Why Cloud-Native Software is the smart choice over incumbent ERPs

Traditional ERPs are often barriers to business modernisation. PaySpace and Workday helped a major bank arrive at a superior outcome through cloud-native software collaboration.

Many incumbent enterprise resource planning (ERP) systems are becoming modernisation and competitive barriers. These ERPs hail from a different time when software was considered a monolithic commodity. Rather than rely on several different software products, one massive software system handled the majority of business tasks. However, modernisation opportunities have evolved since those years, and the larger ERPs are becoming inhibitors rather than drivers of business innovation.

Last year, the retail chain Spar lost an estimated R1.6 billion in turnover due to a botched SAP implementation, creating a R720 million loss of profit for the region. Spar has since stabilised the project, but the blow to its bottom line still reverberates painfully. Other ERP customers are not as lucky: in 2023, the UK city of Birmingham’s council declared financial distress after an Oracle migration project’s costs ballooned from £20 million (R466 million) to nearly £100 million (R2.3 billion).

According to Deloitte, citing Gartner research, up to 75% of ERP projects fail to meet their objectives. This is not a new trend, yet it seems to be getting worse—especially when large traditional ERPs are involved.

Why traditional ERPs cannot catch up

Why are these failures occurring? The picture is complex, but at PaySpace we’ve developed insights based on our direct work with digital modernisation where ERPs were involved.

Even though many traditional ERPs are adding cloud features and selling points, fundamental differences continue to separate them from modern cloud-native software. Genuine cloud-native software combines different features and methodologies that create modern competitive advantages and future-proofed digital systems.

For example, traditional software relies on large software libraries to cover all requirements—a concept that developers informally call monolithic software design. Cloud software instead uses microservices, which are specialised and modular software functions. This difference makes it much easier and faster to adapt cloud software to business requirements.

How does this comparison impact ERP systems? In a landmark ERP replacement project for a major bank, PaySpace collaborated with Workday, a modern finance and HR platform, to replace the functionality of the bank’s established ERP. PaySpace is the first Workday Global Payroll Cloud Certified (GPC) partner with headquarters in Africa. We helped Workday integrate our native payroll engine with their services and the bank’s data, providing native payroll support that the ERP had ceased to support.

Rather than remaining stifled by a traditional ERP, the bank could retain its data while introducing smarter and more agile business functions.

Insight from a successful ERP modernisation

This project, for which PaySpace received the Transformation Project of the Year at the Global Payroll Awards 2024, demonstrates the numerous advantages of combining cloud services over relying on a traditional ERP:

• ERP software and ERP functions are not the same thing: Customised ERP systems in major companies imply that they alone are capable of delivering ERP functions. Yet, flexible cloud platforms achieve the same results with more speed and agility. In this project, Workday and PaySpace’s platforms power numerous specific functions that were once the exclusive domains of the incumbent ERP. You don’t need a massive ERP to leverage ERP features.

• Watch out for unnecessary complexity: Our banking client has extensive expectations around leveraging its ERP data sources and supporting crucial business processes, not to mention the politics and bureaucracies of a massive enterprise. We could meet those expectations because we went above and beyond to understand and address those concerns, supported by development teams that could bend our software to our customer’s requirements.

Efficient integration support is crucial: Complex and demanding integration often stifles and stops ERP modernisations. Traditional ERPs behave as one-stop shops, where integrating with data sources and other applications is an afterthought. The integration capabilities of PaySpace and Workday’s platforms are inherent, offering a wide range of native integration options that significantly simplify the process for our development teams to address complex and unexpected integration requirements.

• Modular deployments are superior to big bang strategies: Traditional software favours a “big bang” approach where customers must often bend to the software’s will. Upgrades and customisation take longer and are more expensive. Cloud platforms are modular and much easier to deploy and test in stages. Customers don’t need to fully commit before witnessing outcomes, and resolving issues related to intricate software modifications is significantly simpler and less costly.

• Implementation partners need to be candid: Major software upgrades or modernisations invariably involve issues that could potentially jeopardise the entire project. Modernisation budgets often balloon because software partners hoped these problems would disappear among the project’s many moving parts. But they don’t, creating massive extra costs. Partners need to be upfront about these barriers, especially when it’s their software creating the problems.

Traditional ERPs limit scale, especially across multiple regions: Traditional software often cannot match cloud software’s scalability. Can the software and its licenses accommodate changing user numbers or specific regional requirements? Can it do so eloquently without substantial reconfiguration, compromises, or bill shocks? Often, the customer becomes aware of a lack of scale only when their financial and resource commitment prevents them from taking action.

Too big to fail?

Traditional ERPs rely on a reputation that only they can handle the demanding functions of a large and complex business. This belief was once true in a time before cloud software. Now, the right combination of platforms, partners, and vision can achieve remarkable flexibility and modernisation.

This revolution extends to modern cloud-native ERPs as well. Like their fellow platforms, they are not trying to do everything on their own. Instead, they embrace the strengths of efficient integration, modular features, low-risk customisation, and incredible flexibility.

But in the modern software age, an ERP might not even be necessary. PaySpace and Workday’s collaboration helped a major bank keep the best of its business systems and processes without incurring the extensive pain and risk of failure associated with traditional ERP projects.

It’s like comparing two walls: one made from immovable poured concrete, the other a harmony of brickwork that is easy to modify yet can still carry the enterprise. For modern and agile businesses, the second choice is the smart choice over incumbent ERPs.

Photo: Aleksandar Pasaric/Pexels