts the re-engineering of processes at the core of cloud adoption.
Unlike all previous business-enabling innovations, cloud offers – in fact demands – a new way of working for those companies and individuals who wish to exploit its many advantages. The notion of adopt not adapt – a key mantra for our contributing editor, Tony Summers, could not be truer when considering moving One’s applications and infrastructure to the cloud. It is not simply that cloud is a different environment and therefore some change should be obvious; the fundamental principles of cloud applications require a business-wide and cultural transformation in order for its many advantages to be realised.
Whilst it’s true that physical migrations can be rapidly deployed, the organisational change required to support a successful migration can be complex and getting to grips with the concept of change is a bedrock of moving your applications and IT estate to the cloud. Cloud migration is not another IT project and those who view it as such are unlikely to derive the most benefit from the exercise. Iain Fox, CEO at KPMG agrees and said: “Organisations that consider it an IT project are likely missing the bigger picture of what a business transformation could mean for their future success, and in many ways, their survival. Cloud adoption is a component of a business transformation initiative: to transform their customer experiences, operational processes and business models.
“It’s often a case of helping our clients understand the value that a cloud-based digital platform will bring to their organisation and then demystifying the steps and costs involved in delivering it. This can be done as a one-off exercise but is also a focus within the first phase of a ‘KPMG Powered Enterprise’ engagement; our proprietary approach to accelerating the path to business transformation via a combination of leading practices and processes, proven technology solutions and a next-generation delivery framework.”
Putting business processes – aligned to what the solution can support – at the forefront of your strategy rather than customising the solution to fit existing processes, is a fundamental pillar of cloud adoption. This re-engineering of processes which may have evolved over many decades must be central to any cloud strategy and Chris Mason, CEO at Namos Solution believes that breaking down the barriers of how businesses have been used to operating is one of the first principles of cloud strategy. He said: “The Namos approach to implementing cloud begins with a process, supported by the system, driving through an ‘if not, why not’ style of change and challenge. Depending on the type of engagement and customer, we may run ‘user story’ scenarios where we start looking at what the expected outcome is, and then define what is needed on and off system to realise that outcome. Limited gap analysis is performed as this tends to trap us in conversations which discuss the legacy process and the common statement ‘because we have always done it that way’ can get in the way.
“In order to ensure you are able to maximise your benefits from moving to the cloud, there are three areas of key focus;”
Streamline and simplify processes to ensure they are as efficient as possible.
Align to the processes delivered by the system. Straying too far away from standard ‘best practice’ increases your costs and efforts to maintain the solution.
Create a guiding principle of a single global design, only supporting divergence where there is a legislative or compliance reason for doing so.
You will often hear the term ‘cloud readiness’ being banded around by both small and large consultancies who offer to help you assess what your journey to the cloud might look like. But long before you engage in activity geared towards the technical aspect of cloud adoption, business leaders need to look inwards; they need to take a long hard look in the mirror and ask if their organisation has the stomach for root and branch change – even when the upsides of such a move seem so compelling.
Some CIOs may not like what’s looking back at them when they gaze into the proverbial mirror and ask are we ready to embrace the cloud? Not because there is a lack of appetite for new and emerging technologies – show me an organisation that doesn’t want to cut costs, become more efficient and have the ability to ramp up and down on demand and I’ll show you a Midlands-based car maker from the 60s. The desire to be part of the cloud-glitterati is strong and if you’re not already on your journey you would be unwise not to consider the options. That said, true cloud adoption as a fundamental business principal is so disruptive that those who attempt to embrace it must overcome some serious hurdles.
Which flavour cloud should you choose?
There are degrees of cloud adoption and choosing the right level of uptake is the first decision customers need to consider. Some may choose full scale SaaS applications coupled with autonomous databases and public cloud hosting. Others may consider a toe-in-the-water approach which might look something like moving your infrastructure to the cloud whilst retaining on-premise applications.
Understanding the cloud options is an important part of the mix, and by extension, understanding which option is going to offer the most benefit within the bounds of your readiness. In short, there are three options to consider and James Cowe, head of professional services at Google sets them out as follows;
IaaS (Infrastructure as a Service) is an infrastructure-based product which offers the primitives to build your own solutions. Typically, these include capabilities such as compute, storage, networking or database services.
SaaS (Software as a Service) delivers functional end-user capability without any need to ‘know’ about the infrastructure running it.
PaaS (Platform as a Service) is a middle ground between IaaS and SaaS; typically, a managed offering that lets you deploy your own application code and services but abstracts the infrastructure layer away.
Cowe said: “Cloud is a viable option for any business today, although the level to which you invest in cloud should vary depending on your needs and goals. A hyperscale cloud provider has the ability to operationalise technology and associated capabilities at a far more cost effective price point than most other organisations; this means every organisation should be considering the benefits of leveraging cloud in some or all parts of their business.
“Taking a simple example, most large organisations have a need for some kind of data warehouse and analytics capability – today it is possible for them to build this capability on-premise themselves, but often the capabilities it brings will remain static in features and become increasingly difficult or complex to manage and scale. Leveraging a cloud offering provides an organisation with a scalable, fully managed data warehousing capability which is continually updated, improved and secured. The cost to benefit of such an approach tilts heavily towards a cloud solution, and there are many such scenarios in which an organisation should consider moving to the cloud – even if they aren’t going ‘all in’.
Cowe highlights Google’s App Engine as a good example of PaaS, and said: “App Engine provides capability to run your custom application code, but handles the scaling, operational management and security of the infrastructure automatically behind the scenes.”
The Financial Model
Also at the top of page one is something for the CFOs to sweat over; cloud applications and infrastructure are paid for through license agreements which are firmly an OPEX consideration. Whereas, historical IT investment has always been a CAPEX cost which was paid for, and the value realised, over a five, ten or even fifteen years cycle.
Whilst this may not seem like a particularly daunting issue to navigate there are many good reasons why this shift to a cloud cost model will pose some questions and why many businesses are calculating the ROI of cloud incorrectly. If you’re a start up or installing new applications the argument for OPEX is simple. However, for established enterprises that have invested in hardware which is in ‘mid-term’ of its lifecycle, the arguments are more complex. That said, a pay as you go model is something that we have all become accustomed to and even the most CAPEXy investments like aerospace engines are now being utilised through ‘Product as a Service’ rather than an ownership model.
OPEX flexibility for infrastructure and applications is a game changer as businesses can ramp up or down as market conditions and opportunities change, as Fox from KPMG explained: “With cloud OPEX models our clients are able to invest in a solution that is the right size for the business at the time of initial deployment and then, with confidence, they can build on this as their needs scale and evolve. This scaling can go in both directions: up and down. Conversely, CAPEX models can be restrictive when you come to scale a solution in terms of rolling out new regions, business functions, and transactional volumes and you have a fixed hardware and infrastructure limitation. You can also match system investment to your activity in the market. For example, compute elasticity and/or temporary business users can scale to meet periods of high demand. Clients should be budgeting for continuous spend on cloud solutions as their needs and businesses evolve. This has the benefit of spreading the investment.”
ROI and TCO
Many CFOs that I have spoken to view ROI as a simple comparison of costs and savings between cloud and on-premise, whereas true ROI from cloud must include an analysis of benefit as well – and not just the obvious upsides. Value drivers that are typically overlooked in ROI calculations include accelerated time to market, improved productivity, decreased provisioning time, greater customer engagement, employee satisfaction and many more soft benefits that are difficult to put a precise number on. Cloud also provides significant value through cost avoidance with integrated assets such as embedded security and uninterrupted up-time. Further, the removal of manual processes decreases the opportunity for human error. We have all been guilty of clicking the wrong button at times, and although most human errors are uncostly, some can be financially devastating and defining for a company’s reputation. Determining a value for each of these benefits is not an exact science but should help CFOs see the full ‘cloud ROI’ picture.
Typically, a TCO analysis is much easier to calculate than ROI and, with on-premise applications and infrastructure, the numbers were plain to see. The difference between a TCO and an ROI analysis is that a TCO defines the costs and savings, whereas the ROI determines the value generated, while taking spending and savings into account. It’s critical that CFOs understand both, and their differences, in order to effectively define the full value of cloud for your business.
However, TCO for cloud is an evolving, fluid set of numbers and although easier to calculate than ROI per se, still only provides the CFO with a narrow view of the financial impact of moving to the cloud. Whilst all ERP vendors would like you to believe that the TCO for cloud is much lower than for installed application – and the headlines costs are – the missing piece from the jigsaw is the likely cost of complex change management. The further you move towards low cost vanilla SaaS applications, the closer you move towards high cost process transformation and training.
Managing the disruption
Cloud by its very nature is disruptive. Generally, the disruption is positive as the term is used mainly to describe the ‘disruption’ of legacy processes and technologies being replaced with more agile and best in class solutions. However, the disruption isn’t confined to delivering new ways of working – the disruption will be felt much closer to home – by employees throughout your business and the customers you serve.
Mason from Namos, believes that defining an approach that has minimal impact on BAU activities should be a cornerstone of any readiness activity. He said: “Any cloud adoption strategy should be clear about the business drivers for making the transition and the commitments involved in doing so. Customers often look to move their ERP application to cloud in order to stay agile, flexible and competitive but they need to do it without risking business disruption, security, compliance or performance.”
Unlike historic IT-system upgrades, where risk, disruption and resource-demand could be ringfenced, cloud adoption does not work within the same confines. It is virtually impossible to leverage value from a true ERP cloud programme without fundamental changes in business processes and working practices. These ‘cloud principles’ must not only be embraced by the staff who are at the coalface of the ERP solution, but also by the broader workforce who will inevitably see changes to the way they work and perform their daily tasks.
Fox from KPMG points out that ensuring the technology team, who are going to be most affected by cloud adoption, are in with both feet is imperative: “Migrating to the cloud offers many benefits – flexibility, collaboration, costs and so on – but in order to maximise these benefits, organisations need to carefully consider their technology team’s skills, structures and ways of working. Critically, your technology team must buy in to the cloud vision and be the proactive enablers of its execution. This can mean educating, upskilling and bringing in new talent before the migration begins. Preparation is key.”
Historically, change management in ERP implementations has been an after-thought and always focussed on making employees feel better about using the new software post go-live. Change and training went hand-in-hand with ‘user manuals’ and internal communications that did little to boost the morale of the workforce and applied a ‘one size fits all’ approach to training and user adoption. However, cloud migrations require a far more integrated effort to change activities which must be embedded as a core component of any transformation exercise.
Chris Burns head of change at Kainos believes that modernising change management practices to suit cloud principles is a linchpin of a successful and cohesive transformation. He said: “It is no longer adequate for change management to operate as a workstream issuing generic communications and supporting end user training just before go-live. In our modern fast paced world that simply doesn’t cut it. Integrating your change management practices into every facet of the project is the only path to success. Change efforts must include plans for identifying leaders throughout the company and pushing responsibility for design and implementation down, so that change cascades through the organisation. The goal of this approach is to build the capacity and capability of the organisation we support. Our aim is to ensure the transformation is integrated into every facet of your organisation to increase the chances of success. It’s essential that the people impacted by the change are clearly identified and their needs understood. It sounds like such a simple thing, but this rarely happens effectively. It is all too easy to focus on the process or the plan – things that don’t react emotionally. Change should be explained explicitly to individuals including how the change will affect them, their role and the opportunities it opens for them.”
Central to the change approach is ‘user adoption’, a term broadly used to describe making sure that the people in the business are willing and able to use the solution that has been implemented. Any successful cloud transformation plan must be blended with the concept of modern user adoption and continuous learning. The skills and methods used to change behaviour and drive cultural change are very different to those needed to build and deliver an ERP system. Meaning that the people who lead and deliver your cloud ERP system may not be – and probably are not – the right people to lead the user adoption program.
Tony Cook, founder of Fudgelearn, a training and user adoption company specialising in cloud migrations said: “Communicate, communicate, communicate – engage with your business from C-level down to ensure an understanding of the vision behind the project, the benefits of the change and the objectives aligned to the business and how this will impact business units and its users. It is vital that this is continued throughout the project and beyond. It should be treated as an internal marketing campaign.
“You can train your business users in a number of ways; starting with your business process owners and key stakeholders to your administrators and then user community. The early stages of this knowledge transfer can be benefited from running physical classes, virtual webinars or hybrid-based workshops, making these very specific to the configuration, processes and enterprise structures. Supporting this learning can be training materials such as QRG’s (Quick Reference Guides), manuals or presentations.”
Andy Bell, CTO at Edenhouse Solutions also believes that user adoption should be front and centre for all businesses when considering a cloud transformation and reiterates the importance of clear and regular communication. He said: “User adoption is key to driving value for the business. To ensure this is successful, clear and frequent communication is critical throughout the entire project lifecycle. More often than not, it is due to ineffectively managing this that leads to project failure. An important aspect of change management, therefore, is to carefully identify all stakeholder groups within the business, understand their needs, and ensure they are specifically catered for as appropriate to their roles or job functions. Individuals need to clearly understand what the project means for them, so defining outcomes and setting clear expectations is essential.”
Contextual help driving personal experiences for users
One of the key innovations to come out of modern cloud applications for UX and user adoption is contextual help. A concept readily deployed in customer service environments, contextual help is the epitome of an internal CX solution. Historically, the entire user manual for a given solution was thrust upon end users who were either expected to read and retain the information or search through endless pages of irrelevant information until they found the nugget that they were looking for. By utilising the same principals as the core ERP solution, modern contextual help provides relevant and personal tuition and support to users navigating the ERP system.
Cook from Fudgelearn went on to explain: “The key products in modern adoption are contextual help solutions, giving the organisation the ability to place the learning within the new cloud ERP applications in real time. These solutions give users step-by-step guidance, context sensitive, role-based learning. Following the processes within the system with fully customisable content to support policy and process changes, company-wide announcements enable users to learn ‘on the job’. These just-in-time solutions allow continuous learning; when coupled with a light touch methodology and workshop based specific learning, an agile adoption is secured.
“The benefits from adopting contextual help solutions are numerous, from a huge reduction in operational support costs, to rapid deployment of usability training to suppliers as well as employees.”
Are all businesses ready for the cloud? Certainly not. Will all business eventually join the cloud? Almost certainly yes. To determine where you are on the scale of readiness you really only need to focus on one key area;
Does your management team have the ability and desire to embrace cloud technology and drive the ‘first principles’ from the top down? If the answer to that question is yes, then everything else will fall in behind it. However, if you try to force a cloud solution into a luddite business where management are unsure of the value drivers and are implementing cloud as a vanity project, then you are sure to fail – or at least come up short.
I have been fortunate enough to see cloud ERP implemented beautifully. A management team which understood the opportunity and was able to bring an entire organisation along on a collective journey. Costs cut in half, deployment of fresh ideas at a stroke, customer experience revolutionised, and new business insights gained leading to increased profitability. I have also been party to cloud implementations very much at the other end of the scale where the management team simply did not understand the technology or the guiding principles of cloud and made a complete hash of it.
Look inwards first. Ask the hard questions internally and then work with a partner that truly understands cloud. As I have said elsewhere in this issue, fundamentally the technology works so don’t be too pre-occupied with the vendor selection process until you have concluded your internal examination and then go forward, boldly, into a new era of the ‘intelligent enterprise.’
If you are unsure of your options and would like to participate in one of our events that are designed to help CFOs and CIOs understand the opportunities, then look out for our event leaders. ERP Today events are free to attend, and they are structured to help management teams understand the options in a non-salesy environment. We are partnering with many of the world’s leading cloud enablers on various topics throughout 2019 so if you ‘would like to know more’ send us an email to email@example.com