November 23, 2011 6 Comments
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.
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.
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.
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:
- Huge cost savings: This can be a huge misconception if customers expect to run on the latest/greatest/fastest possible hardware.
- Quick solutions: There 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.
- 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!”
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.