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CFOs are still focused on digital transformation even as economic headwinds tighten budgets. A Gartner survey revealed 80% of CFOs name “setting finance’s technology strategy and road map” among their top 2023 priorities, along with 75% who name “leading organizational change initiatives” as a key objective. For CFOs who still use legacy ERP systems, moving to the cloud should be considered as a top priority too.
Due to cost concerns, modernizing the ERP system may not be at the top of the to-do list, but it should be since businesses that still use outdated ERP systems are not only spending significant amounts on the initial integration and routine maintenance costs, but they’re also paying an opportunity cost too. That’s why many forward-thinking CFOs are modernizing their ERP systems in a time of economic uncertainty and upgrading to cloud-based systems. This migration is driving stratospheric growth in the cloud ERP sector, which is projected to double to $73 billion by 2026.
Cloud-based ERPs typically cost less overall, require less maintenance and provide easier access to new functionality. Cloud-based systems also enable users to deploy add-on solutions more easily, including ERP payment system integrations for mobile, point-of-sale and e-commerce payments. Here’s a closer look at what companies gain from an ERP payment system perspective when switching to the cloud and why that investment should be evaluated now.
The Benefits of Using a Cloud-Based ERP System
Cloud-based ERP systems do not require invasive and complicated updates each year as most on-premises solutions do. In addition, system workarounds that are often required with outdated systems may include multiple third-party integrations or other add-on functions built and managed in-house. These workarounds might work well enough as long as the person who manages these ad-hoc processes remains with the company, but if that person leaves and an update breaks the process, the company often has to call in expensive consultants to diagnose and repair a system with some potentially unfamiliar home-grown work arounds.
Another advantage of cloud-based ERP systems is that they minimize the risk of catastrophic data loss due to a natural disaster or other event that affects business equipment onsite. Cloud-based ERP solutions are fully redundant in the cloud, reducing risk and enhancing business continuity. Legacy ERP systems often expand their core functionality via third-party plug-ins instead of the hassle-free native integration option offered by cloud-based systems. When many on-premises ERP systems are updated, each plug-in has to ensure compatibility with the update, potentially make appropriate edits, then redeploy and test. This is often a time-consuming, frustrating process for the legacy ERP user. Companies are adopting cloud solutions in part to escape these hassles and recurring backwards compatibility expenses.
CFOs are also modernizing their ERP systems to take advantage of advances in payments technology. For example, embedded payments can help businesses like manufacturers, distributors, retailers, non-for-profits, e-commerce companies and healthcare providers deliver a positive experience to customers by making payments seamlessly available throughout multiple locations within their native ERP system. Further, a thoughtful payment integration can accelerate revenue receipt, and streamline back-office operations by simplifying reconciliation and entry into the company’s general ledger.
A significant portion of merchants still use outdated legacy ERP payment systems, which makes it difficult to take full advantage of modern embedded payments solution features, including automated accounts receivable and accounts payable entries. Most modern cloud-based ERP systems have add-on features that can be implemented out of the box without users having to engage and coordinate with third parties.
The Future-Forward View from the Cloud Versus the Legacy ERP Retrospective
CFOs may be familiar with the usual reasons it makes sense to migrate from an on-premises system to a cloud-based ERP, like lower total cost of ownership, centralized backup and updates, lower consulting fees and the elimination of manual processes. But the top reason to migrate to a cloud-based system is that it frees your IT resources to focus on the future instead of dealing with a legacy system that forces them to spend time on a retrospective view.
Businesses that should be focused on growth, development and efficient scaling are forced to keep one eye on the past if they use and maintain a legacy ERP system. They must maintain the bandwidth to update and maintain on-premises systems instead of fully focusing on the future which constrains their potential.
Companies with outdated ERP systems may also become increasingly constrained as the legacy ERP provider inevitably focuses additional resources on enabling a cloud-first solution. When this strategic direction changes, support for existing products typically deteriorates, and users are often pushed toward mandatory upgrades on a timeline the user does not control.
Cloud ERP Offers Greater Certainty in Uncertain Times
As uncertainty on the financial horizon continues to evolve, CFOs are carefully evaluating investments, and some will decide to defer moving to a modern cloud ERP system, rationalizing that they trust their on-premises system, which works well enough for now. While this may be true, this is a potentially a short-sighted view. As more and more ERP companies focus on cloud-based products featuring leading edge, future-proof technology, support for outdated on-premises products becomes less certain.
ERP solution providers know the future is in the cloud, so it’s likely that fewer development resources will be devoted to providing access and support on legacy platforms for the latest technology, including ERP payment systems that enable embedded payments. Ironically, the on-premises systems they trust to get the company through a period of economic uncertainty may actually be introducing an element of uncertainty in their own right. That’s just one of the opportunity costs of maintaining an outdated legacy ERP system.
As the technology tools available to CFOs continue to evolve, so should the CFO’s assessment of how to evaluate and employ the new tools available to them. Modern cloud-based ERP systems provide an opportunity to reshape the CFO’s technology roadmap expenditures away from simply maintaining their existing systems and focus them instead on future-forward systems that are inherently designed to seamlessly introduce new functionality on a continuous basis. As the market continues to accelerate towards cloud-first ERP development, CFOs should take charge of the timing of their own migration so they can do so at a measured pace that they control before strategic changes at the legacy ERP providers dictate the pace of change for them. There’s never been a better time to engage with a trusted provider and evaluate how cloud-first ERP systems can improve the control you have over your technology roadmap.
John Badovinac is VP of B2B at Fortis