Seize the Cloud: Comparison, Benefits, and Migration Steps for Cloud ERP in Life Sciences Organizations

The life sciences industry is experiencing a paradox between growth in scientific progress and actual innovation output. On one hand, the pharmaceutical, biotech, and medical device industries have seen staggering growth in research and development (R&D), with Pharma companies spending up to 17% of their revenue on R&D, which is expected to reach $203 billion by 2024. On the other hand, pharma faces a technology innovation crisis. The rising complexities of disease, growing attrition rates of pharma R&D projects, longer development requirements for new products, and the increasing costs for new drug approvals all inhibit growth. While there is no panacea for this multi-layered industry challenge, the right technology to manage business operations is as close to a magic pill as the industry can get.

Enterprise Resource Planning (ERP) systems can transform pharma companies by helping them boost innovation output and future-proof their success. However, companies have a choice when they opt for ERP systems: on-premises or cloud-based technology.

In our digital-first world, cloud options are becoming paramount for organizations that want to speed up innovation and growth. Pharma companies that have adopted cloud ERP are well-positioned to reap the benefits of their investment in new drugs and therapies, eliminate manual work, streamline their processes, meet regulatory compliance, and control costs.

This comprehensive blog compares on-premises ERP with cloud ERP, highlighting the risks of sticking with on-premises ERP and the advantages of moving to the cloud. The blog also guides you through the preparation process for migrating to cloud ERP.

On-premises ERP vs Cloud ERP

Life sciences organizations like pharmaceutical companies and medical device manufacturers have undoubtedly heard about cloud ERP, and migrating to it from on-premises technology is easier said than done. However, as technology evolves, life sciences organizations will soon no longer have the luxury of sticking to old, familiar solutions; they will have to consider moving to the cloud or risk high costs, security compromises, and falling behind their competitors. Let’s delve into how cloud ERP is distinctive in fundamental factors such as security, compliance, customization, costs, and access.

Risks of on-premises solution 

Many companies are at a crossroads as the pharma industry faces increasingly complex compliance standards and fierce competition. Legacy technology is putting life sciences organizations at risk and holding them back from the efficiencies, security, and innovation they need to be a market leader.

The following are the biggest risks of remaining on legacy, on-premises Microsoft Dynamics AX systems:

• Reduced agility: You are limited in how or if you can scale your organization up and down as needed without interrupting current business. This includes functionality, capacity, number of users, etc.

• Less flexibility: User access to data is limited to specific locations and equipment on-site and during regular hours.

• Inadequate security: Most organizations struggle to keep up with the latest security concerns and breaches and lack the internal skills and software tools required to adequately protect data.

• Costly disruption: With all IT centralized in one place, your organization is vulnerable to service interruption due to power outages, hardware or software issues, network problems, or other disasters. It is difficult, or impossible, to access a backup and perform disaster recovery promptly.

• Expensive maintenance: There will be a point where you’re spending more money to maintain your legacy systems than you would if you had upgraded your systems to a modern infrastructure.

• Non-compliance risk: Regulatory standards must be followed, and your technology must be supported to prevent fees and penalties for data breaches (security holes), increased downtime, loss of clients and data, etc.

Why Cloud ERP is a Smart Move

In the Forrester Report, The Total Economic Impact™ of Microsoft Dynamics 365 Finance and Microsoft Dynamics 365 Supply Chain Management, seven enterprise organizations that moved legacy systems to Microsoft Dynamics 365 were interviewed. Quantifiable improvements as a composite average across the seven represented organizations include:

• 60% ROI with payback in 20 months
• Savings of $39M in operational efficiency
• Savings of $20.6M in employee productivity
• Increased wholesale/retail profit of $4.6M
• Avoided $10.6M in legacy system costs

For pharma, there are specific advantages and benefits of cloud ERP that have become mandatory to enable growth and innovation in the future, such as:

• Maximum agility: Cloud ERP solutions enable you to stay agile and competitive as you can scale and align your technology aligned to your organization’s growth or need to downsize.

• Lower cost of ownership: With lower upfront costs required to implement world-class technology, you can reduce your capital expenditures and shift funds to more strategic growth initiatives. License costs are flexible and affordable so you can increase access to everyone who needs it.

• As per the Forester study, there was a 4% reduction in total cost of ownership (TCO). An 8% overall savings in licensing and support costs, increasing to 20% and more for organizations with global operations and multiple on-premises Dynamics AX deployments and on-premises infrastructure cost savings of $25,500 per server on average

• Best-in-class security: Cloud ERP vendors like Microsoft lead the world in security and privacy. You automatically inherit leading security systems and controls, which help you stay compliant with no additional costs or IT resources required.

• Built-in disaster recovery: Eliminate the concerns and risks of disruption in the face of disaster. Cloud ERP always offers disaster recovery and data redundancy so you can be back up and running quickly to minimize downtime and data loss.

• Accessibility anytime, anywhere: Remove the constraints of accessibility tied to specific locations and equipment by providing staff with easy, secure access from any location or device. The Forester study also noted a 50% increase in productivity for IT systems administrators tasked with maintaining and upgrading on-premises deployments.

Benefits of Moving to Cloud ERP for the Life Science Organizations

Now that we understand the comparison between on-premises ERP and cloud ERP, there are a few more pressing reasons why life science organizations must transition to the cloud.

1.    Goodbye support and security

First, there’s the obvious: Microsoft Dynamics AX support has ended as of January 2023. Pharma organizations have a clear choice to make ̶ they can stay with on-premises technology and use legacy systems that will go unsupported—introducing high risk—or they can embrace the cloud.

The old mentality around the cloud’s lack of security posture has been disproven as cloud ERP providers have heavily invested in advanced security features and demonstrated their solutions’ ability to keep organizations safe. Rather, the more outdated legacy systems get, the less secure they’ll be.

Staying on legacy technology introduces other non-security-related issues as well as keeping up with regulatory and tax updates. Since future functionality updates will be halted, pharma companies won’t even have self-service support options, and all warranty claims will expire.

2.    Hello, business performance improvement!

Moving to a cloud ERP offers many positive changes for life sciences organizations, including reduced manual work, better productivity, more capabilities, useful insights, and a better user experience. There are many cloud ERP options, but life sciences organizations should look closely at industry-specific solutions to help them with their unique core business functions.

Pharma-specific cloud ERP solutions like STAEDEAN Life Sciences are created with life sciences in mind—offering features and tools that help automate processes and stay compliant with regulations such as Good Manufacturing Practice (GMP) and US Food and Drug Administration (FDA) requirements. Life sciences organizations will see the following benefits,

• Lower upfront costs: Implementing a cloud ERP solution requires little capital expenditure. You’ll be able to distribute your funds to other projects while enjoying a predictable monthly expense.

• Global accessibility: Employees can securely access data from any location or device, broadening your ability to stay productive and support a remote workforce.

• Greater flexibility and agility: Scale as needed as your cloud ERP solution expands and contracts with your organization’s needs.

• Disaster recovery and world-class security: Modern security controls keep you compliant with ever-changing regulations and offer backup should downtime occur.

How to prepare for a migration to Cloud ERP?

Beyond the security and compliance issues that are increasingly likely to happen if you don’t upgrade your ERP system, the cost of maintaining your legacy ERP will eventually be more than the cost of an upgrade.

So, where do you begin? Microsoft offers a set of instructions and a seven-hour tutorial. What Microsoft doesn’t account for, however, are the unique regulatory and compliance needs of pharmaceutical companies, biotech firms, medical device manufacturers, and other Life Sciences organizations.

1.    Setting up a Cloud ERP task force

A large part of your ERP upgrade will involve coordinating activities and managing change internally. So, before you start the upgrade process, it’s a good idea to work closely with your Independent Service Vendor (ISV) and establish a cross-functional ERP task force. This committee can prioritize workloads, ensure the safety and security of your data, work with your ISV, and keep all stakeholders up to speed as the migration efforts progress.

While this task force should originate in your IT department, stakeholders from the business should be part of the team to ensure everyone is aligned with your objectives and the processes required to achieve them.

2.    Setting up a Cloud ERP roadmap

Whether you follow Microsoft’s instructions or use an experienced ISV like STAEDEAN, the basic process is the same. While we use slightly different terminology, our migration roadmap mirrors the Analyze, Execute, and Validate steps found in the Microsoft tutorials.

In addition to supporting the upgrade to Dynamics 365, we can also manage your cloud validation requirements if you decide to move off-premises for security and flexibility advantages.

1.    Conducting a solution assessment

Once you have the general framework in place, your ERP task force will conduct or supervise a technical audit to identify data cleanup needs (smaller databases mean smoother upgrades), SQL configuration requirements, and whether deprecated features need replacing.

The best thing about working with a partner like STAEDEAN during this phase is that we’ll advise you about best practices for optimizing processes and workflows.

For example, we can help you automate second-person verification within your new ERP, eliminating the need for tedious manual work while ensuring that regulatory requirements are met. We’re also aware of the fact that many local laws mandate that healthcare data stays in the same country from where it was obtained; this is of particular importance to multinational life sciences organizations.

2.    Piloting the new solution

Once you know what you need from your new ERP system, it’s time to set up a pilot environment to test it out. You can use your own data, or if you work with us and rely on our industry experience, we can provide you with sample data relevant to your business. Either way, we use readymade templates designed for life sciences organizations to streamline the piloting process.

3.    Implementing your new ERP

After the pilot, when you’re sure your ERP solution is working properly, you’ll start preparing for an organization-wide implementation of the new system. Training users and migrating data can be stressful for most organizations, but if you conduct the pilot properly with the necessary testing, the wider rollout can go quite smoothly.

4.    Validating your new ERP for the cloud

The final step is to validate the solution for optimal risk mitigation. Several companies can provide this service, but one of the things that makes STAEDEAN unique is our ability to “think validation” while implementing the ERP system. You can think of us as your one-stop ERP shop. Validation usually consists of the following stages:

1. Functional validation

• Perform end-to-end application functional validation

• Regression testing over the cloud
• Service integration with other applications
• UI working as expected
• Cross-platform compatibility is ensured

2. Integration testing for third-party applications

• Verify all interfaces and related systems are tested and covered

3. Prepare Disaster Recovery and Business Continuity Plan

The validation must also be based on the risk level of the application

1. Installation Qualification (IQ) should be simple and based on hardware & software requirements for the system, the IQ of the vendor can be leveraged.
2. Operational Qualification (OQ) is conducted to verify critical high-risk systems:

• Security, data integrity
• Audit trail
• Electronic signature
• High and medium risk requirements

3. Performance Qualification (PQ) is conducted to verify the workflow & business process requirements.

By reviewing seven businesses that upgraded their legacy ERP solutions to Cloud (Microsoft Dynamics 365), Forrester found that real-time data analysis, automation, and streamlined processes drove a 10% savings in the cost of goods sold and a 2.4% improvement in gross margins. Based on these findings, Forrester determined that a Cloud upgrade generally pays for itself in about six months.

If you have any hesitation about moving to the cloud, you should know that the advantages far outweigh the disadvantages. A secure cloud architecture allows you to use your ERP from anywhere, on any device, reduces the cost of IT infrastructure and maintenance, and provides efficient and economical failover management, disaster recovery, and data redundancy.

Microsoft has a great cloud ERP and great applications, and because everything comes from a single source it all fits together quite well. What’s more, Microsoft invests more than $1B in cybersecurity each year and its cloud customers receive the benefits of that investment.

Why STAEDEAN Life Sciences?

For life sciences organizations – including biotech, pharma, and medical devices – you have unique needs that must be met with a cloud ERP solution. This typically involves costly customizations and add-ons. However, the STAEDEAN Life Sciences solution, powered by the Dynamics 365 cloud platform, is designed to meet your business and industry-specific requirements and extend your capabilities to achieve rapid time to value.

Powered by decades of experience, we can help life sciences organizations modernize, migrate, and validate their ERP systems in the cloud. To succeed in the cloud with a top-tier ERP system, we believe that life sciences companies need a comprehensive solution that addresses their unique needs and regulatory requirements. Most cloud-based ERP solutions don’t include the necessary components for pharmaceutical, biotech, and medical device companies, and for too long, these organizations have had to perform costly and complex customizations to their ERPs.

Fortunately, the life sciences and ERP experts at STAEDEAN have developed a powerful GAMP 5 Category 4 (configurable) solution with the industry-specific modules you need right out-of-the-box. The solution is purpose-built for Microsoft Dynamics 365 and is designed to ensure full compliance with GxP guidelines.