ERP in the Cloud â Various options for organizations with onPremise ERP
As many IT services are moving to online offerings in the cloud, many IT executive are considering adoption of cloud for their enterprise resource planning (ERP) systems as well.
In the consumer centric environment, you can use applications in the cloud such as Googleâs online documents or Google Drive; watch movies from Netflix. Although some IT organizations have succeeded in moving a few modules within ERP services, such as CRM, HR into the cloud, many CIOs have their own doubts for core financial and supply chain operations.Â
In this article, I will address some of the factors that executives should consider for leveraging cloud based services for their ERP systems. In fact I have prepared a framework to arrive at more specific answers. In a nutshell, this framework considers the area of business, complexity of integration within an organization, existing ERP solution, security and company culture to name a few. The framework also considers each aspect of cloud computing service to be migrated such as Infrastructure as a Service, Platform as a Service, Software as a Service and Integration as a Service.
I will discuss various options within organizations which are leveraging on-premise ERP solutions, as it relates to Cloud adoption:
1) Existing Vendorâs Own Cloud Based ERP Solution- For large organizations, many traditional ERP vendors are now offering cloud based solutions. These are gaining some acceptance due to large ownership costs associated with onPremise ERP. But these may not be hybrid or private cloud offerings and can compromise your organizations security standards. These solutions include SAPâs Business ByDesign, Oracleâs Fusion, Microsoft Dynamics running on Windows Azure and Inforâs M3 offered as a public cloud offering on AWS platform. Biggest drawback for these solutions are lack of deep functionality or availability of standard integration adapters for complex integration scenarios.  Invariably these offerings will also tie you into vendor locking. These solutions are typically geared towards small and medium enterprises.
It is also worthwhile to look into how a cloud based offering is developed by vendor in the first place. Some vendors have developed cloud based solutions from scratch, others have configured their existing ERP solutions for enabling cloud. For example, SAPâs Business ByDesign which is developed from scratch covers Integrated suite with financials, HR, sales, procurement, customer service, and supply chain management. While Microsoftâs Dynamics is adapting to its own Windows Azure cloud offering. Infor is trying to leverage Amazon AWS IaaS for its own ERP solutions typically for small scale clients. It is worthwhile to note that none of the existing vendors have been able to develop a new Cloud offering which will have better market adoption than their traditional ERP solution.
2) Migration of existing onPremise ERP into Hybrid/Private Cloud - For large organizations, migration of existing onPremise ERP into cloud (leveraging private cloud solutions) can be one of the better option except for the costs associated with such an exercise. This can be cost beneficial though if a consortium of various organizations can leverage such a solution. Also if a vendor specializing in cloud offerings enables a consortium with private cloud offering. For example, I see that organizations specializing in data center operations such as Telus taking a lead and providing such offerings to its clients.Â
There can be many benefits for phased migration approach to private cloud as it requires minimal business disruption in terms of existing processes or existing integration. Some design level changes can be imperative and also consideration to existing softwareâs ability to be deployed into Cloud. Being a complex scenario where one size fits all does not apply, I would think that business buy in is a must for this.
3) Migration of existing onPremise ERP into a new Cloud based ERP solution - For large organizations, migration of existing onPremise ERP into totally new cloud based solution can avoid all the headaches of traditional migration. It can also be a cost saving exercise in the long run provided new cloud solution covers all essential functions and existing staff can be retrained quickly to use the new ERP. Vendors such as Netsuite are leading the charge for small and medium scale organizations. At this time, the majority of cloud ERP installations are in smaller companies because they have basic functional requirements, typically donât have a large investment in IT infrastructure, and have relatively few users. This is changing as acceptance moves up-market and larger companies implement cloud ERP solutions.
The cloud vendors are able to implement their solutions faster than on-premises vendors because their solutions are simpler and they donât usually offer the sophistication or flexibility that on-premises vendors do. These cloud vendors may not be ready to handle complex integration scenarios but over the period their solutions can be mature enough for some industries.
Is migration of ERP to cloud right for your organization? This depends on your company culture, resources, requirements, IT infrastructure, IT integration and the total cost of ownership at your organization. Cloud-based technology solutions require companies to loosen their control of critical data. Companies must take a comprehensive approach to the risks, from both the business and the IT security perspectives.
In my software consulting experiences, Iâve rarely come across a situation where one-size-fits-all works. But I hope this article helps you or your organization to delve into various options and arrive at a right roadmap.