Cloud applications and continuous business transformation

Moving to the cloud should be about more than plugging in a solution. To realise the full benefits, it needs to be part of a full business transformation. But when organisations talk about implementing cloud solutions for their corporate functions (finance, HR, IT, procurement), they are often eluding the word 'transformation'.

Instead, they insist on business drivers which are related to the obsolescence of their existing systems. The end-of-life of their software licences, or the need for modern user interfaces. But there is more to it.

Why is the term 'business transformation' often absent from EOI, RFP/RFI? Is it because the concept of transformation has been so overused that it has become meaningless? Or because the benefits of previous transformation programmes have rarely been realised?

Perhaps it is because organisations which are embracing cloud solutions think that it will be easy to implement, with no change impact.

Over the last decade, it made sense that the goal of every major system change should support a business transformation imperative. Software vendors were claiming that new technology would let you do things in new ways, to deliver services more effectively and efficiently, to unlock potential value.

We have seen this time and time again over the last 10 to 15 years. Most organisations have been through multiple transformations, business process re-engineering embedded in large ERP programmes.

But more often than not, they have struggled to realise the expected return on investment.

They have centralised and put in shared services for finance, HR and other business functions. In some cases, they have outsourced or relocated entire functions offshore.

They have genuinely tried to simplify and standardise processes and cut costs. But few have delivered the intended benefits.

The Cloud and customisation

What is really different with Cloud? One of the main benefits can be summed up in a single word: customisation.

Organisations' business processes are still too complex because despite trying, they haven't really standardised. Previous transformations, typically supported by major on premise ERP software, allowed for too much customisation. The result was idiosyncratic, carrying complexity due to the inability of the organisation to challenge the status-quo. This led to highly expensive processes and systems to maintain.

Nevertheless, in a world of constant disruption, there is a renewed pressure to change coming from within the organisation, from the board or from shareholders to further optimise corporate functions.

It has become easier to quantify organisational performance in relation to peers. Within this context, it is apparent that organisations still need to optimise their corporate functions or, in other words, complete their transformation.

Here, we could talk about a third wave of transformation after a first wave of ERP on premise implementations, and a second wave of introduction of shared service centres or BPO deals. But a better way to talk about it is 'continuous transformation'.

The good news is that the cost of continuing the transformation job adopting cloud solutions for corporate functions is now only a fraction – as little as one fifth – of earlier projects which could cost $100 million or more. And when systems are configured – not customised – starting with preconfigured prototypes, implementation time is less than a year, compared to lengthy previous transformation programmes (two to three years).

The role of change management

But it's about more than just technology. The ongoing challenge many organisations face is change management.

Overcoming that is about the conversations to have, about who is in the workshop discussing the E2E solution. There is a crucial need for people with the knowledge, experience and courage to push for standardisation within the organisation and on the implementation partner side.

Because there are changes in multiple dimensions, there is an also important need for people who understand the business function involved, as well as people who can implement a system, and people who can drive change in the organisation.

Because of cloud and a 'zero-tolerance' for customisation, organisations don't need a system integrator. They need a business integrator, a partner who can say: "This is best practice, this is what others are doing, these are the roles and responsibilities that should be in place for your target operating model." Or: "Tell me why you can't do things in a standard way?"

Many earlier transformations failed precisely because the people involved lacked the credibility or maturity to effectively challenge process owners and change the culture.

Finally, as most organisations started to simplify and standardise their corporate functions 15 years ago, the transformation job today might seem to be easier. But adopting cloud doesn't mean an easy road for continuous transformation. It will require a total rethink of operating models. And when people are involved there is always complexity.

By Gerard Vigneron, who is a partner focused on technology enablement at KPMG Australia