Australian tech chiefs are feeling the heat to move systems to the cloud. The pressure is coming not just from vendors who see the future of their products in the cloud but also increasingly from CEOs and board members.
The cloud computing model has captured the imagination of everyone: they see the budgetary benefits that cost effective and agile IT deliver, and they want to be involved. The challenge for tech execs is to understand the broad trends without letting themselves be pressured into enterprise application decisions that go against the best interests of their organisations.
Broadly, the trend is for more software to migrate into the cloud, but it’s not a given that the cloud is the best option for every application. And there is a big difference between saying “enterprises are moving to the cloud” and “enterprises are moving their ERP applications to the cloud” – particularly if by “cloud” we mean software-as-a-service (SaaS) ERP.
That enterprises are embracing the cloud is undeniable. But moving their ERPs to the cloud, as in SaaS? Not so much, at least not yet, and probably not for a long time.
ERP systems are some of the most complex software ever invented, and reinventing them as cloud native products may be the work of a decade or more. The major ERP vendors have created SaaS versions of their software, but they’re different enough that implementing them is almost always a large project rather than a simple upgrade.
That means ditching investments in customisations, which are often important to tailoring an ERP to meet a company’s needs. At the same time, SaaS ERP is essentially a new outsourcing model for familiar software. There is nothing revolutionary or transformational about it. In fact, anyone making the leap needs to analyse what familiar functions and industry-specific capabilities are missing from the SaaS version.
Occasionally, we hear of SAP or Oracle ERP customers making the change anyway because they want to “start over.” However, most can’t afford to throw away the effort they have sunk into tailoring their existing system to meet their needs.
They see the opportunity cost of recreating existing applications for the cloud, rather than investing in something new and innovative. Worse, they typically risk deeper lock-in if they let a single vendor not only provide essential software but control the interfaces and access to it, along with the underlying data.
Fortunately, there are other options:
- Consider hosting your existing ERP on IaaS cloud services. Leveraging IaaS to get your ERP out of the data center is the most cost-effective, least disruptive cloud option. It lets you capture price, performance, and flexibility advantages of the cloud without sacrificing years of investment in making an ERP meet your business requirements.
- Embrace SaaS services that integrate with your ERP to enhance and extend its core capabilities. Enterprise cloud software vendors have every reason to make their products work well with your ERP, but they tend to innovate faster than the ERP vendors do.
In either scenario, if your ERP vendor is pushing you to migrate to the cloud with end-of-support deadlines for your current software, consider third party support as an alternative.
These options reflect a fundamental change in the enterprise software market, where ERP is no longer the center of the universe. Monolithic ERP suites prevailed over the last 30 years when the goal was standardisation and integration.
Today, instead of efficiency alone, business agility and innovating how work gets done have become top of mind for business and IT leaders who are trying to figure out how to transform their business to compete in a digital world.
Pat Phelan is vice president, market research at Rimini Street.
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