ERP SaaS 101: Services Trump Software

How many ERP SaaS offerings are in the market today?  The number depends on who you ask but it is a fair statement to say that all Tier I and the majority of Tier II ERP vendors have a SaaS offering.  A majority of the market and many ERP analysts still take an on-premise approach to evaluating ERP SaaS offerings.  Services, not software, will have the greatest impact on ERP SaaS success.  The purpose of this article is to examine the impact services will have in a SaaS model.

Installation Is Not an Implementation

Ah, the battle cry of ERP SaaS “You can be up and running in a matter of minutes!”  Now, it is a fair statement you will have a running system but it is a far cry from a configured business solution.  Consider the key activities required for this transformation:

SaaS Implementation Services

SaaS Technical Services

Even though ERP software and infrastructure can be provided in an accelerated fashion, the business value realization of an ERP SaaS model can only be achieved through the effective delivery of technology services.   SaaS ERP is not a push-button solution.  I submit that technology services should have an equal or greater emphasis on ERP SaaS selection than ERP SaaS software. 

Great Services Can Cover a Multitude of Software Gaps

ERP SaaS software installation is a very small step in ERP SaaS experience.  Consider the following illustration:

ERP SaaS Solution Lifecycle

ERP SaaS Lifecycle

Following are a few points I would like to elaborate.  First, installed ERP software does not provide any business value own its own.  Business value is only realized when software is configured and implemented in a production environment.   Second, let’s not forget that an ERP SaaS model is outsourcing technical services to the ERP vendor.   Third, ERP SaaS software release cycles will be at least three times faster than traditional on-premise ERP software.  That means that a SaaS software model will address gaps in a shorter term.  As more customers look at SaaS ERP I believe that services not software will be the emerging competitive differentiator. 

Majority of ERP SaaS Offerings are Non-Competitive Differentiators

For purposes of this discussion please allow me to broadly categorize business processes into three areas:

ERP supporting business models

ERP supporting key business process groups

There are some key concepts that should factor in the ERP SaaS selection process.  First, competitive advantage only comes from revenue-generating business processes.  For example, would having the best of breed solution for SOX compliance enable you to gain market share?  Also consider if you would highlight your Payroll system as a competitive advantage to your customers. A best practice is not a competitive practice.  Organizations, just like individuals, cannot be the best in everything but it makes sense to be the best in your revenue generating activities.  A best-of-breed SaaS solution is of little value if the ERP SaaS provider does not provide competent technical services for reliable integration across multiple environments.

Summary

Too often we focus on the cart before the horse.  I believe that we are experiencing this misalignment with the emerging ERP SaaS market.  The best ERP software is of little value if you cannot implement a viable, manageable solution.  Technical services provided by the ERP vendor’s SaaS operations will have the greatest, long-term impact for business success.  Pick an ERP vendor that will focus on improving both their ERP software and SaaS technical services.

SaaS ERP is not a push button solution

SaaS ERP is the latest effort in the ERP industry to provide a rapid, cost-effective solution for customers who want an enterprise solution.  A SaaS deployment model does provide the potential for greater value realization; however, the value proposition is dependent upon appropriate expectations and implementation approach.  The purpose of the following article is to provide insight to ensure customers make realistic and informed decisions.

General Expectations for SaaS ERP

I firmly believe that one of the key reasons for failed ERP implementations is that expectations were not correctly established and managed throughout the implementation.   Consider the following:

Common Expectations of SaaS ERP

Common Expectations of SaaS ERP

 

  1. Cheap:  The customer does not need to make a huge expenditure to implement and utilize.
  2. Fast: Answer a few questions and have an up and running software in weeks.
  3. Flexible:  Business users can make changes.  Minimize IT involvement.
  4. Intuitive:  Quick to learn and easy to navigate.

We can all agree that the above targets are worthy goals of any ERP solution.  However, this is only part of the story.   The next section discusses the efforts required to achieve the goals listed.

Desired Results of SaaS ERP

To better understand ERP SaaS expectations we need to elaborate on the desired results that should be realized by customers. 

Elaborating on SaaS ERP Expectations

Elaborating on SaaS ERP Expectations

 

Some of the desired results are directly addressed by the SaaS model but the majority of results are addressed either by (a) the ERP software architecture or (b) the delivery model.   Example:  SaaS ERP does not require an initial outlay of funding for capital expenditures for hardware and related infrastructure.  SaaS ERP eliminates the need for a separate effort for ERP software installation and certification.  Yet, it is important to remember that ERP software installation represents at most 5% of the total time required to implement an ERP solution.  Therefore the SaaS model by itself does not have a dramatic impact on accelerating ERP implementations.

SaaS ERP Realities

Allow me to share some observations I have regarding the ERP SaaS model that may not appear to be readily evident:

SaaS ERP Realities

Let’s take one of the above desired results to elaborate on the above diagram.  A goal for SaaS ERP is to reduce the Total Cost of Ownership (TCO).  One of the key ERP design strategies is to enable business users to tailor the functionality to meet requirements without having IT to make a costly customization.  However, it is important to understand the shift of effort from IT to functional users.  There may be a reduction in the effort or a change in the nature of the work but the effort is still required.  There is no “push button” to eliminate this work. 

For another example let’s take the ERP value stream.  ERP vendors can create additional value to customers by providing new and enhanced functionality.   The leading SaaS ERP delivery model should provide a 3:1 ratio increase in the software release cycle.   Yet, it is important to realize that more frequent ERP software releases require additional testing and deployment (organizational change) work.  It is interesting to note that many of the leading SaaS ERP vendors do provide an out-of-the-box testing automation solution.  Again, the customer will experience a shift from technical to functional effort.

 Summary

Sorry if I burst your bubble, but I rather have an informed customer that will have reasonable expectations versus a customer with unrealistic expectations.  SaaS ERP is one of many delivery models that ERP vendors offer to customers.  While it is true that SaaS ERP provide customers with new options not available previously, it is not a slam dunk for all customers.  Developing the customer’s use case and understanding all technical and organizational impacts will better ensure an informed decision is reached.

Cloud ERP Strategy: Goodbye IaaS, Hello IaaS

One of the first deployment models for cloud computing was Infrastructure as a Service (IaaS).  Currently, there is a price war between the major IaaS providers like AWS and Rackspace to provide the cheapest infrastructure. However, enterprise customers looking to move their ERP solutions to the cloud should focus more on Integration as a Service (IaaS).  Integration, not infrastructure, will have a greater impact to TCO and ERP success.    In the next sections we will briefly compare the influences that infrastructure and integration have on an enterprise solution like ERP.

Cloud Infrastructure versus Integration

In a previous blog I reviewed the key competencies to consider as part of selecting an ERP cloud provider (ERP Cloud: Finding the Right Provider).  Both infrastructure and integration are key considerations yet I view enterprise integration the greater challenge.  Consider the following:

Cloud Infrastructure & Integration

Key Cloud Consideration Factors

Cost

The cloud storage war appears to be getting the most press in cloud computing but consider two factors driving this type of pricing strategy

  1. Vendors cannot provide a material differentiation or competitive advantage.
  2. Technology improvements continue to drive down disk storage costs rapidly.  Combine this trend with the economy of scale that cloud providers generate to continue driving costs down by another 40% in the next 3 to 5 years.

Moore’s Law highlights the computing hardware trend resulting in greater technology capabilities and driving down MIPS costs.  However, the same cannot be said for integration.  As discussed in one of my earlier blogs (Best of Breed vs. Integrated ERP), integration costs can be up to 8 times the cost of the ERP software. 

ERP Integration Considerations

ERP Integration Considerations

We have all heard the proverb “A chain is only as strong as its weakest link.” Applying this concept to business software, we would conclude that a business solution is only as strong as its weakest integration.

Business Value Realization

Allow me to make the general statement that outsourcing IT infrastructure to a cloud provider should result in a cost savings to customers.  However, I believe that IT organizations will quickly learn that providing this cost savings is a short-term value proposition to their business owners.  Ultimately, IT-driven innovation will drive business value realization.  Gartner identifies Integrated Ecosystems and Hybrid IT & Cloud Computing as two of the top 10 strategic technologies for 2013.     Every ERP solution has a portfolio of edge products/3rd-party integrations to external solutions to provide holistic support of business processes.  The only true method of creating business value is through business processes.

Socialization & Collaboration

The ERP software industry is realizing that people have the greatest impact on business results.  It is refreshing to see the increase in socialization and collaboration capabilities.  Infrastructure is necessary but integration is the critical path to success.

Market Trends

In my opinion, I expect to see the market changing for IaaS providers.  Given how important integration is to a viable cloud solution either existing IaaS will grow into a Platform as a Service (PaaS) or will be acquired by PaaS vendors looking to provide global support.   Just take a look at AWS and Rackspace’s transition from an IaaS to a PaaS:

Summary

History always has a way of repeating itself.  Recalling the Y2K problem, storage (infrastructure) was seen as a strategic/limited resource.  This view resulted in the programming practice of representing the year with two digits and we all know how that came back to haunt IT organizations.   Infrastructure is a cheap commodity when compared to a collaborative, enterprise integration framework.  Infrastructure is a key enabler for cloud computing but integration will ultimately determine your success of ERP in the cloud.   

Building a Business-Aware Cloud Solution

In a recent study conducted by Forrester Consulting “Enterprise Cloud: Lessons Learned From Early Adopters” a key conclusion made is “A complete, application-centric, business-aware cloud solution is needed.”  Let’s say that your C-level executive stops by your office and asks you to lead a project to develop a business-aware cloud solution.  To be successful it is important to understand what you are building.  In the following blog I will attempt to define a business-aware cloud solution.

Defining a Business-Aware Cloud Solution

Your project objective is to develop a business-aware cloud solution.  As you are a competent project manager one of the first areas you want to define is the project scope.  As your humble project assistant, I have searched the internet for you and have leverage greater minds from the University of Edinburgh:

“What different employers mean when they talk about business awareness varies, however their views broadly fall into two areas: (1) understanding an occupation, and (2) understanding the business environment.”

What is Business-Awareness?

I would like to elaborate upon on this definition with the following model.

Defining Business-Awareness

Defining Business-Awareness

There are three key areas that enable business awareness. The business process area includes the business functions, related-activities, and the individual tasks that must be performed in order to generate the desired business results.  The business role(s) area includes the concatenation (grouping) of business activities into responsibilities that can be competently accomplished.  Finally, business awareness also requires an understanding how an industry operates and how it is influenced by local, national and global economics.

Now, your experience as a project manager tells you that a well-defined project scope statement not only explains the end result but also elaborates on what is considered out of scope.  With this best practice in mind let us clearly articulate on some areas that may misalign the focus on business.

 

Losing Focus on Business-Awareness

Blurring Focus on Business-Awareness

Please allow me to elaborate. A business function is a necessary structure resulting in a concatenation of activities/tasks that aligns with the skills/experiences of the organization to best support business processes.  The ERP software industry started as discrete, functional applications that continue to evolve into enterprise-wide, business process solutions.  In general, software applications focus more on business functions requiring the implementation of multiple applications to support an entire business process.  As a veteran project manager, you understand that an application focus may result in gold-plating or poor support of functional hand-offs (integration).  You also appreciate that technology is only one component of a business solution.

We are halfway to having a better understanding of our project objective.  Now, let’s focus on what some may consider the mystical realm of the cloud.

What is a Cloud Solution?

Forgive my “tongue-in-cheek” response above but it is hard to define a clear picture given the varied information available in the marketplace.  Once again, I refer to brighter minds (NIST) to provide a definition.

Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

I would like to focus on what’s not in this definition that may be perceived expectations of moving business software to the cloud

Implied Expectations for Cloud

Implied Expectations for Cloud

The immediate, short-term savings will be reduction in capital expenditures required for IT infrastructure requirements. As correctly pointed out in the book “Cloud Computing – Assessing the Risks“, there is a general misnomer that there is a risk reduction with the cloud.  There is a transference of risk from the IT organization to the Cloud Provider.  Technology results (reliability, response, availability, scalability)  may lead to business benefits – but it is not a guarantee. 

Now that we have a little better understanding of project objective, let’s briefly review the role that the key enablers will play in the implementation of a business-aware cloud solution.

Enablers for a Business-Aware Cloud Solution

As a competent project manager, you know that the project must address all three components of a solution in order to be successful in meeting all expectations.  For the sake of brevity we will only focus on a key expectation for each component.

ERP Business Solution

Business Solution Defined

  • People:  People innovate.  People accept.  People resist.  People ultimately drive project success. 
  • Process: Innovation is a process and not just a brainstorming event.  IT needs to move up the business value chain with a rapid, iterative delivery method.  Governance is not an acceptable substitute for properly educating users on the effective use of cloud technology.
  • Technology: A reasonable expectation is to select a cloud vendor that provides a  reliable, secure, scalable IT infrastructure solution on par (or better) than existing services.   For business software like ERP to be business-aware, the software must have access to business model, roles, and rule metadata that is maintained by business users.

Summary – Are We There Yet?

Do all the technical components exist in the marketplace today to build a business-aware cloud solution?  Technically speaking, the answer is yes if you want to seamlessly integrate multiple technical components with multiple UI experiences, data sources, and training requirements.  Will it be a practical and viable solution?  I suspect that there is room for improvement.  If you wait for a complete solution then it may be too late for your business users.  But you are not just a project manager, you are a project leader!  You know that this effort is a project program with iterative projects that incrementally build upon the individual project results.  Start planning, start delivering!

P.S.  I am conducting a webinar: Best Practices for Selecting the Right ERP Cloud Provider on Wednesday, December 12, 2012 1:00 PM – 2:00 PM EDT

Overview – Next stop: The Cloud! Everyone is talking about it but there is a fog of disjointed information out there regarding moving to the Cloud. In this webinar we will demystify the cloud and discuss one of the key activities customers should carefully consider in moving to the cloud – selecting the right cloud provider. We will also discuss some of the key factors to consider as part of your cloud deployment strategy. Register at http://www.oracle.com/go/?&Src=7604459&Act=251&pcode=WWPN12035291MPP257 .

ERP Cloud: Finding the Right Provider

I recently attended Oracle’s OpenWorld Conference in San Francisco this October.  There was a huge volume of information on the Cloud.  As I walked through the Exhibitor’s halls at the Moscone Center, I observed that every SI partner had ERP in the Cloud or could get customers to the Cloud seamlessly.  What I did not see is any offering or advisory service to guide ERP customers through the storm clouds to find the right provider.  In the next sections we will discuss the key competencies to consider as part of making an ERP Cloud provider selection.

Capabilities for ERP Cloud Providers

ERP Cloud Provider Key Competencies

Hardware Competence

Typically, this is the first area that customers think of when evaluating Cloud providers.  For this discussion, hardware includes servers, processors, network, processors, and storage.  Now, I may be chastised by my technology peers but I take a very practical approach to hardware.  Business users are more concerned about technology results (reliability, response, availability, scalability) versus what hardware configuration is being used.  I’m all for engineered solutions if they provide a material impact to technology results.  I would not consider millisecond improvement on response time as a material impact on response time nor would I pay an additional $100 per hr /month for special hardware.  Remember to keep the end in mind – you are moving an ERP solution to the Cloud.  Review and identify Cloud providers that offer hardware configurations that best aligns to the hardware specifications and recommendations made by ERP software vendors.

Software Competence

For this discussion, software competence focuses on software and standards that enable a viable Cloud solution.

Selecting Cloud Providers - Software Considerations

Selecting Cloud Providers – Software Considerations

For brevity sake, we will focus on a few of the key software enablers for the Cloud.

Software Area Considerations
Open Standards & Technology Open Standards promotes interoperability and data exchange among different products or services and are intended for widespread adoption.  This area will be a key enabler (and indicator) of portability.
Integration A viable ERP Cloud solution must provide a robust toolset for integration back to the customer’s on-premise supporting systems.  Integrations can be a potential point of failure that must be addressed with a cost-effective solution.  Cloud + Poor Integration = Failure. 
Load Balancing Load Balancing is vital for effective distribution of work across a multi-tenant hardware environment.   Optimal resource utilization, maximize throughput, minimize response time, and avoiding overloads are not possible without a robust load balancing capability.  Be leery of simple load balancing algorithms like random choice or round robin.
Virus Protection Viruses can live in the Cloud.  Malware known as Crisis can infect VMware virtual machines.  Moving to the Cloud does not end the need for antivirus protection.
Virtualization Virtualization is a key enabler for Cloud computing.    In order to realize the technology benefits associated with virtualization, Cloud providers must be able to provide a robust solution for the following capabilities: Elasticity – dynamic scalability is an integral feature (enabler) for agility and fundamental IT cost savings. Logical isolation for data protection. Hypervisor management for VMs.VMs replications.
ERP Software Not all ERPs are created the same for the Cloud.  Following are areas to review in determining how “Cloud-Friendly” is your ERP solution.     Single-Tenant vs. Multi-Tenant – Single-Tenant provides a more formal logical isolation for customer data.  Multi-Tenant reduces duplicate upgrade efforts and technology resources. SOA Compliance – How well does your ERP solution expose methods and related data components to external solutions via SOA services? Network Latency – High data volume transfer between Cloud server and the on-premise client. ERP Experience – Also ask if the Cloud provider has “hands-on” experience with supporting your ERP solution. A leading Cloud provider will have a competent level of technical support knowledge for your ERP software.

 Security Competence

Security is a key selection criterion for Cloud providers.  A realistic expectation is that Cloud providers should have a greater level of security than your current on-premise IT environment. Following is an illustration of the key security areas you should consider as part of your ERP Cloud provider. 

Cloud Provider Selection - Security Considerations

Cloud Provider Selection – Security Competence

 There are three key areas that I would like to further discuss.

  1. Identify Relevant Security Standards:  Viable Cloud providers should be able to assist their customers in identifying and applying relevant security standards for their specific industry.  
  2. Security Validations:  Leading Cloud providers are able to demonstrate their security competence via (a) audit and evidence gathering, (b) providing security audit findings for customer review, and (c) enabling customers to perform independent security audits if desired.
  3. Data Encryption:  Encryption of customer data either in transit or at rest should be a non-negotiable requirement for Cloud providers.

 Value-Add Partner Network Competence

 Every ERP solution has a portfolio of edge products/3rd-party integrations to external solutions.  It stands to reason that customers should consider the portfolio of ERP edge products that a Cloud provider can host as part of the selection process.

Cloud Providers - Value Add Partnerships

Cloud Providers – Value Add Partnerships

Selecting a Cloud provider is not a short-term relationship so ensure that you can grow and generate greater value from your ERP investment within the Cloud.

Services Competence

A strategic competency that I feel is being overlooked in the Cloud market is the service portfolio that a Cloud provider should deliver.   Consider the following reality check: 

Reality Check for ERP Cloud

Reality Check for ERP Cloud. Used by permission.

Technology is only part of the solution.  What is the value of providing new ERP features if end users are not formally trained?  Who will perform regression testing for both technical and functional upgrades?  In my mind, a leading ERP Cloud vendor should provide both an automated testing solution and on-demand training solution to facilitate rapid deployments.   Cloud providers should have a services framework such as ITIL or ITSM.  This is a validation that your Cloud provider is committed to delivering reliable professional services.

Summary

Overall, I am very excited about the opportunities that Cloud can offer to existing ERP customers and potential customers who could not afford a Tier 1 ERP solution.  Yet, we must not forget that there are advantages and challenges that we must address in order to provide a reliable solution for ERP customers.  It is also important that we keep realistic expectations for the Cloud.  Cloud is more about a new way of delivering computing resources versus being a new technology.

P.S.  If you are interested then the blog author will conduct a webinar: Best Practices for Selecting the Right ERP Cloud Provider.  Overview – Next stop: The Cloud! Everyone is talking about it but there is a fog of disjointed information out there regarding moving to the Cloud. In this webinar we will demystify the cloud and discuss one of the key activities customers should carefully consider in moving to the cloud – selecting the right cloud provider. We will also discuss some of the key factors to consider as part of your cloud deployment strategy. Register at http://www.oracle.com/go/?&Src=7604459&Act=251&pcode=WWPN12035291MPP257 .

 

SI Partner for PeopleSoft/Fusion ERP

Blog Sponsor – Cardinal Point Solutions, LLC.

Is Cloud Ringing the Death Toll for ERP?

Cloud computing is here to stay, but what does that mean for those who sell and implement ERP solutions today?

First, it means that there is a new way in which business software solutions are being purchased and consumed, and that means resellers need to pay close attention to the way they run their business. Secondly, it means that if ERP companies wish to remain in the game, they need to make some significant changes.

Cloud on its own doesn’t affect the validity of ERP. Businesses still require management software to help them run their organization effectively. What Cloud does do however, is level the playing field and make ERP solutions more accessible to the consumer. That means publishers and resellers need to pay attention.

New Cloud companies are popping up every day, and while laggards scramble to bring their on-premise solutions to the Cloud, these born in the Cloud players are discovering faster, easier, and less expensive ways to deliver ERP. Complex, highly customized and bulky solutions which come with a hefty price tag and a collection of features and functionality not required by the end-user are quickly being replaced by pay as you go solutions. Customer expectations are also changing; soon no one will be willing to accept that ERP requires a huge capital expenditure and lifelong commitment without first researching alternatives in the cloud.

 

Cloud ERP Product Cycle

Product Lifecycle for Cloud ERP Offering

 

While Cloud ERP is still an emerging market, it is fair to say that we’re moving beyond the early adopter stage. We’ve crossed the chasm, and are quickly headed towards the early majority market. Within the next 2 years we can expect to see a majority of ERP purchases made in the cloud.  In our opinion, Cloud ERP will not be an initial threat to a vendor’s existing up-market ERP customer base.  This market is highly saturated (+90%) and today we do not see a compelling value proposition for large customers to move completely to the Cloud.  We do see opportunities where Fortune 500 ERP customers may be interested in implementing edge software products in the cloud (ex. travel & expense, self-service, tax calculation and compliance, etc) as part of a hybrid deployment model.  Where we do see a threat/challenge to on-premise ERP is in the SMB arena – especially for new customers.  This market continues to be a strategic growth area for ERP and customers have a greater flexibility to leverage a SaaS or Cloud model.

The Fate of ERP

While it doesn’t appear that the fate of on-premise ERP solutions is entirely bleak, there will certainly be a marked shift towards Cloud based ones. In fact, the resellers can already feel this happening.  There are fewer people out there looking for business management systems in general, and in a time of economic uncertainty and tight budgets, the appeal of an operating expense and a per-seat price is more than appealing. Customers are becoming more likely to change their processes to align with the functions of a less expensive Cloud based solution, than to go through the process of building one which is fully customized. What’s more, people are less likely to pay the large price tag most often associated with ERP services, instead preferring a solution in which they can turn off functions (thus reducing costs) at their leisure. 

So no, Cloud isn’t exactly ringing the death toll for ERP solutions, but it is changing them. ERP will always be required by many types of organizations, but on-premise ERP may in fact not survive this shift long-term. If traditional ERP companies hope to survive the transition they need to be proactive about developing their Cloud solutions, and that means more than throwing up a landing page and calling yourself a Cloud player.

So what do you do?

If you’re an on-premise ERP reseller with no Cloud transition plan, you better get started. That means developing a team to strategize taking your solution to the cloud, putting the necessary resources behind it, and understanding why some customers have an inherent fear of the Cloud. If you’re already developing your Cloud solution, then keep at it and make sure you’re not just focusing on the solution, but on the marketing and sales as well. And if you’re already well entrenched with an ERP solution in the Cloud, then you should get ready to defend your competitive position because you won’t be alone for long.

ERP Deployment Types

ERP Deployment Types

 

Additionally, if you’re a company seeking out a new ERP system, you should carefully consider the benefits of using a Cloud solution. While we’re only entering the early majority market, Cloud computing is the wave of the future. As consumption models go, Cloud works for a majority of businesses today, and the list continues to grow. If you’re looking to move some of your capital expenses into operating expenses, and looking for a better way to manage your business, ERP in the Cloud might just be for you.

Guest blog by Jason Carroll with contributions from Brett Beaubouef

Jason is an industry analyst for Software ThinkTank.  Software ThinkTank is an online resource that helps businesses keep up-to-date with the latest trends, technology innovations and business solutions through a range of articles, case studies, guides and tools. Visit SoftwareThinkTank.com for more information.

SI Partner for PeopleSoft ERP

Blog Sponsor – Cardinal Point Solutions, LLC.

Fact or Fiction: Hybrid ERP Deployments

With cloud computing and cloud ERP gaining additional attention in the marketplace, ERP vendors, resellers, and solution providers are quickly positioning their products and services as “cloud-enabled”.  However, in my humble opinion, to simply put ERP software on a hosted server and provide subscription-based pricing does not a cloud solution make.    A key value proposition for cloud ERP is the ability to support a truly hybrid ERP deployment.  In the next section we will discuss what is an ERP hybrid deployment including the opportunities and challenges this type of deployment presents.

What is an ERP Hybrid Deployment

A hybrid deployment method has the potential to enable customers the flexibility to deliver ERP capabilities in the most cost-effective manner to users. Hybrid deployments would allow for an optimal mix of the major ERP delivery models.

ERP Deployment Types

ERP Deployment Types

An ERP solution that can support a hybrid deployment must be architected in a manner to support multi-platform environments simultaneously.  In general, following are the opportunities that a hybrid ERP deployment can provide to customers:

Advantages for Hybrid ERP Deployments

Advantages of Hybrid ERP Deployment

Opportunity Description
Rapid Implementation A hybrid ERP model may give you the flexibility to quickly implement a new ERP module or feature set.  Even if you decide to deploy on-premise having a hosted site for prototyping and development can give you the opportunity to start design/configuration activities faster.
Shorten Maintenance Cycles As an IT Director I am faced with the reality that IT maintenance cycles are being reduced given increase demand for ERP availability by business users.  Given this fact, I am looking a cost-effective, on-demand IT infrastructure resources (ex. Infrastructure As A Service) to help shorten the ERP maintenance window.
Load Balancing As part of any ERP solution you will have both real-time and batch processing.  There are different performance requirements for real-time versus batch processing. A hybrid model may provide you the opportunity to have unique performance tuning configurations better suited for specific processes.
Greater Vendor Independence I’m not a huge fan of the “single point of accountability” value proposition because I have rarely seen it work.  If an ERP solution can truly support a hybrid ERP deployment then we all should have greater flexibility in choosing the right partners to be a part of our IT value chain to business users.

Challenges with ERP Hybrid Deployments

As the ERP industry moves to a true ERP hybrid model there are several challenges that must be addressed as we take to next evolutionary leap.

Challenges to address as we move to hybrid ERP

Challenges with moving to Hybrid ERP Deployments

Challenge Description
Coordinating Support Activities Coordinating software development and maintenance activities across the ERP platform.  Since ERP support business processes and business processes will cover multiple functional areas (modules), coordination and prioritization of ERP support activities will be critical to reliability.
Integration & Orchestration Integration is a given but business process orchestration will be extremely important to support a seamless business solution execution.
Seamless UI Simply stated, the end-user should not be able to see a notable difference in appearance and performance across the deployment models.
Master Data Management As long as an ERP hybrid deployment requires multiple database instances then Master Data Management will be a key enabler to keep instances in sync.

As one looks across the ERP industry we are observing some real signs of movement with hybrid ERP deployments.  However, at this point I personally would not conclude that the ERP industry has reached the final destination.  In the next section I will list a  few of the core characteristics for assessing an ERP vendor’s ability to support hybrid deployments.

Assessing Vendor Solutions to support ERP Hybrid Deployments

A hybrid deployment approach enable customers to have a more scalable ERP solution versus limiting their sizing options to a single deployment model. Four major factors determine how viable a vendor’s hybrid ERP deployment offerings are:

  • ERP Architecture: Is the ERP solution constructed in such a way that allows software components to reside in multiple delivery platforms (on premise, hosted)? Integration and orchestration of ERP activities are key software enablers to support hybrid delivery
  • ERP Partner Ecosystem: Does the ERP vendor have consistent, reliable partners with a portfolio of hardware/software and professional services to support multiple hybrid delivery models?
  • ERP Pricing Model: Does the ERP vendor allow customers to utilize multiple delivery methods concurrently? Are there any price penalties or legal restrictions imposed on customers from moving between delivery models?
  • Portability: Customers have the ability to move data and customizations from one deployment model to another as needed.

Summary

My view of a true ERP hybrid solution is a software solution that enables the customer the flexibility to deploy both modules and major features across multiple platforms seamlessly.

Hybrid ERP Deployment

Hybrid ERP Deployment Model

A hybrid ERP deployment is a great way to explore the cloud in an iterative, risk-adverse approach.  Hybrid ERP may provide the opportunity for greater innovation, rapid deployment, or isolating batch intensive processes from self-service applications.  The greatest value of a hybrid ERP solution is the additional flexibility it can provide customers to support business processes.  Let’s hope that the wait is not too long.

 

SI Partner for PeopleSoft ERP

Blog Sponsor – Cardinal Point Solutions, LLC.

Cloud Can Bring Out the Best of ERP

Previously, I discussed some of the hard realities customers have to manage as part of a Cloud ERP solution.  However, these challenges should not deter customers from looking at a Cloud ERP deployment model.  There are broad advantages for Cloud ERP including incremental scalability and smaller start-up investment.  I would like to speak to some of the less known advantages that a cloud model can provide to ERP customers.

ERP Value Proposition Revisited

In a previous blog article (ERP Makes for an Expensive Custom Solution); I outlined the key advantages and challenges associated with ERP software.

ERP Pros and Cons

ERP Advantages and Challenges

 

For a successful ERP implementation, it is vital that the approach address both the inherent advantages and challenges.  The right cloud deployment model can address many of the ERP advantages/challenges in a more effective manner than a traditional On-Premise model. 

How Cloud Can Make ERP Value a Reality

Let’s briefly discuss how a Cloud ERP model can have an advantage over an On-Premise ERP model using the inherent ERP advantages and challenges as the context for the comparison.

How Cloud can support ERP Advantages

Cloud ERP vs On Premise ERP

Let’s discuss some of the less obvious advantages in more detail:

  • Standardization:  Cloud ERP will have an advantage over an On Premise model simply because the costs tend to be more visible to business users.  Traditional internal IT organizations in general do not have a service-oriented price model for their internal customers.  The cost of not standardizing business processes gets lost in the general IT overhead allocated back to internal businesses.
  • Share IT Development Costs:  as far as short-term capital expenditures and scalability costs, I can see where Cloud ERP has a definite advantage.  Longer-term or Total Cost of Ownership may swing the advantage to an On Premise model given factors like (a) customer size and (b) level of software customization required.

Next, let’s review a comparison between Cloud ERP model and On-Premise model on which model can better address inherent ERP challenges.

Cloud vs On Premise ERP Challenges

Cloud vs On Premise ERP Challenges

Let’s discuss some of the less obvious challenges in more detail:

  • Organizational change:  When you own the change the more likely you are to accept the change.  Even though there may be a divide between business users and an internal IT organization, they are both part of the overall organization.   A rapid deployment of functionality does not necessarily mean a rapid user acceptance and effective use of technology.
  • Requirements gathering:  Requirements gathering and business analysis is a gap that most ERP Cloud providers have not addressed effectively.  Onsite, face-to-face interactions is still the most efficient means of gathering and validating business requirements.

 Regardless of the advantages that Cloud ERP may have over an On Premise ERP model, a customer with unrealistic expectations for Cloud ERP will result in a disappointing experience.

 Beware Of Unrealistic ERP Cloud Expectations

Cloud ERP is an evolving solution model with as many misconceptions as hype.  In fact, many have labeled these misconceptions as cloud washing.  Following are common perceptions and misconceptions that customers may have with Cloud ERP offerings:

  1. Huge cost savings:  This can be a huge misconception if customers expect to run on the latest/greatest/fastest possible hardware.
  2. Quick solutionsThere can be a perception of a real-time, on-demand value generation for customers.  It is important to remember that Cloud ERP is only one component of a business solution.
  3. Greater collaboration: Cloud ERP or any technology does not automatically result in greater interconnection between people, departments, and companies.

Be careful of expectations that go far and beyond what the cloud is actually capable of providing.  Customers may want everything automated without having the discipline and effort to utilize technology appropriately.   As the saying goes “You can’t have your cake and eat it too!”

Summary

Cloud ERP is a maturing deployment model that may provide a greater opportunity to capitalize on an ERP investment.  A Cloud ERP model encourages standardization through visible economic drivers and provides the opportunity for greater focus on strategic activities. However, we need to balance our enthusiasm for Cloud ERP with realistic expectations.  There is no such thing as a push button solution. 

SI Partner for PeopleSoft ERP

Blog Sponsor – Cardinal Point Solutions, LLC.

Cloud ERP – New Dog, Same Fleas

I am very excited about Cloud ERP and the potential opportunities for customers, however, I like to speak to the minority opinion for a balanced discussion.  Just as ERP was deemed the panacea for all business automation pains, Cloud ERP is positioned as a revolutionary approach to deploying an ERP solution.  Cloud ERP provides a solution that is flexible, adaptable, scalable, efficient, and affordable.  Customers can enjoy painless upgrades, rapid deployment, and easy customization along with availability “anywhere at anytime”!  Practically speaking, Cloud ERP is just another deployment option available to customers.  The activities required for an “on premise” ERP implementation are also required for Cloud ERP.  The scope and responsibility for the implementation activities may be different but most assuredly they are still required.  Let’s further discuss the key impacts that a Cloud ERP deployment will have on the implementation.  For our discussion, we will refer to the following standard ERP life cycle.

 

ERP Phases

ERP Life Cycles

 ERP Life Cycle: Implementation

A repeated value proposition for Cloud ERP is a quicker implementation and deployment.  However, it is important to note that technology has a limited impact on accelerating implementations.  The deployment approach for cloud will naturally encourage a fixed, limited implementation scope – however, this is not unique to Cloud ERP.    I agree that from a technology perspective Cloud ERP offers a faster installation timeframe.  Nevertheless, it is important to note that Cloud ERP is only one component of a business solution.  There are still multiple disciples required for a Cloud ERP implementation – especially organizational change management.  Cloud ERP can provide very robust functionality but if the organization is not prepared to properly use the software then the value of Cloud ERP will quickly dissipate.  Also, note that data conversion and the quality of the data converted will have a significant impact on both the speed and value cloud ERP can provide.  Third, integration will be a greater challenge in a Cloud ERP model versus an on-premise ERP model – if only because the Cloud ERP will be outside the company’s internal network.   Now, let’s consider the impacts Cloud ERP will have on the maintenance life cycle.

 ERP Life Cycle: Maintenance

 There are two areas of consideration for the Cloud ERP deployment model: customizations and integrations.  These two areas are impacted based upon the cloud model.  Following is a summary of the most common cloud models.

 

Key ERP Cloud Offerings

ERP Cloud Models

The key consideration is whether the customer has a dedicated software instance or a shared software instance.  In general, a customer will have greater flexibility with integrations and customizations if the customer has a dedicated instance.  If multiple customers are on single software then the Cloud ERP provider may limit the level of integrations and customizations because the software changes may have an adverse impact on all the customers on a shared instance. 

ERP Life Cycle: Upgrade

ERP upgrades are necessary for software maintenance compliance and generating opportunities for greater return on investment.   The responsibilities may shift for performing the technical upgrade, however the customer must provide resources for providing input to the delta fit/gap process, conducting organization change, testing, and validation.  Another key consideration is if the customer has any flexibility on the frequency and timing of ERP upgrades.   Lack of flexibility may result in the customer managing to the Cloud ERP vendor’s timetable. 

ERP Life Cycle: Decommission

In general, the typical ERP life span is 10 years.  As most customers are “going concerns” focused on growing and becoming more successful, it is important to consider the options available to move across delivery models.  Consider the following illustration:

 

ERP Deployment Options

ERP Deployment Model

There is a relationship between customer size, integration requirements, customizations and ERP deployment models.  As a customer matures and grows there will be a need for greater integration and customizations to address unique competitive requirements.  Customers must balance cost and flexibility in selecting the right ERP deployment model.

Summary

Cloud ERP is providing additional opportunities for customers to leverage ERP as a viable option to support business operations – especially for smaller businesses with limited resources that require out-of-the-box functionality.  However, it is important to remember that Cloud ERP is not a short cut to success.  Responsibilities may change but the same activities are required to ensure a successful solution.  As with every deployment model, there are advantages and disadvantages to consider.  It is in the customer’s best interest to consider all phases of the ERP life cycle when selecting the appropriate deployment model. 

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