Are Firms Really Ditching Traditional, On-premises ERP for Cloud-Based Systems?
Your on-premise ERP may be costing you more than money. Read more for benefits you can expect from making the switch.
Yes. Professional services firms are ditching on-premises ERPs for cloud-based systems in droves. But the mass exodus began more than a decade ago–making cloud-based ERPs less of a trend than an urgent priority–or even a basic competency.
Organizations that remain loyal to their on-prem systems are taking on more risks than they might think.
Worse, they stand to get crushed by competitors that have been leveraging data to save time, slash costs, and scale their business for years.
In this article, we offer a realistic assessment of what firms stand to lose by keeping ERP systems on-premises. Then, we’ll finish up on a more positive note–and outline the benefits of making the switch.
What is Your On-Premise ERP System Costing You?
To help you understand the true costs of outdated ERP software, here are some specific examples of how your system could be holding you back.
1. You’re Leaving Growth Opportunities on the Table
You’ve likely come across countless articles touting cloud-based systems as the future of X or Y. But that’s no longer accurate. Cloud ERPs are the present–a basic requirement for doing business in the digital age.
Legacy systems were designed for a different era. We’re talking pre-big data, pre-AI, and maybe even pre-social media.
No matter how good your reporting tools are, legacy ERPs can’t surface insights in real-time, nor can they leverage the full benefits of automation, prescriptive analytics, and the advanced capabilities offered by Power BI.
Best case scenario: your ERP gets the job done without running into issues like cyberattacks, lawsuits, or non-compliance fines.
Still, if your current system doesn’t create value for your business, employees, or customers–you have a serious problem.
Whether you’re expanding through strategic acquisitions, preparing to IPO, or you’ve received an infusion of private equity funding, outdated tech forces firms to adapt to its limitations, rather than enabling growth.
Professional services firms need an ERP that scales with the business–and provides the agility needed to pivot when there’s a change in the game plan.
2. IT Dollars Are Earmarked for Maintenance
Per Deloitte’s 2020 Tech Trends report, 56% of CIOs had plans to roll out an Agile-like IT delivery model to drive innovation. Analysts also found that, on average, IT departments spend over 55% of their budget maintaining current operations.
The tension between IT’s needs and existing business processes can undermine a firm’s strategic goals. Maintenance costs swallow tech budgets whole–leaving little room for the types of proactive investments that maximize agility and business outcomes.
This problem is even worse for project-based companies—professional services firms, construction companies, government contractors. These organizations live and die by their ability to allocate resources based on future projections.
Legacy tech prevents firms from preparing for the unknown unknowns that could impact any of a project’s many moving parts. For example, money that might otherwise go toward advanced analytics tools is used to cover storage expenses, IT salaries, and other costs associated with maintaining servers, software, and devices.
3. Customizations Have Become Too Complex or Costly
According to Information Age, legacy ERP systems with “excessive customization” lack the flexibility required to respond to changing business needs.
And that was back in 2014.
At the time, early adopters from sectors like manufacturing and energy were learning first-hand what 10+ years of complex customizations can do to a business.
When more integrations enter the fold, it gets increasingly more difficult (and expensive) to maintain the system. Every upgrade means losing several hours to (manually) configuring workarounds for apps that should have been retired a long time ago.
Then you’ll need to test your work—checking for implementation errors that could impact the rest of the system. If you do find a problem, you’ll then need to track down the root cause. And hopefully, fix it on the spot—before checking your work again—before bringing the system back online.
All together you’re looking at hours of extra work, lots of opportunities for human error, plus any losses caused by all that downtime.
4. It’s Difficult to Integrate Departments, Locations, & Portfolio Companies
Many professional services firms work with disparate custom solutions that might not be very good at “talking to each other.”
Fragmented systems create silos between teams, locations, and portfolio brands.
That means users can’t look at the big-picture when making critical decisions–whether it’s allocating resources, setting sales targets, or ordering inventory. Instead, decision-makers must rely on gut feelings and past experience (aka assumptions and anecdotes) to fill in the blanks.
For example, front and back-office operations are either poorly-integrated or not integrated at all. Or, perhaps Dashboard A doesn’t connect to Dashboard B, making it impossible to gain complete visibility into organization-wide operations.
As is the case with customizations and integrations, the risk of fragmented systems increases exponentially as more variables enter the mix.
It’s hard enough to ensure all departments are on the same page when everyone works from one location.
But consider what might happen if your firm has multiple global outposts, warehouses, fulfillment centers, external sales or service teams, etc.? What happens if you’re buying up smaller companies?
Project-based firms face challenges integrating newly-acquired companies that may already be dealing with their own disparate systems. Often, those systems are either incompatible with your current solution or so old they’re a liability.
According to Harvard Business Review, between 70% and 90% of mergers and acquisitions end in “abysmal failure.” While every situation is different and M&As can fail for all sorts of reasons, technology integration is one of the key points of failure across the board.
What Are the Benefits of Moving Your On-Premise ERP to the Cloud?
We’ve gone over what happens when you don’t take action. The point isn’t to scare you into modernizing your legacy system. Instead, we want to make clear what’s at stake–then offer some hope for the future.
The benefits of moving from an on premises ERP to the cloud range from cost-savings and flexibility to streamlined processes and tighter security. In these next few sections, we’ll shift gears and highlight what you stand to gain by moving to the cloud.
1. An All-In-One System
Cloud-based ERP solutions bring all data into one place–and sync updates across the entire system, in real-time.
One of our clients, FLOCK Speciality Finance, moved from an entry-level QuickBooks account to the all-in-one Dynamics 365Business Central.
According to Accounting Manager Daniel Paul, the move was prompted by investor feedback– who told him it was time to graduate to a “big boy’ system.”
Investors were concerned that FLOCK only had a single login for QuickBooks–with Paul regularly logging in from his laptop. Had the computer crashed, they would have lost critical financial data.
The company was able to streamline portfolio management and gain more control over financial management by replacing QuickBooks with Dynamics 365 Business Central. They also were able to integrate existing solutions like Microsoft Office 365 and Sharepoint with D365–and leveled up reporting capabilities by integrating with Power BI.
If you’re using Dynamics 365, the entire system is unified under Microsoft’s Common Data Model, which ensures everyone speaks a common language–using the same terms and naming conventions. D365’s emphasis on hyper-connectivity helps firms collaborate across all Microsoft solutions including Office 365 and the Dynamics 365 CRM and ERP applications.
You might also use Teams to create a shared digital workspace that combines communication & collaboration tools with Microsoft productivity apps (Excel, PowerPoint, even LinkedIn data).
2. Access to Real-Time Data
Accurate planning and forecasting are huge for any company–but they’re a matter of life and death for professional services firms. On premises systems can’t deliver the information needed to make critical business decisions.
Understanding what’s happening inside the business allows you to visually gauge business performance–and course-correct as needed. Transaction data from the ERP, along with data from other connected apps, IoT sensors, robots, social feeds, etc. can be fed into BI/analytics solutions to surface actionable insights in real-time.
Cloud-based ERP systems also make it easier to connect with clients, vendors, employees, and other businesses — enhancing collaboration and productivity.
Firms also need a way to understand their existing talent—to ensure long-term satisfaction and ensure employees continue to evolve their skills. Real-time data allows you to monitor performance, identify opportunities for improvement, and intervene, when necessary.
As mentioned above, you might also use performance insights to drive growth through incentives like BPB. The idea there is since individual expertise is the product—it’s good for the bottom line to reward team members for generating value.
3. Greater Business Agility
Modern ERPs like Dynamics 365 are designed with agility in mind. They’re more accessible and easier to use than most legacy systems, with technology and baked-in processes that help employees analyze, understand, and act on critical insights.
This, in turn, means firms can address challenges and opportunities—as they emerge. They can add new revenue streams, adapt sales strategies, and change workflows, as they gather more data.
Firms using cloud-based ERP systems also have more visibility into what’s happening across the business, enabling different teams, functions, and portfolio companies to work together to improve performance–whether they’re spread across the entire globe or working from the same building.
4. Improved Resource Management
The days of manual time-and-materials billing are long gone. Rising expectations from clients, along with increasingly complex regulatory requirements are forcing firms to evolve their practices.
As your business grows, it becomes harder to know who has specific skills, or availability. There’s a real need for automated resource management that just isn’t possible with on premise systems–or even fragmented cloud-based ones.
As an example, one of our clients, Global Strategy Group (GSG) opted to move from a fragmented system to Dynamics 365 to improve project control, boost productivity, and manage client relations.
Prior to the move, the firm was trying to use Salesforce as a project automation system. But as they grew, the sales-centric CRM could no longer keep up with increasingly complex projects.
Andy Ho, Senior VP, Technology says that the biggest advantage of D365 is that it provides a single source of truth across all accounts and business contacts. Now, we can track everything from opportunities through to projects.
GSG has also seen great results from embracing Power BI–particularly where utilization reports are concerned. The platform has made it easy to see how employees are spending their time and pulls in billing rates, hours–allowing managers to measure utilization against what was initially scoped out. As a result, the firm can leverage this data to improve project quotes, catch billing mistakes, and make smarter decisions about how they allocate billable resources.
Final Thoughts
Ditching your on-site ERP system in favor of an all-in-one cloud solution is no longer on the cutting edge of innovation. It’s become a workplace essential most firms now take for granted.
If you can’t manage resources, ID opportunities, or make informed business decisions–you can’t scale.
A cloud ERP like Dynamics 365 not only solves these problems. But it also sets the stage for the future transformations that will allow you to capture–and sustain–a competitive advantage.
At the same time, we know how challenging it can be to take on a project of this scale without an experienced partner on your side.
Velosio has 30+ years of experience with Microsoft implementations. Experts know the ins and outs of on premise ERPs like AX and NAV–as well as how to make the most out of Dynamics 365’s newest capabilities.