By: John Foley
For more than 25 years, enterprise resource planning software has helped companies manage all aspects of their operations, from procurement and manufacturing to financial reporting. Now those old, complex systems are giving way to a new generation of cloud-based ERP applications that offer companies big advances in automation, ease of deployment, and artificial intelligence-based analytics.
What makes cloud ERP so different from the on-premises software that CIOs and CFOs have managed and relied on for years? And what do the changes mean for the way their companies operate?
Oracle CEO Mark Hurd tackled those questions in a wide-ranging conversation with Ray Wang, founder and principal analyst of Constellation Research and one of the technology industry’s leading ERP experts. The discussion, at Oracle’s Redwood Shores, California, headquarters, touched on the myriad opportunities for business-process improvement with the new generation of cloud ERP applications, and the potential to reduce capital investment in the systems and data centers needed to run on-premises ERP.
While many companies are still early in cloud ERP adoption, uptake is accelerating. “There are multiple factors driving cloud ERP,” Hurd said in the conversation with Wang. “First, it makes a ton of sense to CFOs.”
CFOs like the fact that cloud ERP powered by AI, machine learning, and pattern recognition can automate routine financial management tasks while reducing dependence on custom reports, Hurd said. That automation results in better, more timely reporting and fewer resources spent on the data integration required for custom reports.
Regulatory compliance is a leading use case for AI-driven ERP, Wang said. In Constellation Research’s 2018 survey of CFO priorities, 41.9% of respondents identified compliance as a top priority.
“The compliance world is increasing,” Hurd said. “All of that has to be automated.” AI-driven reporting reduces the time and resources required for compliance, he said.
Risk management is another top CFO priority, cited by 36.8% of respondents to the Constellation survey. Corporate leaders, Wang said, want to know: “What’s my company’s risk? What’s my appetite for risk? How do I decide what to do?”
AI-driven cloud ERP can help answer those questions. Here, too, the automation and intelligence built into the applications promise to simplify the busy work that occupies finance teams.
Related: Find out about Oracle ERP Cloud Solutions
CFOs like the fact that cloud ERP can help them “get rid of spreadsheets, get out of customizations, lower costs, and get better reporting,” Hurd said.
The conversation turned to the complexity that has overtaken corporate information technology environments after years of buying, building, integrating, and customizing systems and software from many different vendors. Systems integrators flourished as CIOs sought help putting their disparate systems, including ERP applications, together.
There’s growing recognition among business leaders that this decades-long buildup of IT complexity is not only difficult to manage, but also a drain on resources that companies could otherwise use to invest in new technologies in support of business innovation. “The money is tied up keeping this kludged environment up and running,” Hurd said.
That situation is “unsustainable,” Hurd said, and a recent Oracle survey shows that CFOs are looking for a way out. The most-cited reasons for moving to cloud ERP are avoiding the upfront investment in infrastructure, the lower cost of ownership, and avoiding the upgrades required of on-premises software.
The pendulum has begun to swing from those heterogeneous IT environments to a centralized model managed by the cloud vendor, and that’s a game changer, Wang said. “The intersection of ERP and AI is shifting the way people are buying,” he said. “They’re not buying a finance system; they’re buying the ability to ask a question.”
Increased Focus on Strategy
Cloud ERP paired with machine learning can help users identify “next best actions,” Wang said. For example, the cloud service might help a business leader answer the question, “Where do we grow next?”
Such capabilities may be exactly what CFOs need as their roles become more strategic. Constellation Research says the job of today’s “postmodern” CFO involves a shift from providing static forecasts to providing rolling, agile forecasts and imparting enterprise-wide know-how.
These new-style CFOs are also much more focused on information security. Cybersecurity was the #1 priority in Constellation Research’s 2018 CFO Priorities survey, cited by 82.9% of respondents.
A few years ago, CFOs might have been reluctant to put corporate data in the public cloud, but those concerns have faded as evidence grows about just how difficult it is for companies to maintain the security of their on-premises systems.
Increasingly, business leaders see ERP cloud services and new capabilities such as AI and Oracle’s Autonomous Database as a way to take some of the pressure of security and compliance off their shoulders, so they can focus on business opportunities and execution, and put it on the shoulders of cloud vendor experts.