Taher Haj-Yousef, Regional Manager for Rimini Street Middle East FZ LLC
Even before the Covid-19 pandemic triggered a hasty rush toward digital transformation among organisations of all shapes and sizes, there was intense pressure on companies to put digital transformation investments under the scanner and ensure they delivered expected return on investment. It’s no wonder why: according to an IDC study sponsored by Rimini Street, European organisations invested $272 billion on digital transformation in 2019, but only 26% delivered ROI from digital investments.
IDC’s research shows that 92% of CEOs globally are under pressure to execute a successful digital transformation and are faced with the challenge of delivering financial outcomes from their digital investments, sometimes with no additional budget. As such, organisations can no longer afford to experiment with digital transformation. So, finding resources within their existing budgets is now more important than ever. It is time for all projects to be re-evaluated and reclassified to ensure they either help reduce costs or generate new revenue streams. This requires collaborative work between the CFO and CIO.
Cloud is not a ‘One-size-fits-all’
Among the most dramatic recent developments in the world of IT is cloud computing, which has become a catalyst for digital transformation. One of the key findings of the IDC survey is that 72% of respondents said they would ‘increase or maintain private cloud spend.’ The same survey says that strong investment in private and public cloud digital platforms has emerged as the key for business agility and resilience. However, there are many cloud solutions out there including IaaS, PaaS and SaaS and organisations must carefully evaluate which approach best suits their business requirements.
Organisations starting out on their digital transformation journey usually choose a “small-steps” approach and adopt the pragmatic approach of a hybrid cloud model. This is because different workloads require different cloud strategies and there are many best-of-breed alternatives to moving to the vendor’s SaaS version. There is no “one size fits all” approach to cloud and there are alternatives to moving lock-stock to vendor offerings. Organisations need to make a call based on business case, business need, and technical and regulatory compliance.
This planning process has several steps. A company could decide not to move to the cloud at all and stay on their existing internal applications. For some organisations handling sensitive data it is simply too risky to allow data to be run on a public cloud platform. Some companies move their existing systems to a private cloud because this allows them to drop the costs of maintaining a data-centre, while still allowing them to protect their corporate data-centre as it is not on a public cloud platform. This has the benefit of removing capex and operational expenditure of running applications in-house, while benefiting from the scalability and efficiencies of a public cloud environment. And a third option is to do a “lift and shift” approach to public cloud such as AWS or Microsoft Azure.
Upgrading or migrating ERP
Over the past few years, there has been a marked emphasis among organisations in spending big on ERP modernisation, with varying levels of success. From a vendor perspective there is a significant drive to encourage customers to migrate their existing, stable installed ERP systems to new and still maturing ERP cloud platforms to fulfil this modernisation. From their perspective there are significant efficiencies in putting customers on a shared cloud platform. For example, it is easier to manage them, because switching to SaaS-based ERP applications requires customers to adopt a standard version of their existing application, reducing challenges for the vendor around maintaining them.
In reality though, ERP is not the source of innovation for most companies. Adopting a SaaS version of Accounts Payable or HR systems is very unlikely to improve relationships with customers or drive new revenue and growth opportunities. Most companies understand that innovation happens best at the edge of their core systems, because it allows them to dynamically adopt new technologies, such as IoT, analytics, AI/ML and other digital technologies to respond to changing customer demands.
Avoid vendor lock-in by switching to third-party support
Another concern for organisations considering a migration to a cloud-based version of their ERP is the reality of vendor lock-in. Another benefit of ERP cloud for the vendors is the ability to more easily encourage customers to consume more of their applications on their proprietary databases and infrastructure. It is much easier to switch on new users and modules as demand dictates and the more organisations use these cloud ERP applications the more embedded they become with one vendor, making it harder for them to switch out. ERP customers with installed, stable systems today need to consider these facts and make their decisions based on business priorities about what and when to upgrade or migrate.
Third-party support and solutions providers support can help maximise the life and value of current ERP systems by replacing software vendor support and delivering a premium service experience, leveraging a scalable, global support model to drive business results eliminating a vendor pressured migration to new cloud platforms. Whilst achieving strategic flexibility and freedom from vendor lock-in by taking control of IT roadmaps and making decisions based on business priorities. Facing no further vendor lock-ins or upgrade cycles, many clients are freed to migrate to the cloud of their choice on their own timelines.
Relevance for family-owned businesses in the Middle East
Using third-party enterprise software support is relevant to any organisation that wants to ensure the fruits of cloud lead to higher business productivity and smoother operations. Third-party support can enable an organisation to save resources – time, money, people – that can be redirected to digital transformation by reducing the annual vendor support costs and freeing up internal resource. It is particularly applicable to family-owned businesses which may be spread across several industry sectors but are under one business name. Such business models are popular in the Middle East, including the UAE. Integrating their IT systems could save millions of dollars and human resources. Whether we are talking of retail conglomerates, trading giants or food business enterprises, there is significant pressure to stay ahead of the competition and in such uncertain economic times driving costs out of the business enables them to run leaner and faster.
This is critically important as companies look to ensure their competitiveness in the future. According to McKinsey, 95% of economic profit is earned by the top 20% of companies, so even if CEOs are running massive organisations there is a real urgency to continuously innovate and transform the business model. This translates into pressure on the CIO to accelerate the assessment and assimilation of cutting-edge technologies such as AI and the Industrial Internet of Things (IoT) but is hugely challenging if – at the same time – you are having to plan a multi-year migration of your ERP to the cloud. The key for CIOs is to create the headspace to evaluate the right path for the IT strategy to support business critical goals.
Certainly, the pandemic has shown digital transformation can be accelerated and delivered at scale, so the CIO should be careful not to slow down progress with overly meticulous plans. Additionally, he should not be forced onto a vendor’s roadmap for change. The CIO has scope to demonstrate the strategic value of IT to the business and show how organisations can chart out an IT roadmap that will give them the foundations to be more responsive to market opportunities.