REPLACE OR UPGRADE ERP IN THE CLOUD

TO IMPROVE SERVICE AND REMOVE

OBSTACLES
March, 2015
In order to improve services, keep costs in check, and report effectively, constituent and patient-oriented organizations are
often forced to rely on disconnected, outdated technology. When top performers choose to replace or upgrade their
solutions, what aspects of cloud solutions do they use as selection criteria?
Nick Castellina, Research Director,
Business Planning and Execution

Time for a Change

This report examines constituent or

patient-centered organizations. These
include the 31 healthcare, government,
and education organizations that
participated in Aberdeen's 2014
Business Management and ERP
Benchmark Survey.

Constituent or patient-oriented industries, such as government

and education institutions or healthcare providers, are faced
with a unique set of challenges that are often exponentially
increased due to inadequate technology infrastructures. These
organizations must optimize their labor costs, improve the flow
of service, maintain compliance, and increase their ability to
utilize assets while keeping costs low. Oftentimes, these tasks
are managed in completely different business systems to
manage an organization's finances, supply chain, purchasing
and workforce that may not be integrated effectively.
Unfortunately, Aberdeen's 2014 Business Management and ERP
Benchmark Survey found that only 38% of constituent or
patient-centered organizations have integrated business
systems that serve as a complete and auditable system of
record. This can cause major problems such as poor service, high
costs, and inaccurate, fragmented data that is difficult to use
and support. On the other hand, Best-in-Class organizations are
49% more likely than All Others to have these integrated

systems. For this reason, another 38% of constituent or patient

organizations plan to implement this capability in the near
future. The best way that this can be accomplished is through
the implementation of an end-to-end, Enterprise Resource
Planning (ERP) solution to integrate core back office functions
across accounting, AP/AR, purchasing, budgeting, supplier
relations, personnel and benefits administration, and payroll.
When managing multiple systems, it becomes difficult for IT staff
to ensure that all technology is up-to-date. Therefore, some
administrative systems may become obsolete, unsupported,
inflexible, unsecure, and unable to mesh with other new
technologies. Managing this type of landscape can be expensive.
But even with outdated ERP, many of these same problems can
persist. In fact, 65% of ERP implementations in constituent or
patient-centered organizations are over eight years old.
Regardless of the exiting technology environment, old systems
can cause problems. This leaves organizations with a choice:
replace the technology they have, or upgrade existing
technology. Ideally, both options would provide the organization
with an end-to-end solution.
Stay On Top of Things
Best-in-Class organizations understand the pitfalls of obsolete
technology. As a result, the Best-in-Class organizations are more
likely than All Others to take advantage of available upgrades to
their business systems (Figure 1). On the other hand, those that
are not the Best-in-Class are more likely to be two or more
releases behind. Implementing a new solution or upgrading an
existing one is a way to ensure that technology is up-to-date and
effective. For example, this could mean consumer-like, webbased systems that support self-service processes for staff,
constituents and suppliers.

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Figure 1: The Best-in-Class Stay Updated

50%

Implemented on latest release

31%
35%

One release behind

27%
6%

Two releases behind

12%
Best-in-Class
All Others

3%
7%

Three or more releases behind

0%

20%

40%

60%

Percentage of Respondents, n = 201

Source: Aberdeen Group, August 2014

So why would a constituent or patient-centered organization

choose to upgrade their existing solutions? When polled, the
number one reason that these organizations cited for upgrading
their solutions is the need to take advantage of new functionality
(Figure 2). This could mean emerging technologies such as social
or mobile, features related to maintaining compliance to new
regulatory mandates, or simply new best practice workflows and
processes supported in the most current release.
Figure 2: Why Upgrade?
Want to take advantage of new functionality

64%

Vendor no longer supports old version

36%

Old version is incompatible with emerging

technologies (i.e., mobile, social, etc.)

36%

New version is more flexible

29%

Performance of old version is inadequate

29%

0%

20%

40%

Constituent
or Patient
Oriented
60%

80%

Percentage of Respondents, n = 31
Source: Aberdeen Group, August 2014

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But it's about more than just providing new functionality. For
constituent or patient-centered organizations, upgrading brings
more flexibility. This includes the ability to alter processes to
maintain compliance as well as the ability to connect with other
organizations in order to provide clinically relevant information
to care providers, or in order to provide mission relevant
information to program managers. Ultimately, upgrading is
essential when the existing technology versions can no longer
support the organization or agency.

Constituent and patient-centered

organizations upgrade their ERP
because their existing solution is
inadequate, and replace their ERP
because it lacks features, among other
reasons. This is important for both
commercial and federal healthcare
organizations that are tasked with
sharing data with outside healthcare
systems, managing flexible labor,
improving patient outcomes, avoiding
readmissions penalties, and changing
reimbursement initiatives. Upgrading
solutions can ensure that these new
processes are supported and that the
organization can focus on patient care.

On the other end of the spectrum, some constituent or patientcentered organizations may choose to replace their existing
technology environment. Unsurprisingly, the reasons chosen are
similar to the reasons that organizations upgrade (Figure 3).
Again, it's all about a lack of technology that can support the
needs of a constituent or patient-centered organization in the
current environment. This includes better tracking of costs,
enhanced views into executing workflows across the entire
business process, and more robust reporting. Disconnected
systems that were created before these requirements became
essential are inadequate and lack the transparency afforded
with upgraded technology, and it is very likely that they are
inflexible to modification.
Figure 3: Why Replace?
Obsolete technology foundation or infrastructure
of ERP system

35%

Lack of features

29%
Constituent
or Patient
24%
Oriented

Cost of maintenance and support

0%

10%

20%

30%

40%

Percentage of Respondents, n = 31
Source: Aberdeen Group, August 2014

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Either Way: Consider the Cloud

Whether replacing, upgrading, or implementing a new ERP
solution, an organization is going to end up with a solution that
can change the way the organization works. This is a perfect
opportunity to reassess how the technology is delivered and
supported. For constituent or patient-centered organizations,
solutions delivered in the cloud can be an attractive option. In
fact, cloud technology is an emerging trend for organizations of
all types. Leading organizations with over 1,000 employees are
more likely than All Others to deploy their ERP solutions in the
cloud (Figure 4). While this is still an emerging trend, constituentcentered organizations are actually more likely to have
implemented their solutions in the cloud. Twenty-nine percent
(29%) of solutions in constituent or patient-centered
organizations are hosted by the software vendor. Why is that?
Figure 4: Shifting Focus to the Cloud
Leaders

Percentage of Respondents, n = 74

60%
50%
40%

44%

Followers

54%

48%
39%

30%
20%
10%
0%
On Demand / Software as a
Service (SaaS) / Cloud

Traditional licensed on
premise

Source: Aberdeen Group, August 2014

There are many reasons that constituent or patient-centered

organizations cite for implementing their solutions in the cloud
(Figure 5). Unsurprisingly, the top reason is the lower total cost
of ownership. When faced with cost constraints and limited IT
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staffs, constituent or patient-centered organizations want to

look to solutions that require lower capital investments and
allow them to rely on the resources of the software vendor to
manage the IT infrastructure and operations, as well as the
application.

Aberdeens Web Security

in the Cloud: More

Secure! Compliant! Less
Expensive! found that,

Figure 5: Why Cloud?

Lower total cost of ownership

on average, on-premise
solutions had 11
incidents of data loss or
data exposure in the
previous 12 months,
compared to 6 incidents
for those that are cloudbased.

59%

Ease of use

48%

Ease of implementation

38%

Ability to scale solution

34%

Lower risk

34%

Reduces the cost and effort of upgrades

31%
0%

20%

40%

Constituent
or Patient
Oriented
60%

80%

Percentage of Respondents, n = 31
Source: Aberdeen Group, August 2014

But selecting a business solution should never rely simply on

costs. For constituent or patient centered organizations, they
want easy to use solutions that can support new and changing
business models and regulations, can integrate with other
organizations, and can help to improve service quality and cost
controls. This is accomplished through more robust solutions
that can improve visibility into financials and spending as well as
staffing and supply needs and costs. Cloud solutions can
continually provide the latest functionality and user experience
trends.

Security is extremely important for

protecting information in government
organizations. Cloud solutions, which
are actually more secure, provide an
attractive option.

This leads to one of the biggest benefits of cloud solutions for

constituent or patient-centered organizations, the ability to be
constantly updated with little disruption to the organization. No
longer will the organization have to rely on a technology
environment with varying components or disparate ages. The
organization can simply focus on serving its constituents or
patients, and letting the software vendor handle the hard parts
of supporting the technology.
This report is no longer available on Aberdeen.com. If you would like a
copy, please email member.services@aberdeen.com and reference the
following information: #6572 and "Web Security in the Cloud: More Secure!
Compliant! Less Expensive!"

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But ultimately, the benefits of any technology come from the

ways in which organizations can be improved and transformed
through the capabilities contained within that software. In the
case of cloud ERP, frequently updated, end-to-end, useable
software brings capabilities that can help to improve constituent
or patient-centered organizations (Figure 6).
Figure 6: Improved Service and Administration with the
Cloud
Cloud

On-premise

Percentage of Respondents, n = 74

120%
100%
80%

100%
83%

80%

56%

60%
40%

29%

20%

67%
50%

50%
35%

35%

40%

20%

0%
Real-time visibility Decision-makers A fully integrated
view of all
can drill down
into status of all
constituent or
from summary
processes
patient
data to
information
transactions

Unified view of
labor costs and
workforce data

Automatic
Workforce
scheduled based notification based
on defined
on patient or
conditions
constituent
demands

Source: Aberdeen Group, August 2014

For example, due to having one complete system of record that

can be accessed from anywhere, organizations with cloud
solutions are 2.6 times as likely to have real-time visibility into
the status of all processes. This visibility can impact a
constituent or patient-centered organization in many ways. Note
that 83% of organizations with cloud ERP enable decisionmakers to drill down to individual transactions from summary
data. Therefore, the organization can:
Identify labor costs, including spending for contract labor
Identify supply costs, including non-PAR purchases
Track receivables
Monitor claims and service requests
Maintain and utilize assets more effectively

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Additionally, real time visibility can help to provide insight into

patient or constituent information. Service can become more
effective. For example, this could help organizations to improve
Hospital Consumer Assessment of Healthcare Providers and
Systems (HCAHPS) scores in healthcare, or improve constituent
engagement in government or education. Another example
would be to track citizen requests for first responder, nonemergency (311) or tax-related services in real-time.
But really, these capabilities enable an organization to work in a
more holistic manner. With a unified workforce, supply and
financial data, smarter decisions can be made in relation to
staffing. And since this information is integrated with other
operational data, the workforce can also be scheduled based on
patient census and acuity. Lastly, immediate notifications can
ensure that the organization as a whole is managed in an agile
manner, from workforce to finance through managing patient
care needs.
The Benefits
The success of an ERP implementation really comes down to
whether or not the organization is able to use the emerging
technology to induce improvements to the organization. For
example, can patients or constituents be serviced more
effectively and efficiently, can costs be contained, and is
decision-making more effective? In the case of constituent and
patient-centered organizations with cloud ERP, Aberdeen has
uncovered improvements in a variety of metrics (Table 1). For
example, public sector and healthcare institutions with cloud
ERP saw a 38% improvement in time to decisions over the past
year as a result of their solution. This technology can provide the
foundation for a successful constituent or patient-centered
organization.

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Table I: The Results

Average Performance

Improvement in operational costs as a result of ERP

Cloud

On-premise

25%

7%

Improvement in complete and on-time service delivery

as a result of ERP

26%

9%

Improvement in internal schedule compliance as a

result of ERP
Improvement in profitability/balancing budgets over
the past two years

19%

11%

19%

6%

Improvement in time to decisions over the past year

38%

12%

Improvement in the cycle time of key business

processes over the past year

31%

14%
Source: Aberdeen Group, August 2014

In constituent or patient-centered organizations, where costs are

constrained, technology is outdated and disconnected, and
there is high pressure to maintain care or service levels while
providing high visibility into essential data, there is a need for a
change in the technology that supports the organization. The
goal is to provide a single solution that enables improved
processes while providing security and reliability at a lower cost.
Ultimately, this will require organizations to either upgrade or
replace their existing business solutions. A modern ERP system
that is updated with the latest advances in best practices and
supports constantly changing regulatory mandates is the
solution. As a result, ERP delivered in the cloud is an attractive
option for constituent or patient-centered organizations. These
solutions are cost effective, not disruptive, and will enable
constituent or patient-centered organizations to focus on
servicing their constituents' and patients' needs.

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