In the world of modern business, cloud-based enterprise resource planning (ERP) systems have been hailed as a game-changer. They promise lower costs, streamlined operations, and a path to digital transformation. Yet, for many companies, the reality has fallen short of the hype. Despite the allure of increased agility and ease-of-use, nearly half of organizations that adopt new cloud ERP solutions fail to realize their full potential, according to a PricewaterhouseCoopers report. Why?

The answer lies not in the technology itself, but in how companies approach it. “Many executives move to a new ERP solution to improve business processes with an eye toward the future,” the report states. “But when asked about the biggest barriers, they cite a lack of ROI and the organization not understanding the benefits.” This disconnect raises a critical question: If ERP is designed to boost efficiency and cut costs, why do so many companies struggle to see the value?

Take SAP S/4HANA, for example. As one of the most widely adopted cloud ERP platforms, it promises to deliver real-time data processing, advanced analytics, and seamless integration across business functions. Yet, even with such a robust system, companies often stumble. The challenge isn’t the technology—it’s the failure to align the platform with reimagined business processes. Without this alignment, even SAP S/4HANA, with its cutting-edge capabilities, can become just another expensive IT project rather than a driver of transformation.

The Double Debt Problem: Technical and Process Challenges

At the heart of the issue are two kinds of “debt” that weigh down organizations: technical debt and business process debt. Technical debt refers to the legacy systems, outdated software, and tangled interfaces that accumulate over time. Business process debt, on the other hand, involves outdated workflows that are disconnected from customer needs and isolated from broader organizational goals.

To achieve the true potential of cloud ERP, companies must tackle both. “Reducing technical debt involves moving to a consolidated ‘clean core’ with minimal modifications,” the report explains. “But there should be equal focus on reducing business process debt.” Without addressing these outdated ways of working, even the most advanced technologies—like AI and machine learning—will fall short.

The solution? A relentless focus on reimagining business processes and integrating digital innovations. “By layering tools like process mining, data visualization, and generative AI onto the ERP core, companies can achieve fit-to-industry solutions that drive real value,” the report notes.

If done right, the value of ERP can be a game-changer for businesses. Consider the case of a consumer products company that overhauled its procurement process. Before the transformation, the procurement team was bogged down by repetitive tasks like answering status queries and generating reports. By implementing an AI-enabled chatbot linked to their ERP system, they automated these tasks, boosting productivity by 30%.

Of course, there’s more to it than gimmicky chatbots. Machine learning algorithms were used to recommend the best suppliers for spot buys, balancing cost and lead times. AI tools flagged exceptions to purchasing guidelines, ensuring compliance. These changes didn’t just save time—they drove better financial outcomes.

This example underscores a broader truth: Cloud ERP isn’t just about reducing technical debt. It can be a genuine catalyst for reimagining how businesses operate. “It’s about creating digital-first processes that enhance stakeholder experiences and set up organizations for sustainable growth,” the report concludes.

The Data Deluge: A Challenge and an Opportunity

The sheer scale of data generated by modern enterprises is staggering. Artificial intelligence (AI) algorithms churn through mountains of information, while Internet of Things (IoT) devices collect real-time data from sensors scattered across factories, warehouses, and retail stores. Customer relationship management (CRM) systems track every interaction, and point-of-sale (POS) systems capture transactions as they happen. Add to this the unstructured data from call centers, emails, and social media, and the complexity becomes overwhelming.

“The volume, variety, and velocity of data that flow through a typical enterprise system surrounding ERPs can be overwhelming,” reads a 2024 Cloud and AI Business Survey. However, for companies with modern cloud frameworks, this deluge can be turned into a major strategic opportunity. This unfiltered raw data can be transformed into strategic knowledge by integrating disparate data stores, systems, and applications. Organizations can then react more swiftly to changing conditions, from geopolitical events to shifts in customer sentiment.

“Modern cloud frameworks enable businesses to move beyond traditional barriers and create interconnected ecosystems,” says a leading industry analyst. “This is what makes AI-powered, cloud-driven companies stand apart—they don’t just react to trends; they anticipate them.”

The benefits of a well-structured data ecosystem go far beyond convenience. Companies that invest in data modernization are seeing game-changing improvements in multiple areas:

• Speed and flexibility – With AI and machine learning processing data in real time, businesses can respond instantly to shifts in customer demand, geopolitical events, and technological breakthroughs.
• Smarter decision-making – Cloud-based frameworks provide a more complete and accurate picture, allowing companies to reduce costs, optimize performance, and stay ahead of competitors.
• Democratized data access – Employees no longer need to be programmers to work with complex data. Low-code and no-code platforms allow teams to build models, visualize patterns, and explore trends with minimal technical expertise.
• Greater trust and transparency – Standardized data practices ensure accuracy and efficiency, eliminating confusion and uncertainty in decision-making.
• Hyper-personalization – Companies can tailor products and services to individual customer preferences, cutting through the noise and delivering meaningful engagement.

For businesses looking to take the jump into ERP, success requires more than just installing new software or migrating data to the cloud. It demands a strategic approach, guided by a few critical questions:

• Is the transformation business-driven or IT-driven? IT leaders are important, but business leaders must define goals and ensure that data initiatives align with strategic priorities.
• How does this support our core objectives? Data modernization should always be about accessing new opportunities and driving innovation.
• Are we accelerating time to value? Companies need to move at digital speed with agility in mind.
• Are we making our business simpler or more complex? The goal should always be a streamlined, scalable framework that enhances productivity rather than adding layers of bureaucracy.

The journey to value-based ERP isn’t easy, but the rewards are substantial. Companies must standardize and automate business processes, eliminate technical and process debt, and set clear performance targets. By doing so, they can unlock the full potential of cloud ERP—transforming it from a costly investment into a powerful engine for growth.