PeopleSoft has lived a long life. For years, organizations could select and implement PeopleSoft knowing that it provided a solid business platform and scalability to meet their needs. However, like most products, PeopleSoft reached a point in its evolution where it atrophied. Your organization needs a visionary to lead them to a better solution.
The PeopleSoft part of Oracle is recommending that PeopleSoft customers do another expensive upgrade to version 9.2 (other parts of Oracle are advocating a switch to Oracle Cloud – so it can be confusing!). If you have been through a PeopleSoft upgrade in the past, you know that they are expensive, risky and time consuming. PeopleSoft upgrades are measured in months (and sometimes years), and when you need to upgrade it is typically ﬁnance and IT's #1 priority for the year. Even after a successful upgrade, most customers say "I never want to do that again" as outlined in this article.
If you take Oracle's recommendation and upgrade to 9.2, you can then execute a new strategy called PeopleSoft selective adoption. Oracle will not release another new version of PeopleSoft, but instead add functionality that customers can pick and choose from and add to their environment. This puts even more burden on you as the customer to manage the infrastructure of your ﬁnancials application. Why should CFOs have to worry about their technology stack? It should just work and evolve, rather than add to the list of initiatives that need to be managed (and have allocated time, resources, and budget!).
A Better Alternative
For current PeopleSoft customers, instead of upgrading to the latest release, now is the time to consider switching to a new ﬁnancial system. Over the past three years, there have been huge improvements in cloud ﬁnancial platforms. In Gartner's report "Market Share Analysis: ERP Software Worldwide" (May 2014), the ﬁve fastest growing ERP vendors world-wide were cloud vendors. Oracle themselves is heavily investing in cloud technologies. Why should you invest your time and budget in upgrading PeopleSoft when your vendor is clearly not investing their time and budget?
The article 9 Reasons CFOs Love the Cloud (or should!) provides compelling reasons organizations should switch to cloud based applications. Here are two additional reasons:
- Cloud Providers Offer Continuous Innovation - Since all customers are on the same version of the software, cloud vendors only need to support one technology stack. This allows cloud vendors to focus their R&D dollars on delivering new features and tools versus maintaining what is already in production. Since 2006, PeopleSoft has delivered three major releases of their platform. Workday has delivered 23 new releases in that same time span. Also, cloud vendors are investing in solutions that are very non-traditional for an ERP vendor, such as predictive analytics to better make use of your data and public data sources to help guide your decision making process. Continuous innovation means game changing new tools for ﬁnance.
- Cloud is a Much A Better Delivery Model - If you bought an on-premise solution such as PeopleSoft, you will need to procure, maintain and upgrade servers, operating systems, databases and third party bolt-ons in addition to the application. With the cloud, you typically get your production log-ins within twenty-four hours of signing your contract. This delivery model not only shortens the time it takes to implement your ﬁnancial application, but massively reduces the support cost of maintaining it. And upgrades - with PeopleSoft, upgrades occur every three to four years and are measured in months and hundreds of thousands (millions?) of dollars. With cloud providers, upgrades come multiple times a year and happen in a few hours.
So how do I make the Business Case?
You should start by creating a ﬁve-year total cost of ownership ("TCO") model for staying on PeopleSoft versus migrating to a new platform.
Calculating the Cost of Staying on PeopleSoft (aka - the Cost of Stagnation ("COS"))
Oracle's recommendation is to upgrade to 9.2 and then for each customer to apply patches, ﬁxes and new features to their 9.2 version. This means that you have to estimate eight distinct costs for your ﬁve-year TCO model.
- Upgrade Costs - Upgrades are expensive. Upgrade costs include consulting fees, internal IT personnel costs, new hardware and software, and the opportunity cost of your team working on a non-value added upgrade versus improving your operations. One multi-billion dollar company I recently worked with completed their upgrade in 14 months with a project team of over thirty resources. Upgrades cost hundreds of thousands at the low end to millions on the high end. It may seem daunting to calculate the cost of your upgrade, but you can start with past upgrades at your ﬁrm. How long did it take to upgrade? What were the external costs? What were the internal costs? This is a great baseline and probably the "ﬂoor". Since you last upgraded, you have more data in your system, more customizations, more reports and queries. Your upgrade is more complex than last time (not less!).
- Post-Upgrade Stabilization Costs - At best, most upgrades are associated with "hiccups" such as long running or failed processes that take time to resolve and cause business disruption. At worst, upgrade projects fail altogether or go way over budget and miss deadlines. After you upgrade, you will need to budget for stabilization costs - these typically include additional consulting fees to ﬁx performance issues or to ﬁx processes that worked in the past but are not working post upgrade.
- Infrastructure Cost - Most organizations will need to upgrade their technology stack (servers, operating system, databases) as part of the upgrade. When calculating the COS, you need to add in fees for the new hardware and software beyond PeopleSoft and PeopleTools. You will also need to use outside consultants or your internal operations team to install, conﬁgure and test the stack. After the upgrade, you will have the annual recurring cost of maintaining, patching, monitoring, and supporting a large technology stack just to perform basic functions like entering a journal entry.
- Application Support Cost - PeopleSoft is massive. There are millions of lines of codes and thousands of conﬁguration options. Organizations need to have staff with specialized skills in PeopleTools and functional business analysts to support their application. Whether you manage this internally, have a managed service or outsource these tasks to consultants, it is expensive. I often help customers estimate support costs and a good rule of thumb is to have 1 functional and .5 technical subject matter experts full time for every three modules you are using in production.
- Maintenance and Support Costs - As an existing PeopleSoft customer, you know that you pay a king's ransom in maintenance fees every year (Barron's estimates that maintenance fees is roughly 50% of Oracle's revenue at 90% margins). These fees dramatically increase the total cost of ownership as these fees are annual, expensive and far more likely to increase over time versus decrease. In addition to PeopleSoft maintenance and support, you need to add in M/S costs for your servers, operating systems and databases.
- Third-Party Applications Costs - PeopleSoft and its compatriots often require additional third party tools which in turn have their own long term cost. Also, as PeopleSoft is unlikely to meet all of your needs, you need to add in the cost associated with additional software purchased to ﬁll these gaps or the cost of the manual processes your team completes to meet your business need.
- Process Inefﬁciency Costs - This is a harder one to calculate because you have probably accepted the inefﬁciency as "normal". However, there is a real cost to the status quo. PeopleSoft is a transaction processing system. It does a great job for keypunching in data and processing data sets in batch. It has always struggled with creating a great user experience. There are inherent inefﬁciencies that you have worked around for years. For example, PeopleSoft is based on sub ledgers and sub modules. Transactions are processed in these modules and then summarized and sent to the GL. Users have been conditioned to accept this as normal. They have to wait for the next batch run or the monthly close process to be able to see the impact of events or analyze data. You should analyze your existing processes and ask "why" we do the things that we do - if the answer is because that is the way PeopleSoft works, you have found an inefﬁciency that should be part of your calculation.
- Selective Adoption Costs - Once on 9.2, you will have the ability to add new features to your application selectively. This is an interesting concept, but also expensive. Oracle will release new features to version 9.2 on a periodic basis. Each customer can review and select the features that make sense for them. This puts the burden (and associated cost) on you. You will need to review the new features, select the ones that you want, download the feature, install the feature, retroﬁt the feature to work for your conﬁguration and customizations, regression test related functionality and processes, and implement the new feature. This is a heavy burden. The most likely scenario for PeopleSoft customers is that once they are on version 9.2, they will stagnate. CFOs will look to allocate budget and resources to projects that add value to their organization versus adding small features that are expensive to implement and offer little comparative value. If there is a feature that you do choose to implement, you will also need to support it. As most PeopleSoft customers know, when they log a support ticket they are asked what application version, tools version and infrastructure version they are running on. Support also asks if they have customized the process. This makes for a very inefﬁcient process and often puts the burden of support on the customer to resolve the issue. With Oracle's Selective Adoption, support will now also ask which of the individual features you have installed (and have you customized them?). Selective Adoption adds an additional complexity to an already overly complex process.
Understanding the Costs and Beneﬁts of Migrating to a New System
To make the business case, you need to estimate the cost of implementing and supporting a new cloud system. The process is similar to implementing other systems (you still need to do requirements, conﬁguration, data conversion, testing, ﬁnancial reporting, process modeling and designing risk controls), but there are signiﬁcant differences that reduce the cost of implementation and support. You will also need to highlight the expected beneﬁts.
- No Infrastructure. You will not need to procure any hardware (or install it, troubleshoot it, maintain it, or upgrade it). This is huge reduction in costs. You will also not need to pay maintenance and support fees.
- Uniﬁed Solutions. Vendors such as Workday offer uniﬁed solutions for Finance and HR. This makes it easier to share data and processes across the organization versus processing transactions in the HR system and then waiting for an interface to run or for someone to manually re-key the data in the Financials system.
- Less Customizations. Cloud applications stress conﬁguration vs. customization. They offer numerous setup options and conﬁgurable workﬂows that should meet most of your needs. They offer advanced business process modeling features that allow you to easily map their functions and features to your business process. In the old on-premise ERP model, implementation and total cost of ownership costs skyrocketed as companies built hundreds of customizations. Each customization added to your custom “off the shelf solution” – making it unique to you and only you. Each one had to be designed, built, tested, regression tested and supported.
- Less Training. Cloud applications are built like consumer applications. They are fundamentally easier to use and understand versus traditional on-premise transaction systems. Also, for the casual user (e.g. - expense reports, timesheets, purchase requests, approvals) applications are built with mobile in mind allowing your workforce to work anywhere anytime.
- Continuous Innovation (with limited work from your end). According to Webstern Buchanan Research, one large ﬁnancial institution estimated that it will take them 44,000 hours to complete their PeopleSoft upgrade. With the cloud, you typically get a preview release a month before the upgrade, you regression test your interfaces, and review the release notes for new functionality you want to implement. During the upgrade weekend, the vendor does all of the heavy lifting and typically completes the upgrade overnight. You then put your energy into using the new software versus selecting, installing, retroﬁtting and supporting it.
- Process Efﬁciencies. The ﬁnal step in building your business case is to layer in potential process efﬁciencies. As mentioned, most organizations have been using PeopleSoft for a long time and have accepted work-arounds, non-user friendly interfaces, confusing navigation, multiple clicks to accomplish tasks, and underwhelming mobile applications as the normal course of business. Once organizations have identiﬁed red ﬂags in their processes they can quantify expected process improvements. An example of a process efﬁciency is real time reporting. In PeopleSoft, the architecture is built on modules and batch processes. In modern applications, your ﬁnancial platform does away with this construct. Users can see data (and its impact) as it is being entered. Finance can measure results real time and click through the system to research variances throughout the month. Not only do you get better data, but you spread work that typically happens during a three day close period across the month.
After adding up all of the costs of staying with PeopleSoft, you will come to a fairly signiﬁcant number over a ﬁve year period. In addition to the cost factor, you will be re-investing in an old technology product. According to Gartner (Adoption of Cloud ERP, 2013-2023), 47% of companies plan to move their core ERP systems into the cloud by 2018. Your ﬁve year TCO will end in 2020 - two years after Gartner's estimate for signiﬁcant adoption. By staying on PeopleSoft, you will be at a competitive disadvantage compared to your peers when it comes to your core ﬁnancial system.
In order to implement a new cloud ﬁnancial solution, you will need to rally your organization around the business case. If you have completed the cost analysis, the ﬁve year TCO on hard dollar costs of upgrading versus implementing should already provide a compelling ﬁnancial reason to make a change. Staying on PeopleSoft will be more costly than migrating to a new system. When you layer in the many beneﬁts of a cloud solution in terms of a reduction in infrastructure, support and upgrade, the case will become clearer. Finally, cloud providers are investing signiﬁcant R&D into their products and advanced concepts such as predictive analytics. Cloud providers will be the vendors introducing these disruptive solutions that will change the way you do business versus releasing patches meant to keep the application running.
Now is the time for you to lead your company to the cloud. You will be seen as the visionary and hero that replaced your decades old ERP system and implemented an application that will carry you forward for the next 20 years. PeopleSoft was created in the 1980s and 1990s to solve issues like disparate systems and Y2K. It is time to invest in technologies that solve today's challenges.