"Cloudy with a chance of clouds." This Deloitte article title from a few months ago sums up the continued growth in cloud computing - a trend that remained resilient despite the economic pressures of 2020. One specific cloud use case, and the area this blog will focus on, is the move from an on-premise General Ledger (GL) to a cloud GL.
Just five years ago, one of the largest UK Banks was one of the first to migrate their General Ledger to the cloud. Today, it is rare to find a financial services organization who does not have this as part of their roadmap. This makes sense. Many existing GLs are legacy systems that are currently stretched to their breaking point, trying to store increasing amounts of data and retain granular transaction detail despite not being built for this purpose. Now that the security concerns that lingered around putting an organization's most sensitive financial data in the cloud have all but disappeared, CFOs are moving forward with plans to migrate their GL to the cloud.
So once you've made the decision to implement a Cloud General Ledger, what steps should you take to address any risks associated with implementation and get the most out of the solution?
In the following sections we look at some of the risks inherent in a move to a Cloud General Ledger.
Standardization vs. customization
When an organization moves from an on-premise implementation to a cloud offering, speciﬁcally a SaaS offering, it’s widely accepted that your ability to customize the solution will be at least reduced or simply not permitted. The efficiencies gained from the cloud depend on some level of accepted standardization. Cloud ERP solutions are no different. Migrating from an on-premise ERP solution that has been the victim of workarounds and manipulations for years, to a mostly standardized offering, has risks. Since nearly every on-premise ERP application environment today is likely customized to some degree, organizations need to be aware that they will likely have to abandon some of the custom business processes they currently utilize – or ﬁnd another solution to execute those processes.
Likewise, Cloud ERP solutions will not ﬁx bad data or inefficient, inconsistent processes. In fact, they will only amplify existing issues because the ability to manipulate the system to make it work is signiﬁcantly reduced in cloud solutions.
The cost of data
Depending on the size of the organization and the amount of data storage and processing power required, Cloud ERP solutions can get quite expensive. Actually moving data in and out of the cloud can increase costs even more.
It also makes sense to consider exactly how much data you want or need to be storing in your cloud general ledger. Historically, the ERP solution was the holder of signiﬁcant amounts of detailed data, often requiring customization to store that data in a meaningful way. To mitigate the cost of data storage in a cloud ERP solution, companies may look at an accounting subledger that can hold the granular detailed data and provide a link from a ‘thin GL’ to the source systems where the transactions originated.
A subledger can also support the actual moment of transition, which can be a risky one. Given that an ERP solution often handles mission-critical data and processes, making sure that process goes smoothly is vital. Having an accounting hub and subledger in place can ensure business as usual during the migration.
Moving to a cloud solution may also require additional investments in vendor infrastructure for test and development instances. For example, purchasing the Oracle Cloud Accounting Hub and Cloud Financials also requires the purchase of Oracle Managed File Transfer Service, Oracle Cloud Orchestration Service, Oracle SOA Service – and potentially others – in order to support a basic ERP cloud implementation.
When considering the solution price and discount, make sure you understand the surrounding solutions that will be required to get the ﬁnal capabilities you need. Similarly, support costs could actually increase once you factor in the cost of supporting the primary solution in addition to the surrounding solutions required.
While there are plenty of risks to navigate when implementing a cloud ERP solution, there are companies who are getting it right and de-risking their implementations.
To read more about two organizations who have successfully used an accounting subledger to support a cloud GL migration, please download our PDF, Supporting the move to a cloud GL. We'll also send a case study outlining why a major US Health Insurer selected Aptitude to support their finance modernization efforts which included the implementation of a cloud GL.