The Cloud Journey – lessons from cloud ERP for manufacturing customers

Profile picture for user brianssommer By Brian Sommer May 5, 2016
The benefits of cloud ERP for manufacturers are coming through thick and fast. Here's the current list plus lessons learned from recent implementations.

Cloud manufacturing
Over the last week, I’ve had the opportunity to moderate two different panels with a total of five different Plex customers. One panel was during Plex’s PowerPlex user conference (in Detroit) and the other was at the Manufacturing & Technology Conference & Expo (in Chicago). Their very real, personal comments regarding their journey with cloud ERP were noteworthy.

Before I get to their comments, it's worth noting that Plex has been a cloud vendor since 1997. It offers a multi-tenancy ERP solution that initially sold well to Midwest/Rust Belt discrete manufacturers. Automotive suppliers were (and remain) a particularly strong market segment for them. Since then, the company has expanded to more verticals (e.g., food producers), more geographic coverage and more complex functionality. I tell you this to put these panelists’ comments in perspective.

Speaker takeaways

  • Prepare the external auditors – I was really surprised to hear so much commentary from one panel regarding the need to prepare one’s external auditors for a shift to cloud ERP. Apparently, even major accountancies are still in need of proof points that data will be secure in a vendor’s cloud. European auditors were singled out more than others but regardless of where and who the external auditors are, they all came around once additional documentation and assurances were produced. (Editor's note: this should not surprise because of tests around division of responsibility and security but once the auditors understand where the technical details lay then they should have less systems testing than are required in on-premuse application scenarios.)
  • The need for external implementation help goes down dramatically with subsequent locations – Many companies used some external help with the implementation of their first plant/division. However, panelists from both events indicated that external help was not needed (at all) with subsequent implementations/conversions. When external help was required, some panelists relied more on other customers for tips/tricks/techniques than the vendor or external implementation partner. This observation has to be particularly disquieting to major implementers/integrators and could explain why one sees so many of the old-school integrators hanging out at on-premises ERP vendor events and not at cloud ERP shows. One of my clients last year went with a cloud Financial Accounting solution. Like these panelists, they had some external help with the first division they converted and are doing subsequent divisions on their own. (Editor's note: We noted something similar in a Workday implementation involving an acquisition and merger.)
  • With Cloud ERP, IT gets rethought – One panel had a lively discussion re: how their IT staff today is composed more of business analysts than hardware/systems software/application maintenance personnel. The skills IT must bring in these cloud ERP shops is more centered around analyzing and acting on the vastly expanded amounts of net-new and up-to-the-second data that is now available in these modernized systems. Unquestionably, the use of vendor maintained multi-tenant cloud ERP solutions is removing a lot of low value-added work (i.e., patching, maintaining and upgrading ERP software) from IT departments. The choice for IT professionals is to either passively wait for the change to impact them or to proactively expand their skillsets to remain relevant.
  • Version control and data consolidation are no longer issues – When we discussed economic issues re: cloud ERP, several panelists brought up something new. Prior on-premises ERP solutions in-use at their firms had one major problem: no two divisions/plants were on the same version of the software. More than one panelist indicated that some plants/divisions could be several versions back on support. Even if the divisions were synchronized from time to time, the implementation, tailoring and customizations each plant had made, made it hard to coalesce data across the enterprise. Finding out what was really going on in the company was time-consuming, frustrating and expensive. A key piece of the business case for cloud ERP was to actually have all plants/divisions staying in sync with the same version of software ALL of the time. This is one of those pleasant side effects that multi-tenant cloud solutions provide. (Editor's note: this has profound audit implications that play back to notes above.)
  • Cloud ERP means moving global compliance from your firm’s responsibility to the vendor – Because a SaaS vendor has multiple customers in a given geography, they possess the scale to identify localization, regulatory and compliance risks cheaper (and maybe faster) than a customer would. One panelist likened this to “Compliance-as-a-Service”.
  • User count exploded vis-à-vis predecessor systems – I heard several panelists describe how they had to offer (PC) mouse training to several groups of plant/operational personnel as they previously had little, if any, interaction with PCs, tablets or the old ERP solutions. Additionally, many companies have dramatically expanded the use, placement and access to real-time information by placing iPads all over shop floors. Now, most any worker can check product, inventory or other status items with a few swipes or screen touches in dozens or hundreds of places around a firm. The result has been a substantive increase in the number of system users for these firms. (Editor's note: one of the reasons we are seeing is because ease of use has become a priority in cloud apps. Salesforce pioneered this of course.)
  • Mobile and Cloud ERP changes the where, when and how of work – As the previous point mentioned, iPad use exploded in these firms. Interestingly, a review of the usage showed people like plant managers frequently checking in on 2nd shift work from the comfort of their homes. Executives were checking up on production status and other items while travelling. Salespeople were better able to quote prices and production dates from laptops and tablets while on the road. With a simple internet connection and a Chrome netbook, an iPad, laptop or other smart device, users can see all of the company’s data via access to the cloud. I know that sounds obvious but the enthusiasm of the panelists re: this attribute points to failures in prior solutions to truly deliver an easy to access mechanism for reviewing ALL corporate data. A related benefit to this Internet, interconnected world was the ability of these firms to go paperless.
  • Some handheld devices could be in jeopardy – There was some discussion re: the use of certain handheld devices on the shop floor. These devices can scan bar codes, read RFID tags, etc. Several panelists reported that with these devices often costing $10,000 each, using low cost tablets or netbooks could be a major capital savings wherever feasible. (Editor's note: we saw this during the visit to MFC Netform.)
  • A mobile device management solution (MDM) may be needed with cloud ERP implementations – One panelist indicated that cloud ERP has created hundreds of new users of the system. However, without a MDM solution to keep track of all of the tablets, netbooks, etc., there could be problems. Cogent advice…
  • Older on premises implementations often had a valley of despair moment but not so much with cloud ERP – I specifically asked all panelists about this phenomenon. Most responded that they experienced no such event during their implementations. One panelist did report that they did have a rough patch when they tried to move too much, too fast (sort of a bridge too far moment). To respond, they did a reset on the team , its goals and the project timeframe.
  • On-premises data centers may not be where you want to put your data – Data security questions were mentioned as something the management or boards of these companies were initially concerned about when they heard the company might be considering a cloud ERP solution. Numerous panelists pointed out that their firm’s security was nothing close to that used by the cloud solution vendor. One panelist told how they hosted a hackathon just to see which systems they had were most vulnerable. In their case, it was the shop floor machinery that could be most easily hacked.  The cloud ERP solution was the most bulletproof.
  • A novel disaster recovery approach – One panelist described how long it was taking for them to get their IT department to get them Internet access for their cloud ERP implementation. To get around this, this group used a Verizon mobile hotspot to do the job. They went live with this. Now, their fallback Internet access mechanism is the mobile hotspot. It’s cheap and not reliant on the ISP or hardware they currently have. (Editor''s note: the converse works as well where businesses are situated in areas that are prone to natural disasters)

Audience members asked some great questions. One wanted to know what was the one ‘unexpected benefit’ from going to a cloud ERP solution. Panelists responded that:

  • Their entire operation is more productive than ever before
  • The speed with which business analysts can get and analyze data is phenomenal
  • This project is pulling more initiatives (e.g., HR) into the cloud too

I also heard some very tweet-able comments from the panelists. These included:

  • “There is life after SAP”
  • “ERP implementations are terrible and should be avoided if at all possible”
  • “Our (different, varied, stitched together) systems resembled Joseph’s Amazing Technicolor Dreamcoat”

I particularly liked that last one!

My take

I’m still running into folks who possess unnatural fears about cloud technology. Yet, I can state, unequivocally, that these panelists did not suffer personally or professionally for these cloud ERP projects. In fact, their firms seem to be far better off for the experience.  I was struck with both the ease with which these executives spoke of their projects and successes and the abject lack of problems they encountered. None of this sounded like the older ERP projects I had so much exposure to in my career.

That said, I hope we can bring an end to needing panels like this going forward. The business world AND the shop floor have gone to the cloud. It’s time to start a dialogue on newer issues.