Don't use the cloud to fix a problem you don't have

Issues of information management will not be solved simply by moving your ERP applications to the cloud

New doesn't necessarily mean better

The cloud means many things, but with the ‘cloud first' mantra in the public sector it appears to have become a catch all for new and innovative. There is a perception it is ‘better' than internally-deployed, which is not necessarily the case.

However, it is questionable this approach really is solving the fundamental issues the public sector - central and local - are facing. Take the recent Institute of Government report Policy Making in a Digital World, which laid bare many of the challenges that central Government must resolve if we are to deliver modern, digitally-based public services. Rightly it highlighted information management as a major challenge with information stored in different formats on different systems making it virtually impossible to create a clear, integrated picture of what is happening within individual departments. This is an issue of integration, information silos and a lack of standardised formatting and archiving. These are real and serious issues for both central and local governments.

They will not be solved simply by moving your ERP applications to the cloud. It could be said the ‘cloud first' debate is a distraction from such pressing requirements. The public sector has many statutory duties, none of which are mandated to be delivered by the cloud. In reality, is having your HR, finance and accounting applications delivered by a cloud ERP provider going to make a dramatic difference to the way you serve your customers today, the general public? Will it deliver the modernisation this Government says it is so committed to delivering?

Doubtful. There are certainly businesses cases for the cloud, in its different forms, but organisations need to be careful not to assume ‘new' is necessarily better.

Debating the business case

Different forms of the cloud have relative merits, but when developing a business case the evaluation should really start by understanding how it helps an organisation to fulfil its statutory requirements.

For example, we have seen some of our customers prefer to focus on integrating back office applications and leveraging a shared services model to reduce their capital and operational expenditure. With an integrated, single instance of back office information they are able to build out additional mobile functionality, such as enabling employees to access core HR, finance and procurement systems.

This means more seamless processes, such as managing employee records much more easily and automating purchase order and invoice processing for suppliers. Particularly when remote working has become such a focus, this integration and streamlining of existing systems combined with innovation at the edge enables manageable, incremental service improvement.

This would not be a model the major vendors would want you to follow. Vendor marketing suggests that moving to Oracle Cloud ERP, UNIT4 or SAP S/4HANA Cloud will lead to much more simplified applications environments with automation of essential support and updates, but this ignores a lot of hidden costs attached to adopting a cloud platform.

Take the customisations built up in existing ERP applications. If you move to an ERP SaaS vendor's platform, they will encourage you to adopt vanilla SaaS processes. When I read the business case presentation prepared by a council for adoption of a SaaS cloud platform it underlined the potential challenge. It admitted the council would have to change business processes and convince staff to change behaviours to adopt the cloud version of their treasured application. Such SaaS applications also have to be configured to meet statutory requirements, but in some cases fail to deliver even basic segregation of duties, so it could be open to security vulnerabilities that can be exploited. This is a change management exercise - good work for the Systems Integrators (SIs) but not the sort of time-consuming expense public sector bodies can tolerate in the current climate.

It should also not be a surprise that project overruns are common with such implementations. Based on my conversations with public sector customers and prospects I am aware that pretty much every Public Sector HR/Payroll migration to the cloud has ended in cost overruns. There is also a danger organisations are confused by complex T&Cs and statutory rules that can make migration to cloud ERP even more challenging. It can lead to organisations buying capacity for potential peak usage requirements, which never comes to fruition - something that the Unitary Council of Cornwall did leaving it a £2m bill for unused software licenses.

Despite claims about the automation of patching and upgrades there are still costs to consider with Oracle Cloud ERP and SAP S/4HANA Cloud, which can end up being more costly than remaining internally-deployed. It will require additional resources to ensure the security and privacy of citizen data, as well as managing integrations with other cloud applications (because in reality no one uses a single cloud vendor).

While the vendor performs the patching to the hosted environment, the customer must undertake regression UAT testing to ensure the updated application still works. With up to four upgrades a year that can be a significant amount of work, made more complex if there are customisations to consider and interfaces to third-party applications. Often customers turn to Systems Integrators to manage these challenges, but that can be messy and therefore costly.

It is also possible to ‘lift and shift' an existing ERP environment to keep existing applications but benefit from the reduction of capital expenditure by moving to an infrastructure cloud provider, such as AWS, Microsoft Azure or Google Cloud. This Hybrid IT strategy allows public sector organisations to deliver cost savings and minimise disruption. Resources can be concentrated on streamlining application instances, breaking down silos and integrating information to help ensure the entire organisation is working off the same, accurate information.

Another form of Hybrid IT sees organisations maintain their existing applications in-house and innovating at the edge using SaaS applications, potentially from their current vendors or adopting more specialist best-in-class applications. The challenge becomes supporting their existing applications, which may be on older versions that the vendors no longer fully support or are preparing to stop full support. This is where third-party support offers the reassurance of a partner to maintain existing applications while public sector organisations concentrate IT resources on priorities that will drive efficiencies and modernise services.

Delivering value in times of crisis

Fundamentally, moving to the cloud - in whatever form - will likely not deliver efficiencies and better services for citizens if the approach does not address the underlying challenges as outlined by the Institute for Government.

When I see the NHS is evaluating moving to one cloud-based ERP system, it fills me with dread. The vision may be right to achieve operational efficiency, but "one cloud to rule them all" is a huge undertaking that will take many, many years. Given the cost constraints now - and more importantly those coming in the near future - can the NHS really risk and costs of such a complex implementation? This is exactly the sort of opportunity for SIs to manage and run, but at what expense for the tax payer? A report earlier this year by the National Audit Office (NAO) estimated that delivering the digital strategy for the NHS will require the Trusts to contribute £3 billion between 2019 - 2028. That would be a significant sum in normal times, but as we emerge from the pandemic finding such resources will be very difficult.

So, when you build your business case for modernisation, don't build it with only ‘cloud first' in mind. Make it a ‘business-first' approach. Understand the fundamental challenges you face particularly around areas such as information management. Look at your operational expenditure and understand how you can streamline it. For example, the NAO report talks about £1.6 billion for the maintenance of live core IT systems and services. Not all of that will be enterprise applications but shifting support to third- party support could immediately cut some of the annual support fees by 50 per cent.

More importantly, if public sector organisations consider the Hybrid IT model it should buy them time, particularly if combined with third party support. Existing systems can be maintained by a third-party provider for at least 15 years, while in-house resources can be focused on streamlining application instances, integrating silos of information and building out new functionality and innovation that will enable better services.

Without enough consideration of these fundamentals and instead focusing on the adoption of cloud-based equivalents of existing internally-deployed applications, public sector organisations will likely create new problems, which could lead to costly service disruptions they can ill-afford.

Mike Cattermole is public sector director at Rimini Street UK