How to Boost the Back Office by Moving to the Cloud

When it comes to back office enterprise functions, from finance and HR to supply chain, challenges are everywhere. For instance, there is tremendous cost pressure facing companies who always want to do more with less. Then, there are the large, monolithic, heavily-customized on-premise ERP systems most organizations invested in during the early 2000s — to the tune of nine figures in some cases — that are now sprawling with bound-together applications and a complex web of integration. Finally, failures of complex IT systems have led to vulnerabilities and security incidents that make companies chomping at the bit to offload that risk.

According to Matt Richards, Managing Director, Advisory at KPMG, the best way to address those challenges is to move back office functions to the cloud. “Organizations will do it at some point; it’s just a question of when — so they might as well do it now,” he says. “Clouds also cost less, while cloud providers generally have vastly better security capabilities than what a traditional Fortune 100 company can provide.”

In addition, moving to the cloud tends to make organizations embrace best practices and drive out customization, he adds. “Clouds are inherently restrictive, with no forcing of function, which I think is great,” he says. Companies who move to the cloud now are still on the leading edge, he explains: “There is still a real opportunity to influence the vision.”

An integrated, holistic platform for the back office

In particular, Richards believes an Oracle cloud-based environment will provide organizations with the best opportunity for success. While he says Oracle missed the initial wave of the cloud, in which companies began to move some people functions, such as HR and CRM to platforms such as SalesForce and Workday, now the company is enjoying a unique space and time in the marketplace. “They have made clear it will not miss the second wave of cloud opportunity,” he says.

Oracle is the first provider to offer a fully integrated cloud application that encompasses the entire back office and has the confidence in  areas including HR, finance and supply chain. “It’s a really interesting situation because Oracle’s game plan is not to convince clients to buy a best-of-breed application, but a holistic platform,” he says.  Today, streamlining the back office is all about simplification, he explains — that is, purchasing one integrated platform from one provider. 

“It’s a really good time for Oracle — I think this year is going to be monstrous for them in the finance space, for example,” says Richards. An integrated platform is not possible for all industries — such as healthcare and manufacturing, he adds. But with others, such as service, media technologies and logistics, “It’s now entirely possible.”

Recently, KPMG worked with a prominent media company to implement a large, Oracle cloud-based back office for their organization. The company had outgrown its technology, with an implementation almost frozen in time. This was proving a near fatal limitation on the company’s growth. The cloud was particularly useful for the organization because it had made many small acquisitions — and the cloud is, inherently, infinitely scalable, says Richards. “In theory you can’t outgrow it, you just add to it,” he says. “It is also iterative, so it is continually updating without the company having to pay for big upgrades.”

Other successful Oracle cloud implementation examples are more tactical, he adds. For instance, if implemented correctly, the cloud enables the HR department to stop doing transactional work and move to more strategic work. “Cloud offers the ability to automate, to participate in the next iteration of robotics, and move to where the conversation becomes more value-based,” he says. In one client case, when the company implemented an integrated performance management system, earnings per share grew by 30percent which was attributed to the project. “That’s what really excites us about this market,” says Richards.

Advice for Making a Successful Back-Office Move to the Cloud

1.    Cloud means change management. The old way you did a project 10 years ago doesn’t work with the cloud, so change is a big part of cloud implementation. “Cloud projects are really just big change management efforts — as much as 25 percent of the budget,” says Richards. “Think about it — clouds are restrictive so you have to adhere to the operating model it prescribes, you can’t customize it.” Explaining to teams why things are changing and why it matters is critical, but also difficult.

2.    The business case is essential. A bad business case leads to a bad project, Richards explains, which is particularly challenging in the cloud. “It used to be that you could just add funding, but cloud business cases are different because the commitment of dollars is over such a long period of time.” When you buy a cloud solution, you are buying a platform that will likely tie you down for a decade, with a ten-year commitment, according to today’s renewal rates. “You’re getting married to that, whereas on-premise solutions are only around as long as the software depreciates,” he says. “So you have to think about whether you want to be married to this solution, which is a big choice to make.”

3.    Dealing with data is a cloud challenge. Clouds are restrictive in process, but also incredibly restrictive when it comes to data, says Richards. “In legacy applications, you can make data do what you need it to do. If you want an input of 1 instead of 2, no problem.” Cloud, however, is more restrictive. Getting data from old systems is also not easy. “You would think scrubbing would be turnkey, but that’s not how it works,” he adds. “Data is very hard to convert — particularly employee payroll data.”

For those companies who move their back office functions to the cloud and do it right, the savings can be “tremendous,” says Richards — up to 30-40 percent. The results certainly outweigh the challenges, especially, if at all possible, the organization purchases one integrated platform — from one provider, such as Oracle, for the entire back office. “Ultimately, all back office software will be in the cloud,” he adds. “This is a great time to move forward.”