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TABLE OF CONTENTS
1 2
Executive Cloud ERP Drivers for an
Summary System for Enterprise Cloud
Enterprises ERP Platform
3 4
Cloud ERP Key Takeaways
Evaluation
Criteria
Page 9 Page 14
Page 16 Page 20
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Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 3
underway. Take the example of a decision by chaos, disintegration, inconsistent
leading global beauty company Avon to halt governance, and lack of visibility and
the rollout of SAP’s new Order Management control into finances and key performance
system, with the cosmetics giant having indicators—requiring more resources to
to take up to a $125 million charge for the patch and maintain the hairball of systems.
failed project.1 In another example, a newly
The answer? Deploy a cloud-based ERP
released audit report has found that the price
system at the subsidiary level, which can
tag for troubled SAP project will skyrocket to
sidestep the proverbial Morton’s Fork.
nearly $1 billion.2 There are many more such
examples of large projects that not only fail However, selecting a cloud ERP vendor can
more often but also deliver less. be challenging and making the right decision
for your business is key to a successful
That brings us to the million-dollar question—
ERP implementation. There are several
if an enterprise is stuck with on-premise ERP
factors that need to be considered beyond
at the corporate level but does not want
evaluating just the functionality offered by
to go through the painful experience and
the cloud ERP solution.
costs at the subsidiary level, what are its
options? What is stopping it from pushing A thorough evaluation demands
the on-premise ERP system at the corporate making sure that the cloud vendor
level out to its subsidiaries? From harsh has the capability to support your
experience, enterprises know that such a business needs as they evolve
step would require enormous resources in
over the course of years and
servers, software and network infrastructure,
IT personnel, training, and maintenance
decades, essentially future-proofing
costs just to manage local ERP systems. your business.
Implementing the system and integrating it This paper proposes several evaluation
with the corporate office could take months, criteria as a starting point for what you, as a
if not years. Equally undesirable is letting business leader, should be looking for in a
each new subsidiary keep their own legacy cloud ERP vendor.
systems or allowing them to choose their own
solutions—a certain recipe for operational
1
http://www.informationweek.com/software/enterprise-applications/avon-pulls-plug-on-$125-million-sapproject/d/d-id/1113061
2
http://www.pcworld.com/article/2691712/price-tag-for-troubled-sap-project-will-skyrocket-to-nearly-1-billion-audit-says.html
Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 4
Chapter 1
A cloud-based ERP system at the subsidiary Although this hybrid ERP architecture
level lets companies run the equivalent of two can be created with a combination
ERP systems at once: one at the corporate of systems, a model that enables
level and one at the division or subsidiary
a third-party cloud-based ERP
level. It enables organizations to keep existing
system at the subsidiary level excels
ERP investments at the corporate level, while
empowering divisions or business units to
because of the inherent advantages
innovate with a second ERP system. of rapid and scalable deployment.
Cloud-based solutions for ERP, financials, The end result gives headquarters the real-
CRM, ecommerce and supply chain time visibility it needs, at a much lower price.
are increasingly being implemented at This model enables subsidiaries to configure
subsidiaries, divisions and geographic ERP to their own special needs and support
locations of multi-entity companies. This hybrid their local requirements. It also ensures that
approach, also known as a two-tier model, gives a remote subsidiary does not end up with a
organizations lower cost, faster time to value cumbersome, hard-to-maintain on-premise
and the cross-enterprise transparency of a cloud ERP deployment.
solution, while enabling the company
The model offers other benefits such as
to preserve its investments in on-premise ERP
lower capital and ongoing IT costs, greater
at headquarters.
operational efficiency and visibility, increased
Cloud ERP systems can be quickly and speed and flexibility, support for regulatory
affordably implemented, rolling up financial and geographic requirements, and getting
data through pre-built connectors to a SAP or acquisitions or new subsidiaries up and
Oracle system at headquarters. running faster and ensuring local operations
Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 5
Figure 1. Cloud ERP Adoption Plans. All Respondents
Already Done So
2%
Don’t Know
17% Within the Next
3 Years
26%
Unlikely to Happen:
We Will Keep the
Majority of our ERP
Systems On-Premises for
the Foreseeable Future
30%
Between 3 to 5 Years
19%
More than Between
10 Years 5 to 10 Years
2% 4%
can be productive quickly. This puts forward advises CIOs and application leaders of
the case for large enterprises standardizing financial services institutions to "consider
on a single cloud-based ERP at the subsidiary cloud ERP as a potential replacement for
level, enabling more rapid deployment aging core ERP systems that are out of
with less overhead. Implementing all the support or running on an old technology
subsidiaries on the same cloud-based system platforms (such as mainframes)".
brings further advantages because it is faster, According to Louis Columbus, a Forbes.
easier and cheaper to link, coordinate and com contributor and CRM, Cloud
govern the local ERP instances. Computing, ERP and Enterprise Software
expert, two-tier ERP is the Trojan Horse
Growing Popularity of Enterprise
of cloud ERP. If Gartner had asked their
Cloud ERP
respondents about if and how cloud-based
Enterprises in the market for ERP solutions are
ERP systems are being considered and
increasingly considering a cloud strategy at
used in two-tier ERP strategies globally,
the subsidiary level.
their survey and previous forecasts would
• A study completed by Gartner titled "Survey have been significantly different, i.e.
Analysis: Adoption of Cloud ERP, 2013 cloud ERP adoption is faster than Gartner
Through 2023" published in January 2014, predicts, he suggests.3
3
https://www.forbes.com/sites/louiscolumbus/2014/02/07/why-cloud-erp-adoption-is-faster-than-gartner-predicts/
Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 6
• Saugatuck Technology’s 2012 Cloud just a few years, suggesting a challenging
Business Solution Survey predicts that transitional period for enterprise IT leaders
through 2016, “hybrid” cloud deployments and organizations.
will become the enterprise platform of
My company’s preference for deploying
choice, with at least three quarters of new
new business software (on a continuum from
enterprise IT spending involving hybrid or
on-premise to Hybrid-Cloud to pure-play
cloud platforms. Much of that hybrid focus
Cloud) will be the figure below.
will shift toward pure-play SaaS/Cloud within
63%
50%
47%
40% 39%
18% 19%
13%
10%
Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 7
Chapter 2
At a high-level, the following scenarios make • New Business Models – In order to make
the most sense for enterprises to deploy a the shift to support new business models
cloud-based ERP system at the subsidiaries.4 such as new billing models (recurring and
subscription-based revenue), services
• Standardize Subsidiaries – When
companies selling products and vice-versa,
enterprises want to standardize divisions,
a cloud-based model optimizes existing
subsidiaries and regional operations on a
investments while easily launching new
single solution with global consolidation and
business models.
rollup capabilities thus increasing agility and
getting better visibility into subsidiaries. • New Channels – As companies experiment
with new revenue models, cloud-based ERP
• M&A, Divestitures – Cloud-based ERP
facilitates the entrance of new sales and
system offers a strategic response to
distribution channels such as ecommerce
quickly integrate new companies or
(examples: manufacturers going direct to
business units and efficiently manage joint
consumer, B2B going B2C and vice-versa)
ventures and divestitures.
as companies need technology that can
• New Markets – When establishing a support the new channels.
presence in new and emerging markets, a
cloud-based ERP system helps automate
and integrate complex business processes
and extend global reach, while meeting
local needs and gain entry into new markets
faster and more affordably than ever before.
4
Accenture & NetSuite: Delivering High Performance Through the Cloud 2014
Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 8
Chapter 3
CLOUD ERP
EVALUATION CRITERIA
Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 9
of the processes are managed by the local Additionally, since many organizations need
cloud-based system and the remaining to integrate standard ERP functionality with
processes are managed by a centralized vertical industry applications and other
ERP system. Whether the business unit is a in-house apps, the cloud vendor must
sales and marketing operation or includes support a wide variety of integration options
distribution, the application should be able ranging from flat file import/export to dynamic
to comprehensively model the business web services and published APIs.
processes that need to be supported in a
International Capabilities
cloud framework.
The cloud application should support
Full Financial Roll-Up multiple languages, currencies, taxation rules,
The enterprise application should enable sales commission structures and reporting
a multi-tier organizational hierarchy and requirements. At a minimum, the system has
consolidation, where the information from to be adaptable to the applicable national
local business units can be rolled up into currency and local tax rate. Adapting the
one or multiple levels of hierarchy. For system to the country-specific financial and
example, Hong Kong operations might roll payroll accounting regulations would require
up into the Far East business unit, which rolls a more intensive localization effort.
up into the APAC business unit—all on the
Customizations
cloud enterprise application system, which
There is no industrial strength ERP system that
eventually rolls into the corporate
will work for every business out of the box.
ERP system.
Most enterprises build custom extensions on
Integration Capabilities top of their ERP platforms. Customizations
The cloud application should have the ability are a way of life. A cloud-based ERP
to integrate with corporate ERP and roll up system should provide a comprehensive
transactional data into the parent system cloud customization environment, whether
such as invoices, purchase orders, shipments, extending the system to fit business needs
inventory adjustments, invoicing, sales orders, or developing completely new applications.
receivables and payables, etc. Transaction- Tools should include workflow management,
level data integration should support a model scripting capabilities, analytics, web services
in which a number of such processes must be and more.
centralized within the corporate ERP instance.
Roll-up level integration should support a Customizations must automatically
decentralized model in which the division or migrate with every upgrade, enabling
business unit is fairly autonomous and rolls up you to customize with confidence.
consolidated statements to corporate.
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Ideally, a company should choose a platform
with superior extensibility that enables IT Here is a checklist when
resources to easily transfer skills. selecting consultants to
Your experience with on-premise vendors assist with your cloud
and the shackles of version lock may have implementation:
you shying away from customization but with
• Demonstrated expertise in the solution
a true cloud platform that migrates all your you are buying.
customizations forward automatically with
every release, customization is how you build • Expertise in your specific vertical
specialized software add-ons that could
in your very own secret sauce, which keeps benefit you.
you ahead of the competition. So remember,
customization is not a dirty word: only the way • Complementary solutions – Some partners
have deep expertise in specific vertical
to tailor your last mile. segments that they develop.
Upgrades • Global implementation expertise.
Upgrading an on-premise ERP package can • Cloud integration skill – Ensure your
be a multi-year endeavor (and sometimes partner knows how to leverage “cloud-to-
a career-ending project). One of the key cloud” integrations using web services.
benefits of cloud-based ERP is that upgrades • Hire a company you like and trust.
are applied automatically by the vendor in
a manner designed to minimize disruption.
You need to explore the upgrade process
and assess potential landmines and in their current environment work with a
adaptations that may be required. You should cloud ERP solution, and size up the cloud
never have to worry about version lock vendor’s partnerships with ISVs offering
because customizations should carry over complementary applications.
automatically with each new release.
Additionally, the vendor’s cloud ecosystem
Ecosystem should include applications, consultants,
Many enterprises have augmented their integrators, partners, third parties and
on-premise ERP environments with point anything in their environments that has
solutions specific to their industry, business or a bearing on the other components that
target markets. For example, functions such enable their services to participate in an
as résumé processing, recruiting, payroll and ecosystem. The collective set of capabilities
tax processing, ecommerce integration, and from multiple organizations and services
more. Companies need to verify and ensure spanning multiple platforms and cloud
that third-party applications implemented environments together should form an
Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 11
ecosystem that feeds and builds upon each system would be down less than 8.76 hours
other and generate best practices and per year. Likely if you carefully tracked the
reusable processes and communities. uptime of your on-premises system,
you would find it is down more often than
After purchasing a new ERP system, it must
you realize.
be implemented—that is, configured to
work in your organization. This process of Global Services and Support
implementation is the bridge between new Professional services and support (either
ERP software and a go-live point, where it can from the cloud ERP vendor or its partners)
be used to perform real work. must have a global footprint and customers
should be able to source skills locally. This
Security
is a critical requirement since the customer
Most organizations don’t invest enough
is likely to implement the cloud ERP system
in ongoing routine maintenance of their
in divisions that are operating in smaller
systems which leaves them vulnerable
markets, and any inability to access local
to security threats. With a cloud-based
resources significantly reduces the benefit of
solution, companies no longer have to
a cloud ERP model’s lower cost and risk.
worry about whether they are adhering to
routine maintenance schedules or not. Look Referenceable Clients
for high levels of security when evaluating Whether you are purchasing ERP software
potential cloud vendors, ranging from secure directly from the vendor or from a reseller,
data center facilities and data management take the time to check the references. And
practices, to product security such as role- don’t just check the ones the vendor/partner
level access and operations security practices gives you—but ask around. These references
including 128-bit data encryption and system should be companies that the vendor has
monitoring. Vendors should also meet audit, provided a similar product to. When you
security and compliance standards such contact the references, you should ask them
as, but not limited to, SSAE 16 Type II, ISAE if the software met their needs as expected,
3402 Type II, PCI-DSS, EU-US Privacy Shield, if they are happy with the service provided
ISO27000 and SOX. by the vendor, how the vendor reacts when
problems arise, how the overall efficiency
Uptime
has increased as a result of the software and
As part of the SLA (Service Level Agreement),
if the employees are happy with the software.
your cloud vendor should supply uptime
guarantees and explanation of the redundant Vendor Stability
systems in place to protect against major After you’ve determined which vendors are
system failure. To put this in perspective, if industry leaders, evaluate each vendor’s
your cloud provider guarantees 99.9% uptime financial stability including its available
this means in the worst case scenario your cash, its ability and desire to continue
Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 12
product investments and upgrades, its Experienced vendors can also teach you
outstanding obligations, and company profile new and efficient ways to operate your
and credit ratings. Review annual reports. business. Also, look for any negative or
Read industry and analyst opinions. Ask for critical reviews of the vendor—it’s best to
company statistics. Read their product release look at not just the positive, but the negative
information. The more information you have reviews as well in order to get a good feel of
available, the more informed decision you the strengths and weaknesses of the vendor.
can make.
You want a vendor-partner that would be
Find out how long the vendor has been in viable over the long-term, that is focused on
business. How large is their install base? the ongoing development of its product and
ERP vendors that have been operating for that understands and is in sync with your
a number of years and have a larger install expectations of a partner in terms of support,
base are much more stable than those that requirements and flexibility.
have only been around for a few years.
Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 13
Chapter 4
KEY TAKEAWAYS
It can be said with certainty that cloud is mobility with wireless devices, anytime,
reshaping the ERP landscape. The revolution anywhere access, embedded analytics and
is well underway in businesses of all sizes and the ability to serve a globally distributed
across all industries. The question business organization with great ease.
leaders should be asking is if they are
By using a cloud-based ERP strategy,
prepared to lead the transition.
organizations with multiple subsidiaries
Getting information on questions like stand to gain from comprehensive, highly
these is the first but critical step in vendor customizable solutions, lower costs, as
evaluation for a cloud-based ERP model. A well as greater innovation and agility than
detailed analysis should follow, which should they could achieve using a single, large-
include interviews with key stakeholders, an scale traditional, on-premise ERP solution
evaluation of the cost of various cloud ERP throughout their organization. However,
options and a detailed analysis, external and they need the right cloud ERP solution that
internal, to assess the move forward towards provides comprehensive functionality, is
ERP selection process. highly flexible and adaptable, and offers
robust, easy-to-configure and maintain
The flexibility and simplicity inherent in cloud-
functionality that reduces TCO and can
based systems enable enterprises to adapt
fully deliver the benefits of a cloud-based
to new ways of work that were previously
ERP strategy.
expensive or difficult to attain such seamless
Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 14
NetSuite – Your Cloud ERP Solution NetSuite OneWorld enables efficient financial
You may want to consider NetSuite to consolidation at both global and local
standardize on subsidiaries. NetSuite has levels while powering front- and back-office
helped multi-entity, multinational companies operations on a worldwide scale.
in a range of industries capitalize on the
Highlighted below are some examples of
benefits of the cloud-based ERP model at the
companies that have achieved success
subsidiary level. Deployed in 170+ countries
by deploying NetSuite for ERP/financials,
and dependent territories, 20 UI languages,
CRM, ecommerce, supply chain and more at
100+ countries tax calculation and reporting,
their satellite operations, and synching with
transactions in 200+ countries and dependent
on-premise ERP at headquarters.
territories, supporting 90+ bank payment
formats and 190+ currencies updated daily,
Copyright © 2017, Oracle and/or its affiliates. All rights reserved. Page 15
Case Study
Land O’ Lakes
SIMPLER CONSOLIDATION
THROUGH SHARED
INTEGRATION
For Land O’Lakes, a leading US agricultural consistent process and better consolidation
cooperative, implementing NetSuite OneWorld and reporting that helped streamline its
across several subsidiaries and joint ventures operations and provided a platform for
in the US, Mexico and China allowed it to growing its international business.
standardize on a shared, multi-company ERP
A slightly different example comes from global
system that integrates to a core Oracle ERP
consumer brand owner Procter & Gamble,
platform at corporate headquarters. The
which uses SAP for its corporate ERP. It has
deployment eliminated a number of disparate
implemented NetSuite to provide a consistent
systems currently in use in the second tier,
platform through which its distributors interact
together with the various consolidation
with the company.
processes associated with them. The 9,000+
employee organization gained from a more
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Case Study
Jollibee Foods
ALLOWING RAPID,
COST-EFFECTIVE
ROLLOUTS
Fast-food restaurant chain Jollibee Foods, managed reporting and consolidation via
headquartered in Manila, Philippines, used a email. This inevitably prevented Jollibee
two-tier approach to enable an accelerated from acting as a truly coordinated
rollout initially to Vietnam, where it brought international entity, making timely and
10 stores live in the space of two months, informed decisions difficult.
and then to 256 stores in China. Although
The introduction of NetSuite OneWorld
Jollibee’s corporate headquarters uses Oracle
to its subsidiaries has enabled real-time
for financial management and reporting, the
visibility across territories and optimizes
company decided it would be too costly and
operating, purchasing and expansion
resource-intensive to expand Oracle to its
decisions. In addition, it has allowed Jollibee
international operations. Before implementing
to consolidate international financials and
NetSuite in place of a patchwork of legacy
enforce corporate governance standards.
systems with no real integration, it had
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Case Study
Magellan GPS
INTRODUCING NEW
TECHNOLOGY-ENABLED
CAPABILITIES
Portable navigation device maker Magellan with the company’s core Oracle ERP system
GPS implemented NetSuite to upgrade its enabled real-time order processing, improving
online commerce capabilities in 20 different efficiency and reducing operating costs. The
countries of operation. Replacing a home- new platform also made it possible to add a
grown ecommerce system put an end to mobile commerce site, keeping the brand a
extensive customization work that used to be step ahead of its competition.
necessary to add new product lines. Integration
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Case Study
Shaw Industries
WORLD’S LARGEST
CARPET MANUFACTURER
LAUNCHES NEW CHINA
FACTORY WITH
NETSUITE ERP
A Berkshire Hathaway subsidiary, Shaw ERP applications led Shaw to conclude that
Industries turned to NetSuite for its launch of a NetSuite OneWorld was best suited for its
new 210,000-square-foot manufacturing plant international initiatives. NetSuite’s repeatable
in Nantong, China to produce carpet tile for deployment model positions Shaw to quickly
Asian markets. Shaw Industries needed an equip new global subsidiaries with ERP as
ERP solution that could scale across a complex international business grows.
global environment with a lean IT footprint,
NetSuite OneWorld gives Shaw visibility
low capital expense and swift deployment.
and control over the China plant and 10
The $4.5 billion company wanted a solution
international subsidiaries in countries including
that also supported the Mandarin language
China, India, Luxembourg, Hong Kong,
and multi-currency conversion and featured
Singapore and Australia. In a two-tier ERP
manufacturing capabilities. With its China
model, Shaw links OneWorld for international
plant, Shaw sought to reduce by several
operations to on premise Oracle and
weeks the time required to deliver product to
customdeveloped systems at its headquarters
Asian markets, vs. shipping U.S.-made carpet
in Dalton, Georgia.
tile overseas.
The real-world success of these NetSuite
Shaw selected NetSuite as a critical element
customers testifies that cloud ERP is not some
of its strategy for global growth by producing
future-state vision—it’s a practical and proven
carpet tile for Asian markets from its China
solution that is driving quantifiable business
factory. Due diligence and evaluation of leading
benefits today.
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ABOUT THE AUTHOR
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www.netsuite.com
info@netsuite.com
877-638-7848