The global pandemic has seen more and more companies accelerate their move to the cloud and become more cost-efficient, agile, and innovative. As an on-demand, self-service environment, the cloud is now vital to achieving end-to-end digital transformation. Now, more than ever, the cloud is helping businesses reinvent and outmaneuver uncertainty.
Cloud migration initiatives, such as Enterprise Resource Planning (ERP), Enterprise Performance Management (EPM), Human Capital Management (HCM), Business Intelligence (BI), and others are critical for achieving real-time and updated performance and efficiency. As such, cloud migration initiatives require careful analysis, planning, and execution to ensure these transformation projects complete in time, within the allocated budget, and deliver on the cloud’s promise.
Many organizations depend on their ERP, or general ledger system, to manage finance, human resources, supply chain, and inventory. And although ERP migration to the cloud is becoming a focus area for these organizations, there is a lack of best practices and specific guidance around what it will take to complete these projects successfully. To help address this gap, I got a chance to sit with two of our experts at Informatica to get their advice on running successful cloud transformation initiatives. Phillip Nifong is an MDM Specialist at Informatica with over 20 years of experience in finance data management. Robert Paramore has more than 18 years of experience in the finance domain and works at Informatica as an MDM Solution Architect. Excerpts from this discussion follow below.
Prash: So, If I’m planning an ERP migration to the cloud, where and how do I get started?
Phillip: The best place to start is by asking for copies of the internal and external reports delivered by Finance. Start mapping current process flows and the business owners responsible for each step. You have to document mapping/crosswalk from the ledger to each report. You should be prepared to change processes and adopt new methods when embracing cloud technology. Also, pick a strategic thinking integration partner, someone who had done it before, possibly many times.
Robert: Typically, most companies start by outlining their goals when moving to the cloud. Is the goal to lift and shift the existing dimensions and transaction data to the cloud with zero changes and updates? Are they looking to this opportunity to streamline their current reporting and chart of accounts design? Frankly, we see most companies utilize this as an opportunity to do the latter. When deciding to use this as an opportunity to transform, organizations need to create a checklist covering how the chart of accounts and reporting structures change on the cloud. For example, streamlining the hierarchies, changes to the accounting blocks (for example: move from 6 to 8 characters to support a growing number of accounts), etc.
Prash: What are the elements of a good migration plan?
Phillip: Three things come to mind. First, the best migration plan has the support of leadership. Two, the project should state clearly defined goals with set objectives, milestones, and dependencies, along with the success criteria of each stage. And three, it streamlines the decision-making process but includes regular updates to all impacted such as finance system users, administrators, and business owners, along with their information technology counterparts. Communication between teams and ensuring everyone has a common understanding of the changes and the quality control procedures are vital in implementing the project on budget and on time.
Prash: From a data transformation standpoint, what are some of the things that we need to be aware of during these migration projects?
Robert: Almost every project like this involves changes to hierarchies and dimension data as part of the data migration. From a data transformation point of view, there are several things required. Typical projects involve redesigning the chart of accounts, changing accounting code blocks, expanding or shrinking the number of segments, maintaining legacy mappings in the new system for historical reporting purposes, etc. During these projects that run for months, your regular transactions continue, and reporting processes don’t stop. You have to look at the impact of these changes and have a clear plan to migrate both current and future states.
Prash: Does the complexity increase based on data volumes and the number of ERP systems involved?
Phillip: Yes, complexity and project timelines increase if you have more ERP applications. Most companies will retire on-premises applications one or a few at a time. Depending on the ERP system’s nature, you may have to support multiple ERPs at the end of the project. Change management is critical in such a setup, as the lack of centralized control can drive a higher cost and longer implementation times.
Robert: That is correct, as Phillip said. Simply put, the more ERPs involved, the more complicated the process becomes, and the longer the project takes. I have seen implementations that consolidate 45 ERPs down to 5 or a more modest 5 to 1. Complexity also arises from the quality of the data. Not having tools to address data quality issues and standards can multiply the complexity by many folds. Hierarchy rationalization is another considerable challenge. You will have to analyze existing hierarchies and dimensions to see if they are utilized and are needed in the future state. You may have to redesign the chart of accounts and understand if there is enough space in the code block for future growth. You will also need to understand if your natural accounts are organized in ranges or if the current ranges have so many exceptions they no longer matter.
Prash: Is this a project you can manage with current resources or get help from outside. Perhaps system integrators?
Phillip: Invest in a system integrator as they bring tremendous experience managing similar initiatives. My recommendation is to combine the in-house expertise you have with system integrators and advisory services. Partners can augment your staff while bringing expertise, best practices, and tools to ensure you don’t feel the full burden. Partners also help you envision the end state goal based on their experience. They will also help you challenge the status quo (“This is how things always have been done” mindset) and help to manage the reluctance to change.
Prash: Who should be involved? Business, Technology, Both?
Robert: A successful migration effort involves a combination of both. In the beginning, leadership at the executive level is a must-have. Throughout the project, both business and IT will be required to work together. The business has a higher engagement and often has a dedicated project manager to ensure business and finance teams clearly understand the legal, regulatory, and internal reporting needs.
Prash: What is an estimated time for carrying out a transformation initiative like this?
Phillip: These projects range from 3 months to multi-year. You can shorten the time by having a good plan and leveraging the tools.
Robert: I agree with Phillip. I have been on projects where we have seen tools alone helped to reduce the implementation time and cost by 20-30%.
Prash: Thank you, Phillip, and Robert. Your advice is of great help.
I hope you all enjoyed reading part 1 of this interview with our experts. While we touched on some of the key topics involved in these migration projects in this post, in part 2 I will discuss more details about the tools and technologies available in the market and how they can simplify these large migration projects.