Feature
One of the last holdouts in the enterprise stack for migrating to the cloud are enterprise resource planning (ERP) platforms. Yet if Gartner’s recent Magic Quadrant for cloud-based ERP for product-centric enterprises is any indication, the tide is turning. While 40% of ERP platforms are currently on premises, Gartner estimates this will change to 25% by 2027.
The interest in bringing ERP platforms to the cloud is clearly there. However while any migration to the cloud is complicated, ERP is even more so given the higher levels of business process complexity and the change management involved. So what can those organizations making the shift do?
ERP in the Enterprise
The current problem is probably best illustrated by the recent announcements from SAP that any upgrades to its ERP offerings would be for cloud users only and will not apply to on-premises or hosted on-premises users.
SAP CEO Christian Klein told analysts during the company's quarterly earnings call in July: "It's also very important to emphasize that SAP's newest innovations and capabilities will only be delivered in SAP public cloud and SAP private cloud using RISE with SAP as the enabler. This is how we will deliver these innovations with speed, agility, quality and efficiency. Our new innovations will not be available for on-premises or hosted on-premises ERP customers on hyperscalers."
SAP Hyperscalers are the public cloud providers that SAP uses as hosting partners for their cloud solutions and services. The primary vendors meeting that criteria are: Amazon Web Services (AWS), Google Cloud and Microsoft Azure.
ERP Moves to the Cloud
Klein’s announcement accelerated the number of ERP customers looking to migrate to the cloud, said Wanclouds CEO Faiz Khan. He said that while migrating these complex workloads has been historically cumbersome, one positive is the many ERP users currently deployed within on-premises VMware environments.
"This opens up more ability to automate migrations to public cloud providers. These automated options provide a lot more flexibility and software configuration options than manual approaches, in addition to being easier to execute."
The overall best practice migration process for SAP HANA databases or other ERP workloads is typically a four-step process, Khan added.
The first step is assessing existing infrastructure and organization, which is followed by planning migration priorities and preparing the organization of workloads and applications. During the actual migration, 'lift and shift' methods are usually preferred to minimize the changes needed with data and applications moving to the cloud. Lastly, validation and verification are performed to ensure the workloads are running as expected in the public cloud you have migrated to.
Related Article: What Does the Future Hold for ERP?
The Role of Enterprise Workflows
ERP end-of-life can leave a lot of companies scrambling with how to efficiently and effectively transition to cloud solutions, especially if they're dealing with vulnerable legacy systems, OvalEdge CEO and cofounder Sharad Varshney told Reworked.
Migrating from an on-premises, proprietary database to a cloud database may produce benefits related to cost, scalability, flexibility and maintenance, so making the change will help the organization in the long run. However, he continued, all roads to the cloud start and end with data — the most critical component of just about every system.
“The cloud initiative will not deliver agility if the data scientists, analysts, and engineers are constantly yanked from development projects in order to fix broken reports and manage data errors in the process of migration,” he said.
Companies that initiate ERP cloud migrations without first addressing the factors that lengthen analytics cycle time will ultimately not achieve their full potential in terms of agility — so this really needs to be one of the first steps in the planning process for moving ERP to the cloud, Varshney said.
The lift and shift approach to cloud migration assumes that a company moves its current workflows from on-premises to the cloud. He says that in these cases, organizations should only expect agility to improve for those areas in ERP in which the on-premises tools are creating a bottleneck.
Generally speaking, the major bottlenecks in data-analytics workflows tend to be related to people: either an outstanding individual contributor who gets pulled into every critical project, or a group like IT, tasked with provisioning a new development system or a data set.
If an enterprise strives for business agility by deploying their ERP to the cloud, then its most valuable assets are the business processes, methodologies and workflows that enable it to rapidly respond to change.
“People come and go, but workflows remain,” he said. “The cloud is a powerful tool, but it serves the enterprise's workflows, not the other way around. Some may find it ironic that focusing on workflows instead of data and tools is the optimal approach to data monetization using cloud technology."
Related Article: The 3 Types of Integration That Define the Digital Workplace
Your Cloud Migration Preplist
Migration to a cloud ERP is not just a technological upgrade but a transformational process that can significantly enhance operational efficiency and agility, said Steven Velte, a senior director of professional and cloud services at OpenText. He recommended organizations consider three fundamental areas when modernizing their ERP systems:
1. Choose the Right Deployment Model
Moving to the cloud can mean adopting a pure SaaS ERP system like Oracle NetSuite or SAP S/4HANA public cloud, but it can also mean deploying licensed software within a cloud environment, Velte said.
The main drawback of SaaS ERPs is typically their limited ability to support customizations, which means that many large enterprises that currently have heavily customized on-premises ERP systems are opting for the more flexible license-based option, such as SAP S/4HANA license version, which will get support until 2040, and deploying it in a cloud environment such as Microsoft Azure either themselves or through a systems integrator partner. This means, he said, that pure SaaS is not the only available option.
Conference
Sep
16
HR Tech Conference Las Vegas 2025
Register
Conference
Oct
27
Gartner HR Symposium/Xpo Orlando 2025
Register
However, he also points out that customizations undermine some of the key value propositions of cloud-based ERPs — particularly ease of updates — and most ERP vendors would prefer customers to choose their SaaS/public cloud version instead of the traditional license model.
“Each company needs to identify the approach that best suits their needs as choosing the wrong model could delay implementation timelines by months and increase the costs by three to four times the original budget,” he said.
2. Implementation Plan and Expertise
ERP migration is one of the most critical points of failure that a company’s IT team faces, with some estimates placing the failure rate of a cloud ERP migration at 75% or higher.
These long and complex projects involve various stakeholders, which makes careful coordination and effective communication crucial for staying within the planned timelines and budgets. With 51% of companies experiencing operational disruptions at launch, implementing a new system requires specialist skills, but also collaboration across various stakeholders, clear guidance from business leaders and careful preparation, Velte said.
The collaboration becomes particularly critical when developing the plan, as it is only through input of all stakeholders that a clear picture emerges of the interdependencies laced throughout an organization with the existing ERP.
3. Execute with Care
While focus is typically placed on designing and configuring the business processes and associated flows, what often gets overlooked is understanding the data exchange between the old ERP system and other internal and external systems, said Volpe. So in addition to building and testing the core ERP processes with care, migrating existing integrations between the ERP and other systems is crucial for avoiding negative impacts on day-to-day business operations.
“These integrations will impact the requirements for the new ERP system’s data model,” he added. “Understanding them in detail is an essential step in not only informing data model creation, but also in developing migration and test plans for avoiding surprises and disruptions during migration.”
“These pillars emphasize the importance of selecting the appropriate cloud model, creating a strong implementation plan, and executing with precision and care for a successful ERP migration to the cloud,” he said.