Cloud ERP Assessment Model

Cloud ERP Journey from Board Room whispers to serious discussion : ERP Maturity Model

Executive Overview

Cloud which was an interest area till few years back is fast becoming a major strategic differentiator for CIO’s and organization top management. We are not far (few years) from a situation where Cloud hosting/implementation will become a commodity like outsourcing and global delivery models. When organization started outsourcing from on premise to near-shore, far-shore or off-shore we had similar apprehension. If we look the situation today any implementation unless constrained by any local factors ranging from law, privacy requirements, anti-offshoring sentiments etc etc. Could ERP or ERP SaaS market is expected to grow from $21.2 B in 2011 to around $78.4 B by the end of 2015. For this blog purpose we will be using the word Cloud ERP

•       The Enterprise Cloud/SaaS was initially adopted mostly in CRM area with HCM picking up in last 2-3 years.

•       Next 5 years will see further adoption of SaaS in enterprise space with Supply Chain and Project & Portfolio management leading followed by traditional core ERP (Forrester & Gartner)

•       Gartner’s IT Market Clock for ERP Platform Technology indicates that multitenant SaaS-based ERP is maturing rapidly, driven by time-to-market and cost advantages

In an emerging area like cloud, there are many short term and long-term tasks and benefits. Some of these are related and some not. But, in developing a sustainable long-term architecture ROI from Cloud ERP , it is best to be aware of the various points of entry and create a strategy that ensures alignment over time. Cloud deployments requires significant and often far-reaching changes to truly reap all the promise of this new model for ERP. Successful adoption of a Cloud model depends on careful planning that addresses the full range of capabilities implied by a comprehensive Cloud Computing strategy.

** For this blog purpose, I am using ERP as term to cover ERP, SCM and PPM per Gartner report.

Introduction

This blog describes the parameters which can be used by an organization model their organization maturity to have a ERP implementation on cloud.

Let’s talk about key concepts in modelling a Cloud ERP

Sectors: If we take inputs from ITIL and CITP there are 8 key sectors which determine how an organization can model their readiness for a Cloud ERP. Obviously there can be additional parameters which can be unique for an organization which may not be covered under these sectors which can be included in an organization specific analysis.

 (***FYI, Methodology for The model build and scoring. For sector identification I have used inputs from ITIL and Prince2 while for sector analysis and scoring model I have used Stanford  PPM inputs).

Business & Strategy – Sector Contains high-level sponsorship that allow the Cloud ERP initiative to proceed. This includes such things as business motivation, expected benefits, guiding principles, expected costs, funding model, etc. Capabilities such as service selection and service level agreements gain relevance in Cloud initiatives as well. The Cloud ERP have much more relevance to be based on a ITIL model then and traditional ERP.

Architecture – Sector Contains capabilities concerning the definitions of the overall architecture and guidelines for various implementers to ensure adherence to the architecture. Capabilities fundamental to cloud architectures, such as resource pooling, interoperability, integration, and self-service are considered in the model. Though these are important with integration and interoperability as two key ones.

Infrastructure – Sector Contains capabilities concerning the service infrastructure and tools that provide the technical foundation for the Cloud ERP. For an organization implementing ERP on cloud infrastructure (Application patch level, upgrades) are more important than physical infrastructure which is also very important if ERP is hosted on an internal environment.

Projects, Portfolios & Services – Planning and building of cloud services, and management of the portfolio of services.  Any organization looking for Cloud ERP should be looking for strong portfolio management then project management as cloud ERP implementation along with other Cloud initiatives will lead for a greater portfolio management then project management as configuration/implementation are as vanilla as possible. In my view as Cloud services will keep becoming mainstream strategy for organization, portfolio management will increase in importance.

Operations – Sector for post deployment aspects of cloud service i.e. the Operations, Administration, and Management aspects of the cloud environment. This includes capabilities for the delivery of self-service functions, and change management. This is the area of biggest organizational advantage or disadvantage depending on operations management.

Organization – Contains capabilities concerning the development of organizational competency around Cloud ERP including the organizational structure and skills development, as well as executive sponsorship and organizational authority.

Governance - These include policy management, risk management, and auditing capabilities. Maturity and adoption of adequate governance is a leading indicator of the overall success of a Cloud ERP initiative.

These eight sectors, although interrelated, are distinct, and they form a means of organizing an assessment effort, as well as the development of a roadmap. Successful transition to Cloud ERP requires adequate progress in all of these sectors. Inevitably an organization will be more advanced in some sectors  than others. Therefore, it is important to be able to measure the relative weighting with in each sector. The weightage is based on organization importance ( Perceived or defined) for different sectors keeping a hosting agnostic view.

I have put in my relevant organization weightage (obviously my personal view) The scoring is minimum 1 and maximum 10. I would recommend an incremental of 1 which helps in putting clear decision scoring. In an organization the weightage assignment needs to be done by a group of participants which include

-          Sponsors

-          Governance and strategy

-          Architecture

-          Operations

-          Project/Portfolio management

-          System owners

-          Others

Now the scoring model is

Option	As-Is (In-House)	Hybrid	Cloud	Weightage
Business & Strategy	Score	Score	Score	2
Architecture	Score	Score	Score	3
Projects, Portfolios & Services	Score	Score	Score	1
Operations	Score	Score	Score	2
Organization	Score	Score	Score	1
Governance	Score	Score	Score	1
Infrastructure	Score	Score	Score	1
Total

In line with Stanford PPM suggestion I would recommend a dramatic scoring or 1-3-5-7-9 to achieve clearly visually comparable results.

A sample scoring can be

					Scoring
Option	As-Is (In-House)	Hybrid	Cloud	Weightage	As-Is (In-House)	Hybrid	Cloud
Business & Strategy	1	3	5	2	2	6	10
Architecture	3	1	5	3	9	3	15
Projects, Portfolios & Services	7	3	5	1	7	3	5
Operations	1	3	5	2	2	6	10
Organization	1	3	5	1	1	3	5
Governance	3	1	7	1	3	1	7
Infrastructure	1	3	7	1	1	3	7
Total					25	25	59

This scoring shows that Cloud deployment scores the most.

Giving a visual representation to assist in decision making.

Maturity and Adoption Scoring

Knowing the sectors where organization give greater importance is important but assessing  if the organization is mature enough to adopt such initiative a Maturity and Adoption assessment needs to be done. CMM model comes in handy for this.

Within the software industry, maturity is frequently related to the Capability Maturity Model (CMM) and the CMM successor, the Capability Maturity Model Integration (CMMI). The Cloud Maturity Model parallels this understanding and measures Cloud capability against six defined maturity levels.

The maturity levels progress from ‘None’ up to ‘Optimized. Generic not specific to Cloud ERP.

The six levels of maturity used in the Cloud Maturity Model from lowest to highest are:

None - There is no Cloud approach being taken. No elements of Cloud are being implemented.

Ad Hoc – Awareness of Cloud Computing is established and some groups are beginning to implement elements of Cloud Computing. There is no cohesive Cloud Computing plan being followed.

Opportunistic – An approach has been decided upon and is being opportunistically applied. The approach has not been widely accepted and redundant or overlapping approaches exist. It may be informally defined, or if documented, may exist primarily as “shelf ware”.

Systematic – The approach has been reviewed and accepted by affected parties. There has been buy-in to the documented approach and the approach is always (or nearly always) followed.

Managed – The capability is being measured and quantitatively managed via some type of governance structure. Appropriate metrics are being gathered and reported.

Optimized – Metrics are being consistently gathered and are being used to incrementally improve the capability. Assets are proactively maintained to ensure relevancy and correctness.

Adoption

Adoption measures how widely Cloud Computing is being accepted, embraced, and applied within the enterprise. For smaller organizations within a single line-of-business, maturity and adoption are usually tightly related since there is a single approach to Cloud being followed by the entire organization.

However, within large companies with multiple divisions or lines-of-business this is not usually the case. Understanding and knowing the previous adoption of Cloud computing initiatives is critical for Cloud ERP implementation.

No Implementation - There is no current implementation anywhere in the organization of the capability being measured.

Discrete Resources - The capability is established for a single resource (e.g., application, hardware system, discrete organizational workgroup [e.g., project]).

Across Collections - The capability is established consistently for a collection of resources, primarily defined by the resource affinity or coupling in relation to a higher level function (e.g., suite of related applications).

Across Pools - The capability is established consistently throughout a pool of resources, primarily defined by a common administrative purview (e.g an organizational division).

Across Units – The capability is established consistently within an operating unit (e.g., applications or resources across multiple independent operating unit or subsidiary).

Across Clouds – The capability is established consistently across an entire 'enterprise' and may span cloud providers (i.e., all applications, all data centers or all organizational units, or multiple clouds are using the same approach).

Depending on Cloud maturity the organization and adoptability the organization can understand their position which is critical to understand that this will provide a basis to know how easy or difficult Cloud ERP journey would be.

In the plotting above Org C and Org B may have better probability of successful Cloud ERP than Org A

Building and Applying the Cloud ERP Maturity Model

A detailed assessment of an organization requires interviews of a variety of roles within the organization including executives, enterprise architects, developers, project and program management, operations, etc. The implementer then uses the details of the Cloud Maturity to assign levels of maturity and adoption for each sector. These scores can then be presented in a variety of forms depending on the audience and the amount of detail desired.

I generally like the heat and Spider maps as they provide a nice visual representation. In the examples that I have used, I can combine the sector and Maturity & Adoption together.

This sample heat and spider map shows that if organization is able to improve on certain architecture capability then it can be a good Cloud ERP candidate as once on cloud ERP operational needs are reduced which is least optimized area for this organization.  While deciding on ERP on cloud its paramount to select right partner from both hosting and implementation perspective.

Conclusion

Cloud ERP can reduce the cost of delivering services, and increase business agility. Achieving these benefits requires a systematic, widespread, holistic, and pragmatic approach to Cloud ERP options. Most of key ERP vendors now offer ERP on cloud option.

The market is growing at exponential rate and will provide excellent opportunity for organization to optimize their out go based on their business strategy and budgets. Specially in this tough economic climate.

I welcome comments and feedback on my thoughts which I can help me refine.

Best Regards

Ashish