According to Gartner, worldwide public cloud service revenue will reach $364 billion by 2022, which represents a compound annual growth rate of 12.6% since 2018. And the reason is simple: More and more enterprises are embarking on their digitalisation journey and migrating their infrastructure and applications into the cloud. In fact, cloud adoption has become the default choice for many CIOs planning strategic digital transformation.
But for enterprise resource planning (ERP) systems, which have been vital for all kinds of businesses for decades, cloud adoption has been much slower. For some companies, ERP systems are so important that they are reluctant to tinker with them; for others, the attitude is along the lines of “if it’s not broke, don’t fix it.” In many cases, however, ERP systems and their underlying infrastructure have decayed into the legacy systems. And ERP systems are costly in terms on-premise hosting and application maintenance.
Cloud can help, and ERP systems are finally starting to embrace cloud computing. In fact, Gartner predicts that business intelligence, supply chain management, project and portfolio management and ERP will see the fastest growth in end-user spending on SaaS applications over the next few years, reaching $143 billion by next year.
Traditional, on-premise ERPs offered CIOs the freedom to adapt these powerful solutions to suit their enterprise’s needs, offering differentiation and competitive advantage. But insight from Gartner – its Pace-layered Application Strategy – highlights the fact that there is no real advantage in heavily customizing systems of records used primarily for operational efficiencies (a layer within which almost all ERPs fail).
Some enterprises may require a unique, differentiated approach for their systems of engagement or systems of innovation. One consequence of this idea is that adopting standard processes for systems of records, hosted by a SaaS ERP provider, can ensure world-class processes that are tested and proven and can be used in many industries. Small- and medium-sized companies are already moving to a SaaS ERP, but even large multinational enterprises are finding it safe to adopt SaaS ERPs for their systems of records.
CIOs are increasingly keen to move ERP systems to the cloud – not just their custom-built, on-premise cloud-based ERPs but also SaaS-based ERPs. They want to take advantage of the many benefits of cloud computing: lower total cost of ownership, much greater scalability, reduced risk of deployment, access to innovation (via continual upgrades), and enabling accessibility to critical enterprise applications for global users.
The CIO dilemma: From strategy to implementation
This trend begs the question: What’s the best approach to successfully putting ERP systems on the cloud? Wipro believes that modern program transformation practices can help organisations improve efficiency and ensure success in their SaaS-based ERP implementations. The right program management approach helps ensure effective alignment, integration, and control. It requires strategies for prioritising and sequencing a series of multiple projects, managing their interdependencies, implementation methodologies, benefits, stakeholder management, establishing and implementing governance, and orchestrating organizational change management.
In fact, the decision about how to proceed with a SaaS implementation may be as important as the decision to proceed. SaaS-based ERP transformations do entail risks, at the implementation phase or in the long run, that may negatively impact the initial business case. A truly informed decision will reflect many factors and challenges:
- Other enterprise transformation initiatives (such as a new operating model, business process outsourcing, or information technology outsourcing)
- Business change management, early involvement of users and ongoing change mindset to embrace the changes brought by mandatory regular upgrades
- Choosing how fast to go live: “big bang” versus phased
- Adoption of standard processes versus seeking to maintain existing customisations.
- Detailed requirements documentation versus fit-to-standard workshops
- Definition and documentation of “to-be” processes
- Understanding cloud limitations for complex integrations and customisations required to mirror the current ERP processes
- Appreciating the need for new skillsets for implementation partners (to configure, integrate, and customise a SaaS ERP) and for business users (to move from the legacy system to the new one)
- Program governance and solution design authority
- Planning, at the high and detailed levels
Methodologies: Waterfall, Agile Fusion, and “WAgile”
Traditionally, ERP applications have been implemented using the highly structured waterfall approach: requirements, design, coding, and testing. Gartner’s Pace-layered Application Strategy suggests that this highly structured implementation method is ideal for implementing systems of records. Take conventional ERP implementations as an example of the waterfall approach. Typically, this involves these steps:
- Project preparation
- Final preparation
- Support and operate
Each of these steps is discrete and distinct; each is completed before moving onto the next. But waterfall is not an ideal methodology. For example, a waterfall approach can make it very challenging to visualize the application from the requirements documentation, one of the most difficult parts of software development. This can lead to dissatisfaction with the delivered product. Also, the waterfall approach is not change-friendly. Changes are often difficult and costly to implement. And, finally, waterfall approach is not fast, which means it could take months or even years before the customer sees the final product and starts to see results.
However, the rise of SaaS ERP providers has tilted the balance more towards the agile development process, an iterative, team-based approach that emphasizes rapid delivery of complete functional components. Tasks and schedules are broken into sprints or iterations. Completed work can be reviewed and evaluated by the project team and customer through daily builds and end-of-sprint demos. These benefits are why agile is so popular, but it’s not a silver bullet that can address every implementation challenge:
- Agile requires business users to work collaboratively with the development team in a spirit of trust and partnership. This typically requires breaking down some organizational barriers.
- Agile may not be totally appropriate for major transformation projects that require a more plan-driven approach to achieve some level of predictability.
On the plus side, agile shortens the delivery time and makes it easy to gather feedback in the early stages to better suit customer requirements.
Agile is good, but many development and implementation projects today use the WAgile – the phrase combines “waterfall” with “agile” – approach that dismantles the siloed approach. In WAgile, planning, design, and requirements definition are done using the waterfall methodology, but development and modular tests are conducted in in short sprints using the agile (scrum) methodology.
Some other key points about WAgile:
- Takes a user-centric, more modular approach to planning with quick prototypes, enabling the project team to launch basic functionalities for immediate use by the business, while offering the flexibility to augment new ideas at any stage by coupling with new modules (an incremental approach) without losing the core functionality.
- Manages planning and requirements in an agile manner by breaking them into user stories and prioritizing them in the sprint.
- Enables adherence to compliance with standards and, most importantly, with documentation.
- Provides enhanced collaboration between business and technical teams as appropriate to optimise resource utilization and improved communications.
- Generates more resilience for market changes and customer demands.
- Shortens project implementation cycle, resulting in quick realisation of benefits.
The WAgile implementation model for SaaS ERP applications uses the minimum viable product (MVP) approach, which starts with the premise that end-users have a minimum fundamental need and the application chosen for implementation satisfies that need. The project team then delivers a MVP – essentially a subset of the desired end-goal application (in this case, a SaaS ERP system) – with enough features for a reasonable sampling of users to try out and provide feedback for further development, fine tuning, or for the phased rollout.
MVPs are valuable in that they help developers avoid lengthy and potentially unnecessary work. Instead, they iterate on working versions, responding to feedback and challenging and validating assumptions about meeting the application requirements. This approach helps avoid application configuration that customers do not want or seek, avoiding unnecessary costs and delays. A MVP also becomes a quick win in and of itself because it helps the business become familiar with the application.
Essentially, a MVP entails independent development of some modules or components while the planning phase is still underway along with some activities – such as setting up the cloud infrastructure or planning for data migration – are being tackled as separate workstreams. The diagram below illustrates a WAgile process flow for end-to-end delivery.