Why Cloud ERP Migrations Fail (And How to Avoid it Happening to You)

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By CJ Singh, Chief Technology Officer, GHX

The healthcare industry has been slow to adopt cloud technology, finding comfort in the perceived safety, reliability and control of an on-premise system. However, over the last few years, many providers have started to see the value that the cloud can bring to their organizations, including benefits like improved efficiency, better systems reliability, enhanced security, and reduced capital investment. This realization has led to a massive shift in the industry, with more hospitals and health systems making cloud investments. 

One area of the cloud that has gained popularity and adoption among the healthcare industry is the migration to an enterprise resource planning (ERP) system. A cloud ERP provides greater support for supply chain resiliency for healthcare organizations, which proved to be vital amid the rapidly changing environment of 2020. In fact, the cloud ERP market is expected to grow more than $55M in the next five years, surpassing more than $101B by 2025. Yet, despite this uptick in adoption, roughly three-quarters of all ERP migrations fail to deliver on key business objectives and a return on investment. Consider these facts:

  • A cloud migration can take 12-18 months to successfully implement and deploy.
  • A cloud migration can cost an organization between $5-20 million from start to finish.
  • If data isn’t properly migrated, a cloud implementation can take significantly longer than expected to carry out. 

With hospitals losing roughly $20 billion per month in the wake of the pandemic, providers need to feel confident that their cloud migrations will deliver the intended return on investment. The path to a successful cloud ERP migration lies in understanding and avoiding the common pitfalls that typically upend an implementation and build upon a foundation of modern supply chain processes that will help drive agility into the business, power an organization’s financial performance and deliver on major initiatives, such as value-based care and consolidation strategies. 

Avoid Bad Data and Bolster Automation 

Data is the engine that drives clinical, financial, and operational success within a healthcare organization. Yet, most providers are challenged with data that is siloed and incomplete. For example, procurement data from contracts, group purchasing organizations (GPOs), vendor representatives and supplier catalogs might be housed in one system, while clinical data is housed separately in the electronic health record (EHR). It’s hard enough to get all this data aligned for procurement and payment purposes, let alone getting this quality data into other systems, such as the EHR or billing and revenue cycle management. This makes it challenging for an organization to trust the data that is powering its systems, leading to less effective business decisions. 

Another source of the healthcare industry’s data issues lay with the many supply chain processes that remain manual, resulting in inefficiencies and errors. Everyday tasks, such as purchase order (PO) confirmation, item sourcing and inventory management are all areas that are ripe for automation. It’s estimated that roughly 40% of an organization’s item master data is inaccurate and without an automated approach, fixing one inaccuracy takes approximately 25 minutes per SKU with an estimated cost of $7.61. This lack of automation isn’t just inefficient and costly for healthcare organizations. It also impedes their ability to improve supply chain resiliency and carry out more agile work-from-anywhere processes for staff. Perhaps most importantly, it also means that the aforementioned data feeding into such systems is often inaccurate or incomplete and cannot be fully trusted. 

A cloud ERP can centralize data, but it cannot outright fix a provider’s inherent data challenges. Organizations first need a solid, cloud-ready data foundation to feed into the ERP, that will then fuel all other downstream supply chain processes. To meet the demands of a demand-to-outcomes orientation – that looks at the entire supply chain holistically and utilizes unified, evidence-based data to power decision making – data feeding into an ERP needs to go beyond just the item master to include vendor, transaction, and clinical data. This data also needs to be centralized, constantly updated, and made available to the right stakeholders and decision makers when needed. This level of automation not only cuts down on administrative tasks (and the human error that can accompany them) but creates greater visibility into the data organizations need to glean upstream insights on purchase decisions and showcase the downstream value of those decisions. 

Find a Trusted Partner to Counter Limited In-House Cloud Expertise 

Given how complex healthcare data is, expertise in a healthcare cloud implementation is specialized and scarce. Supply chain professionals are experts in their businesses, but they are not usually experts in the cloud. Without the right resources and support, these teams can often get bogged down moving item data to the new system, chasing down missing POs, or correcting contract price discrepancies. This drives team members away from the most critical work – improving patient care – and creates inefficiencies that can trickle down to poor financial and operational outcomes.

Similarly, top cloud consultants may not possess the right healthcare-specific knowledge needed to support a healthcare provider’s cloud migration. This knowledge gap can lead to key areas of a cloud ERP rollout getting overlooked, such as the need for change management and heightened collaboration among the provider’s functional units. Without a well thought out implementation plan that prioritizes these areas, organizations can expect their cloud ERPs to go live with lower automation rates than they started with, or worse, have their go-live dates pushed back, racking up significant costs along the way. 

This is why it is critically important that organizations have a trusted and experienced partner working with them in their cloud migration journey to ensure long-term success. This partner must understand cloud ERP and the intricacies of healthcare supply chain processes, the data that fuel them and how to redesign processes and data flows to extract as much value as possible from the cloud. 

Scalable, Interoperable Platform  

A solid data foundation will only power a cloud ERP if the right infrastructure supports it and healthcare data’s level of sophistication requires a scalable, highly interoperable supply chain platform. This platform should have advanced capabilities to help providers achieve maximum automation, perform touchless closed-loop order management and support integrations that automate the flow of unified data across supply chain systems. And, perhaps more important now than ever before, providers need a platform that allows for agile processes that are no longer beholden to an on-premise system, creating a more flexible, work-from-anywhere environment. 

Healthcare organizations will also want to make sure that the technology partner they are working with is aligned with the ERP organizations. By developing specific capabilities that fit within the software provider’s specific product, organizations are able to create a more seamless user experience in requisitioning the ERP system. 

The Cloud ERP Tipping Point

The market is changing, and cloud migrations have become multi-million-dollar opportunities that healthcare organizations need help seizing. But just recognizing the need and investing in a cloud ERP is not enough to prepare your organization for the new business of healthcare. To achieve the strategic business goals that initiated the move to the cloud in the first place, providers need a scalable, interoperable supply chain platform that can support a solid data foundation with the help of an experienced healthcare partner to see the project through. 

By taking these steps, organizations can ensure that their investment pays off and that the promised benefits of the cloud – improved processes, increased resiliency, maximized reimbursements and more readily accessible insights that can help improve patient outcomes – are realized. Without these data, partner and platform considerations, providers cannot leverage the power of data, nor can they effectively think ahead toward additional strategic initiatives to layer on to programs, such as sourcing and utilization, to advance their work. For providers teetering on the edge, now is the time to make the jump and see just how much a cloud ERP can support the advancement of their organization’s clinically integrated supply chain and ongoing transition to value-based care. 

CJ Singh is the Chief Technology Officer for GHX.