Please read the discussion article entitled “Top 10 ERP CostOptimization Ideas” by Gartner and then compose a short response.Address the following two points in your post.

• Briefly summarize the main ideas of the publication in 4-6sentences.
• From the 10 ideas for cost optimization, find the top 3 thatyou consider the most important for cost savings based on yourperspective, then list them and explain why you believe they areabsolutely essential.

Article

ERP initiatives are associated with high costs. As a result,CIOs look for ways to minimize ERP-related expenses whereverpossible. We list 10 ideas for optimizing ERP costs and identifyrelated Gartner publications to help you realize savings.

Key Findings â–  ERP implementation and maintenance is expensive,but necessary for most enterprises.

â–  Most CIOs have tried some ERP cost-saving ideas, but oftenfail to realize the expected savings due to issues withexecution.

Recommendations CIOs responsible for postmodern ERP strategiesshould: â–  Reduce the risk of budget cuts by executing common costoptimization approaches before pursuing more drastic measures thatmay inhibit ERP benefits realization. â–  Get in-depth information oncost-saving ideas to improve ERP execution, savings and valuerealization by studying the Gartner publications referenced in thisdocument.

Introduction

Optimization of IT costs is an undertaking that CIOs frequentlypursue in order to manage expenses and ensure investments delivermaximum value. Since ERP represents one of the largest investmentsthat an IT department makes, it is the focus of this document. SomeERP cost optimization ideas provide short-term savings, but withthe trade-off of higher costs and technical debt later. Other ideasmay provide radical savings at the risk of significant businessdisruption or failure. Before attempting drastic measures, CIOsshould explore the 10 ERP cost optimization ideas in this documentto determine which provide the best recurring and consistentyear-over-year savings for their organization, along with limitedor manageable risks. What are the main ways to optimize ERP costsand how can CIOs choose the best options for their organization? Avital component of successful cost optimization is continuousevaluation of new ideas. It's also crucial to drive current effortsforward in order to continue value realization and track costsavings. As new IT products, services and approaches emerge, so toodo opportunities to realize greater benefits and save more money.Cost optimization should be pursued as a collaborative effortbetween the IT department and the business. While some ideas impactthe IT department primarily, others will require the engagement andbuy-in of the business in order to succeed. Establish an ERP costoptimization process to ensure the ideas you are applying result inthe expected ERP benefits and expense reductions (see \"Toolkit:Postmodern ERP Cost Optimization\"). This list of 10 ideas focuseson actions that CIOs can take to enable cost savings related totheir ERP initiative (see Figure 1). Some of the ideas arecost-cutting measures designed primarily to meet cost reductiontargets, and have minimal impact on quality and service. Othersprovide moderate cost savings, while delivering more significantERP benefits in terms of agility, flexibility or scalability, or anew set of features and services.

Analysis

1. Move ERP Solutions to Cloud-Hosted IaaS One of the mostpopular ways to optimize costs is to move the hosting of ERPapplications from on-premises data centers to cloud-hostedinfrastructure as a service (IaaS) providers such as Amazon WebServices and Microsoft (Azure). A \"lift and shift\" approach canprovide cost savings, while minimizing business disruption byavoiding the more significant time and investment required for afull switch to a SaaS application. In addition to cost savings,IaaS has the potential to improve scalability, flexibility andagility. The following Gartner publications provide furtherinformation on shifting to IaaS and maximizing savings: â–  \"ThreeMoves for CIOs to Lower Business Costs With Cloud\" â–  \"10 BestPractices for Azure Cloud IaaS Cost Optimization\" â–  \"Seven DeadlySins of I&O Cost Optimization and Transformational Investment\"â–  \"Magic Quadrant for Public Cloud Infrastructure Managed ServiceProviders, Worldwide\" 2. Use Third-Party ERP Software SupportServices CIOs that use third-party ERP software support servicestypically see at least a 50% reduction in the cost of vendormaintenance agreements. However, there are trade-offs, andthird-party support is not available in all cases, such as for SaaSERP, where support services are built into the subscription fee.With major ERP vendors shifting their investment to cloud products,some clients have felt a reduction in the quality of on-premisessoftware support and a diminishing return on their maintenancespending. Study the following Gartner publications if you want toexplore the use of third-party ERP software support services: â– \"What to Consider Before Canceling Your ERP Vendor's MaintenanceAgreement and Switching to Third-Party Support\" â–  \"Does Third-PartySupport Have a Role in Your Postmodern ERP Strategy?\" â–  \"How to Geta Great Deal on Third-Party Support for Application Software\" â– \"Two Best Practices to Mitigate the Risks of Adopting Third-PartySupport for Oracle and SAP ERP\" â–  \"What Rimini Street and SpinnakerSupport Are Doing to Support Oracle and SAP ERP Products\"

3. Standardize Processes, Data and Configuration AcrossOrganizational Groups Processes, data and configuration acrossgroups within an organization frequently become fragmented due tooperational silos or changes over time. Standardization can delivervalue and efficiency through adoption of best practices. This maytake place within a single ERP instance that is configured withmultiple business units. Those business units may use functionalityin different ways to support processes that are not truly unique ordo not provide value-added differentiation. There may also bemultiple ERP instances supporting each process. Standardizing theunderlying processes will enable the application consolidationcovered in the next idea. CIOs that partner with business leadersto implement standardization will realize cost optimizations insidethe IT department and across the whole organization. For moreinsight into this savings opportunity, see the following Gartnerpublications: â–  \"Postmodern ERP: Why Process Standardization Isn'tthe Same as Best Practice, and Why You Need Both\" â–  \"ERPConsolidation: Standardizing Processes and Evaluating Your Options\"â–  \"When Application Standardization Works, and When It Doesn't\" â– \"Establish a Standardization Mindset for Success With SaaS ERPSolutions\" 4. Consolidate ERP Application Instances Frequently, anorganization's standardization of processes, data and configurationacross groups facilitates technical consolidation of ERPapplication instances. Proliferation of these instances may resultfrom mergers, acquisitions or the growth of independent businessunits over time. For CIOs who nd themselves with numerous ERPinstances, consolidation can optimize costs by minimizingredundancy in infrastructure, maintenance and support, whilesimplifying the application landscape and reducing integrations.This can also enable the deployment of an IT shared-service model,leading to further cost savings. For additional information onconsolidating ERP application instances, see the following Gartnerpublications: â–  \"How to Approach Postmodern ERP InstanceConsolidation\" â–  \"Two-Tier ERP Meets the Needs of a ProtectionistBusiness Era\" â–  \"Use Gartner's Pace-Layered Application Strategy toClean Up ERP During Upgrades and Consolidation\" â–  \"Apply These BestPractices for Application Consolidation\" â–  \"In ApplicationRationalization, the Number of Applications Is Irrelevant\"

5. Move Core ERP Functions to SaaS Solutions Implementing a SaaSsolution for certain core ERP functions can provide short-term costsavings and smooth out annual expenditure on ERP. This is becausesome vendors offer attractive discounts on initial SaaS contracts.On-premises ERP solutions have higher short-term costs, such as forpurchasing perpetual licenses and local data center infrastructure.These costs are followed by significant spikes in spending incertain years when a major upgrade is needed to the software orhardware. A shift to SaaS solutions avoids spikes by spreadingcosts evenly over the duration of a subscription. Major ERP vendorsare dedicating more research and development funds to SaaSsolutions than to on-premises products. CIOs whose current ERPsolution is not meeting business needs or is too expensive shouldconsider a move to SaaS solutions that now have feature-parity incore functions such as human capital management, nance andprocurement. For more details on optimizing costs with SaaS ERP,see the following Gartner documents: ■ \"Toolkit: Minimize SaaS Riskand Cost Using This Toolkit to Efficiently Negotiate Optimal SaaSContract Terms and Conditions\" ■ \"SAP SaaS: Minimize UnbudgetedCosts and Risk by Negotiating Six High-Impact Terms\" ■ \"ImproveYour Enterprise SaaS Implementation With This Three-Step Processand Checklist\" 6. Scrutinize Lifetime Costs and Values WhilePrioritizing \"Continuous Improvement\" ERP Initiatives The cost ofERP initiatives can grow during implementation and after deploymentbecause of customizations and configurations. These changes createtechnical debt by increasing upgrade effort, system complexity andtesting. But they can also provide much needed functionality tosupport differentiated business processes. It's important toprioritize continuous-improvement changes through governance toprovide the greatest value and benefits, with consideration oflifetime costs. The following Gartner documents examine how toprioritize the right improvements and realize benefits: ■ \"Build aCulture of Continuous Improvement to Take Advantage of the RegularUpdates of SaaS ERP\" ■ \"Stop Chasing Rainbows and Unicorns: LearnFrom ERP History to Maximize the Value of Postmodern ERPStrategies\" ■ \"An ERP Design Authority Plays a Key Role inGovernance\" ■ \"Postmodern ERP Benefits Realization — Chasing the'Pot of Gold'\" ■ \"Realizing Postmodern ERP Benefits Requires aFocus on Value Measurement\"

7. Automate All ERP Application-Testing Activities ERPapplication testing has high costs in terms of time and effort, dueto the breadth of functionality that ERP covers, the tightlyintegrated nature of ERP applications, and the resulting largenumber of test cases. A shift to quarterly software updates by manyvendors has placed an even greater burden on the IT department andthe business to complete testing quickly. Automating ERPapplication testing relieves that burden and can result in a fasterand cheaper process that still meets quality assurance demands.Software-testing automation tools have short-term costs fordeployment and training, but can deliver great value relativelyquickly. CIOs looking to adopt automated ERP testing should readthe following Gartner documents to learn more about the process andthe key tools they will need: â–  \"The Eight Essentials When Movingto Automated Software Testing\" â–  \"Use Layered Testing to EnableContinuous Delivery of Digital Business Capabilities\" â–  \"MagicQuadrant for Software Test Automation\" â–  \"Critical Capabilities forSoftware Test Automation\" 8. Remove Unused or Low-Value CustomDevelopments and Replace Other Customizations With Standard PackageFunctionality Although prioritizing continuous-improvement ERPinitiatives can lead to cost optimization, it's important torevisit those changes and older customizations periodically todetermine whether there is now standard functionality to meet thesame needs, such as in a recent vendor release. Customizations thatare not being used or not delivering expected benefits should beremoved or replaced. Studying the following Gartner documents willhelp you devise a customization strategy and manage previouschanges to your ERP applications: â–  \"Define Your CustomizationStrategy for SaaS/Cloud Business Applications\" â–  \"Manage ERPCustomizations, Don't Avoid Them\" â–  \"Hybrid ERP Demands a DifferentApproach to Managing Customizations\" â–  \"Customization: The CostThat Keeps on Costing\" 9. Utilize Citizen Developers and Create aStronger Superuser Network to Save on Support, Development andTesting IT staff face a challenge to meet the support anddevelopment needs of users who are moving into the world of digitalbusiness. CIOs looking to optimize costs should partner withbusiness leaders and end users to shift some of that effort tocitizen developers and superuser support networks outside thetraditional IT organization, which has higher personnel expenditureon average.

Improvements in easy-to-use tools and the digital skills ofbusiness users enable this savings opportunity. Read the followingGartner publications to gain greater insight into superusers andcitizen developers: â–  \"Invest in the Superuser Role to Improve ERPSupport\" â–  \"Best Practices for Managing the ERP Superuser Network\"â–  \"Citizen Development Is Fundamental to Digital Transformation\" â– \"Good Citizen IT App Development Security Depends on Good ITCitizenship\" â–  \"Survey Analysis: Citizen Development Is Happeningand IT Needs to Be More Engaged\" 10. Outsource ERP ApplicationDevelopment, Maintenance or Service Desk to Offshore LocationsAnother way to move further away from potentially costly in-houseIT resources is through outsourcing to offshore locations. CIOshave optimized costs by shifting ERP application development,maintenance and service desk functions to geographic areas withlower labor costs. This may be accomplished through managed serviceproviders or by setting up internal ofces offshore. The followingGartner documents give further details on how to approach thisoption: â–  \"Best Practices for Contracting and Managing OutsourcedSoftware Factories\" â–  \"How to Make Bad Outsourcing Deals Better\" â– \"Toolkit: Negotiate More Effectively Using Key Labor Rates for ITApplication Outsourcing Deals\" â–  \"Investing in Transition PlanningWill Maximize Success for Managed Services Outsourcing Deals\" â– \"Essential Metrics for Outsourcing Testing Services\" Further Ideasand Next Steps In addition to these 10 ideas, there are many otherapproaches to reducing costs associated with ERP. New technologiessuch as artificial intelligence, blockchain and the Internet ofThings have the potential to change the ERP landscape and deliverdramatic savings, while offering new benefits and driving digitalbusiness transformation (see \"Predicts 2018: Postmodern ERP Evolvesto Support Digital Business, Investments Must Be EvaluatedCautiously\"). Explore the 10 ideas in the present document, whilecontinuously evaluating new technologies and services. An ongoingfocus on optimizing ERP costs and measuring savings through adefined process will improve results and ensure opportunities arenot missed.