Resolutions Applied to Business Software

The most popular personal resolutions from the sites above can also be applied to business software. In this article we describe the tools available to help you achieve your business resolutions.

1. Lose Weight, Trim Down

The #1 personal resolution is very applicable to business software. Many ERP deployments suffer from code patches, bulky client software, and customizations that lock businesses in to old technology. Just like personal weight issues, software bloat can cause issues that develop over time. Your business becomes less responsive. Changes to business processes become more difficult. Maintenance of your software becomes more expensive and provides fewer and fewer benefits.

Following through on your resolution

Deploy web-based software to eliminate client software installations and reduce the complexity of maintaining applications on Windows, Linux, handheld devices. Just like losing weight, purchasing a new ERP system is a process that requires a plan and execution. But, the longer you put it off, the more difficult it is to accomplish.

2. Save Money, Stick to a Budget

Another common personal goal is to save money and adhere to a budget. Sticking with a budget is perhaps even more difficult in a business environment because there are many more uncertainties and unknowns. This is especially true if you are using antiquated software that cannot adapt to new business opportunities, split out costs by department/product, or integrate with other systems.

Following through on your resolution

Cloud and web-based accounting software delivers key advantages that will help your financial processes. First, the Cloud delivers real-time data and reports to your home office, remote offices, and business partners. Second, the Cloud is easy to deploy to all people in your organization. By involving everyone, you ensure that processes are not left out and get a clear picture of revenue and expenses throughout your organization. Finally, if you are still using QuickBooks and you suffer from multi-currency issues, lack of a complete audit trail, lack of integration with other systems, or lack of a centralized view of your business, then consider upgrading a more advanced solution in 2012.

3. Get a Better Job

Many individuals pledge to get a better job in the new year. For businesses, outdated software can be a major source of job dissatisfaction. Old software increases complexity and creates manual work for employees. The net result is longer hours, mistakes, blame, and less productivity.

Following through on your resolution

Upgrading to a modern Cloud ERP package can improve your job and your work environment without the hassle of finding a new place to work. Imagine performing your most tedious daily task with a point and click/press from anywhere you happen to be. Tracking sales leads, managing inventory, merging online/offline sales orders, creating accurate financial reports, and getting purchase orders approved are all examples of processes that can go from misery to automation with the right ERP software.

4. Enjoy More Time with Family and Friends

Spending more quality time with family and friends is one personal resolution that is a bit tricky to translate to business. Not many people will pledge to spend more quality time with business associates. However, improving your business life can help you achieve your personal goals.

Following through on your resolution

Installing a cloud solution that provides access from anywhere will help you be productive, even when you are not in the office. Approve an expense report, confirm arrival of a shipment, note a conversation with a sales prospect, and perform other business tasks. Of course, working on your mobile devices while you are ‘spending quality time with family’ should be done at your own risk.

5. Get Organized

In your personal life getting organized involves arranging personal items, cleaning up trash, and getting on top of your to-do list. In business, many of these same tasks apply. Automate your to-do list. Clean up dead inventory, old data, and unimportant tasks. In your personal life, the main obstacle is time and motivation. In business, an old ERP system is often the biggest obstacle to achieving organization. Old ERP software prevents rapid exchange of data, simplified auditing, and process automation.

Following through on your resolution

Take a couple days to define all of your business processes. Then determine essential processes, important processes, and nice-to-have processes. Next, contact your business partner or software vendor and schedule a meeting to discuss process improvement. Determine which essential tasks are being impacted by corrupted data and determine essential and important processes that would benefit from automation. Your business partner or software vendor should be able to give immediate feedback on the viability and ballpark costs associated with automating business operations.

Summary

The New Year should be a time to set business resolutions in addition to personal goals. Making a pledge to get the software you need to run your business better will improve your business. This is especially true if you are running a system that is 5+ years old. Then, once you get your business running better, you will have more time and more money to work on those personal resolutions you’ve been making.

Cloud ERP Adopters – Testimonials and Complaints

I’ve spoken with several folks who have deployed ERP systems. In a few short sound bytes, these users reveal their opinions, both good and bad. The customer names and vendor names have been omitted to protect the sources and avoid a slew of defensive rebuttals. I should be noted that these comments represent a random sampling, not merely quotes from the list of happy customers that you see on vendor websites.

We thought that connecting to a US based cloud service would be terribly slow, but it worked quite well. The software eliminates the amount of data that is transferred, making the response time faster than we have experienced with websites that contain too many graphics and flash movies.
– Distributor in Africa

The ERP software works well, but the Cloud service has slowed operations on a few occassions. I like the fact I’m not worried about IT resources, but I’m considering running the software on an internal cloud so I can eliminate occassional performance issues.
– Manufacturer in Southern US

Cloud ERP gives us the capability to summarize data from multiple locations to get summary reports at headquarters and still maintain the detail to see how individual franchisees are doing.
–Franchiser in Southeast Asia

The cloud eliminated client software so we can easily involve business partners and remote employees without the hassle of installing and maintaining software remotely. This allows us to centrally manage sales across multiple suppliers and distributors while keeping costs low.
– Online retailer in Eastern US

We have been able to customize [vendor name removed] to meet most of our needs, faster and at a lower price than we would have with any other system.
– Software Company in Eastern Europe
 

We needed to customize our [same vendor as above] software, but the cost quoted by [vendor] was more than 3 times the annual cost. This locked us into a solution that was not able to suit our needs.
– Software Company in Northern USA

The cloud allows me to try the software solution before I buy. Three years ago, I purchased a legacy system from [vendor name removed] and made the mistake of buying into a feature set that was promised in a future release that has yet to occur. The cloud lets me see existing functionality and learn quickly what I am capable of importing and customizing.
– Ecommerce company in US Central

We’re very happy with the software and quality of service delivered by [vendor name]. By removing the complexity of software we can focus on running our business. However, recently [vendor] announced a price increase that more than doubles our current price. The cost of switching to another solution is high, so we had little choice but to absorb the price increase. The price increase eliminated the savings we got by switching to the Cloud.
– Ecommerce company in US Central

Common praises and concerns

The quotes above mirror many testimonials and criticisms of Cloud ERP. On the benefit side there is access from anywhere, scalability, reduced implementation time. On the negative side there can be price/vendor lock-in, some performance issues, and software ownership issues.

As with legacy ERP software, customer expectations and preparation play a large part in overall satisfaction. For example, two customers using the same vendor had very different results with regard to cloud customizations. One customer reported a positive experience while another complained of proprietary tools, lack of on-premise integration, and highly specialized programming requirements. This shows that each customer implementation is different. This makes it difficult to make blanket statements that pertain to all Cloud ERP customers.

One statement that is true across client-server and cloud ERP: customers with a well defined and well prioritized list of requirements tend to have higher satisfaction from their deployment than those who figure things out as they go. This best practice is the same in the cloud world as it is in the on-premise world.

Summary

Different people had different experiences regarding their cloud ERP deployments. Most were very positive and mentioned common benefits such as lower maintenance costs, less IT hassles, and access from anywhere. In a couple cases customers complained about vendor lock-in when faced with slow performance or increasing prices. Overall, the cloud ERP experience in 2011 was very positive and folks were planning on increasing their cloud spending in 2012.

¹ The ROI Of Cloud Apps, Forrester, June 2011.

CFO Involvement

Thirty years ago, managers didn’t need to know how to operate a keyboard. There were secretaries to type letters and agreements that formalized phone conversations. Times have changed. In addition to understanding business, today’s managers need to develop a working knowledge of the software tools that are designed to make their job easier. The CFO is not exempt.

Over a quarter (27%) of CFOs say they’ve become more involved in their company’s operations over the past three years, and 15% say specifically that they’ve become more involved in IT according to a recent report by Robert Half Management Resources survey of 1,400 CFOs. There has been plenty of information and hype about cloud computing with a strong shot of technical jargon thrown in.

Cloud Software, IT, and the CFO

Some IT professionals are threatened by the perceived notion that the cloud will make their jobs obsolete. The reality is that IT jobs will change, but will not be eliminated. IT personnel will become more involved in the business and less involved in the day-to-day management of servers and software updates.

Some CFOs are worried that the Cloud limit the control they have over data. As the steward of the organization’s financial well-being, the CFO has the responsibility to understand the current transformation in IT and provide guidance. With a predicted increase in IT spending of 7.1 percent over 2010 (worldwide IT spending is forecast to total $3.67 trillion in 2011) according to Gartner’s 2011 Q2 update, there is a lot at stake.

Just as IT needs to understand more about the business, CFOs and COOs need to understand more about software options available to them. Getting smart about the cloud is becoming easier with a proliferation of objective articles and white papers. Some ERP Cloud News articles discuss ERP cost comparisons, security issues, and 2011 predictions.

More Information for CFOs

Recently the ERP Software Blog published a white paper targeting CFOs who want to get smart about the cloud.
This paper gives CFOs the foundation ask educated questions and lead discussions about moving ERP software to the cloud.
You can read the white paper on the ERP Software Blog at www.erpsoftwareblog.com/cloud-erp.

“It’s time for companies to move on. To eliminate these massive shackling on-premise systems that have been inhibiting growth and creativity for so long. Stop pushing aside innovative projects because they simply can’t be done under SAP. It’s time to get creative again, fuel growth and create the jobs that our country and others desperately need. SAP’s efficiency allowed companies to cut jobs and costs. The cloud will maintain that efficiency but re-integrate the level of creativity that these great companies once thrived on.”

The Cloud delivers many benefits to ERP software designers. Access from anywhere, scalability, reduced IT costs, pay-as-you-go, and elimination of client software are among many benefits. Building Cloud ERP systems as web-based applications, delivers even more benefits as discussed in a previous ERP Cloud News posting. However, the claims made in the aforementioned article are exaggerated and require some clarification.

A Rebuttal, a Clarification, and Support for Cloud ERP

Rebuttal: SAP in the Cloud

Although not mentioned in the article, SAP has demonstrated that it is taking the cloud seriously through the launch of Business ByDesign as well as their work on a cloud-based platform. SAP might be too expensive. SAP might be too big for mid-sized businesses. SAP might be process driven. But I wouldn’t call SAP inflexible. If your business has a healthy budget (read millions) and large volumes of transactions to automate, then you can make SAP do just about anything. See sidebar “ERP and innovation.”

Clarification: Some Clouds are More Rigid than On-Premise

The his article, Mr. Yarnold states “the dominant rigidity of on-premise ERP systems appears to be evaporating with the advent of more flexible cloud-based applications.”

Clarification: Multi-tenant cloud-based systems can be more rigid than on-premise deployments. With multi-tenancy, you gain some efficiency, but you lose control of the source code because it is shared by many users. I’ve worked with many multi-tenant applications (ERP, CRM, marketing automation) that allow you to define variables, parameters, and custom work flows – so I would not call them inflexible. If you can accomplish what’s needed with configuration (not customization), then the cloud will save you time and money. The key is knowing what you can accomplish with configuration. If your process requires core logic changes, then you will get faster results with an on-premise vendor.

Flexible Cloud ERP

The best of both worlds is an on-premise cloud implementation. On-premise clouds are more flexible and much less expensive than a client-server deployment. Modern development tools with web-based APIs eliminate client software and deliver robust applications to a web-browser. Since these applications are managed centrally, they can be designed and deployed faster and cheaper than client-server software.

Unlike multi-tenant cloud applications, on-premise clouds provide access to source code. Before starting your customization, make sure that the vendor protects your customizations during software upgrades. Otherwise, you will have to reinstall or redevelop your customized code during each upgrade cycle. A single tenant application will also allow you to upgrade your application at a time that is convenient for you. The multi-tenant upgrade will occur automatically, but at a time specified by the vendor.

Conclusion: Cloud ERP helps drive Efficiency and Innovation

David Yarnold’s article endorses modern cloud ERP software. But the article goes too far by saying all cloud systems are more flexible than on-premise systems and misses the fact that SAP is pursuing cloud strategies. I would not blame job loss, lack of creativity, and the demise of some US manufacturing sectors on ERP software.

ERP software is designed to make business processes (sales, orders, manufacturing, accounting, invoicing, etc.) more efficient. The cloud accomplishes this by offering rapid scalability, pay-as-you-go pricing, and eliminating the burden of client-software.

When choosing a cloud solution, the ability to customize and connect with other systems is critical. Core accounting processes are rules-based and need to be flexible and open, but not innovative. ‘Creative accounting’ usually leads to big problems and falling stock prices. However, inaccessible and unconnected accounting systems are just as dangerous. Innovative manufacturing processes, line-of-business applications, support processes, and other business advantages need to be easy to plug-in to the core accounting, ordering, inventory, and management processes offered by the ERP system.

ERP systems should make businesses more efficient and provide them with the tools to innovate. Cloud and web-based systems offering SaaS and on-premise deployments provide the flexibility and efficiency required to reduce the cost of innovation. This allows new ideas to be implemented faster and sooner than legacy software solutions – making Cloud ERP systems both efficient and innovative.

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. This cloud model promotes availability and
is composed of five essential characteristics, three service models, and four deployment
models.

This post will relate the essential characteristics, service models, and deployment models specified by NIST for general cloud computing to the more specific topic of Cloud ERP.

Relating the NIST Definition to Cloud ERP

The Five Essential Characteristics

1. The first essential characteristic is the notion that a consumer can unilaterally provision computing capabilities, such as server time and network storage, as needed without requiring human interaction with each service’s provider. Of all criteria in the NIST definition, this component is the most problematic since most ERP companies require a licensing and up-front payment to gain access to additional resources. In the case of ERP the value of the software is the major component of the service, so vendors have opted for a business model resembling software more than services. The ability to meet this definition exists from a technical standpoint, but vendor business models do not meet the strict requirements the definition.

2. The second essential characteristic explains that broad network access is required through heterogeneous thin or thick client platforms. This definition eliminates the possibility of hosting legacy client-server solutions and calling them “cloud” as we discussed in a post on cloud ERP versus hosted ERP software – a much needed industry clarification.

3. The third essential characteristic explains that resource pooling is required and cites examples of storage, bandwidth processing, memory, network bandwidth, and virtual machines. This definition emphasizes a multi-tenant architecture, but protects the idea that Cloud ERP may require customized application code for different customers. Thus, we can conclude that ERP still can be considered “cloud” if composed of multi-tenant hardware and operating systems running unique application code.

4. The fourth essential characteristic addresses rapid elasticity (or scaling) of resources. By definition, this can happen on demand and may happen automatically. As with the first characteristic (on-demand self service), this can be problematic with Cloud ERP – not because of vendor capabilities, but because of financial models.

5. The fifth essential characteristic explains that service resources can be measured. Resources can include storage, processing, bandwidth, and active user accounts. All Cloud ERP vendors support this capability.

Service Models

The NIST definition cites three service models (SaaS – software as a service, PaaS – platform as a service, IaaS – infrastructure as a service) offered by cloud service providers. See ERP Cloud News article for info on PaaS / IaaS.

Most Cloud ERP providers offer SaaS since the application software is the most critical component of a Cloud ERP offering. SaaS allows the vendor to control software upgrades and offer customers an all-inclusive service. Some of the more flexible Cloud ERP vendors allow customers to purchase a software license and deploy PaaS where they “have control over the deployed applications” or IaaS where they “have control over operating systems, storage, deployed applications.” All of these options are consistent with the NIST definition.

Deployment Models

The NIST definition cites four deployment models.
1. Private Cloud. Some flexible Cloud ERP vendors offer customers the ability to run the application code on their own infrastructure. The infrastructure can be run on premise of off premise.

2. Community Cloud. Rarely used in Cloud ERP, this model involves several organizations sharing and supporting a single cloud infrastructure.

3. Public Cloud. The most frequently used Cloud ERP model. The definition supports a community or a single organization owning the cloud infrastructure and offering or selling cloud services to the general public. In the case of Cloud ERP, it’s usually a single organization/vendor that sells services.

4. Hybrid Cloud. This involves utilizing two or more types of clouds that remain unique entities but are bound together by standardized or proprietary technology. Although rare in Cloud ERP, some customers back up their Public Cloud data to a Private Cloud.

Summary

The good news is that Cloud ERP fits the guidelines established by NIST for the definition of a Cloud Service. Further, the definition and explanations eliminate some services that vendors have inappropriately called “cloud” by stretching the definition of cloud for marketing purposes. The service and deployment models also align with the way Cloud ERP vendors offer service.

With Cloud ERP, the application software is a critical component of the service – and frequently the most expensive component of service. This causes the Cloud ERP business model to be at odds with the NIST definition in the areas of on-demand self services and rapid elasticity. Technologically, the Cloud ERP services fit the definition, but the business model that requires paying up-front for software doesn’t align with the pay-as-you-go requirement suggested by the definition.

- Perception 1: Cloud software costs less than traditional software
- Perception 2: Cloud software is only for small businesses
- Perception 3: The Cloud and hosted ERP are the same

Perception 1: Cloud software is less expensive

In the technology world, people are conditioned to think in terms of Moore’s Law. If I paid $X for ‘it’ 2 years ago, I should be able to pay $X for ‘it’ this year and get twice as much. Moore’s Law applies to things like memory sticks, computing power, and silicon chips … and it also applies to software perceptions.

With ERP software, the Cloud represents the latest, greatest, and most influential change in years. Since people associate the Cloud with technology, customers expect to get double the features and software the same price that they paid 2 years ago.

While the cloud can reduce upfront costs (see article on customer pricing models), it may not offer the degree of savings associated with Moore’s Law.

Cloud cost savings are primarily derived from:

• Reduction in IT staff – this is a valid source of savings, be careful not to overlook the overhead associated with Internet access, user management, user training, and data management.
• Reduced server costs – server virtualization allows datacenters with multiple servers to share workloads and increase overall server utilization. Remote access can be managed without additional servers and costly software.
• Economies of scale – outsourced datacenter management (backup, replication, operations, etc.) can lower computing costs, just like buying power from a power company can lower energy costs.

Despite the fact that these savings are real, there are many other ERP costs in areas such as requirements gathering, software configuration, training, data migration, and customization. Unfortunately, the Cloud doesn’t significantly reduce costs in these areas. Since these areas can represent a significant part of ERP expenses, the cloud may not live up to expectations when it comes to savings.

Conclusion 1: Somewhat true, but not for everybody in all situations

Perception 2: Cloud ERP software is only for small businesses

Cloud software solutions are appropriate for all customers – from small shops to Fortune 500. Here are a few reasons why the Cloud is good for enterprise businesses:

• Scalable. Cloud software and cloud datacenters are scalable so the solution can grow rapidly to serve large customers with significant processing requirements. The cloud can also shrink in periods of lower demand.
• Multi-National. The Cloud is everywhere so it can span continents for a multi-national business. Cloud software can serve remote offices without requiring additional servers and IT staff to manage the applications.
• Advanced Security. Cloud software has strong user and group security settings so specific data and capabilities can be limited to specific individuals.
• Choice of Device. Web-based software works with browsers, so users can access the system with their choice of device regardless of operating system, hardware platform, or form factor. This is useful in companies with multiple subsidiaries that cannot mandate a standard platform across all users.

Even though Cloud software is appropriate for large businesses, Cloud adoption started with small and mid-sized companies. This is because SMBs are more nimble. In a small business there are fewer committees and organizations that need to be convinced of the value and included in implementation, so decisions get made faster, deployment starts sooner, and training finishes faster.

A small business environment has more flexible processes than most enterprises. Years ago, when cloud software had fewer features than the ERP client-server incumbents, businesses with rigid processes were not willing to make the switch. These customers postponed their buying decision until all features were ready and tested. Most medium sized businesses have the same needs as larger businesses, but the benefits of automating may not justify the cost of waiting for the feature while utilizing outdated technology. A manual process performed once per week is acceptable. A manual process preformed once every 5 minutes would benefit from automation.

Conclusion 2: The cloud can serve all size businesses, but market adoption initially favored SMBs

Perception 3: The Cloud is nothing more than hosted ERP

We have argued that a hosted deployment is different from a Cloud deployment. With the help of NetSuite and several IT analysts, the concept of the Fake Cloud is being exposed as a poor substitute for a web-based system that requires no client software. More on this perception.

A cloud based application is different from client-server on many levels. The obvious difference is that customers do not install or maintain client software. Several less obvious differences involve statelessness, network traffic, and security.

The stateless nature of cloud applications ensures that they continue to work if there is a temporary break in internet connectivity. Client-server applications were designed to utilize a steady network connection. Think of cloud communications as exchanging postcards (that are instantly delivered without stamps), while client-server communications are more like cell phone calls (when your connection drops you have to “rewind” your conversation).

Cloud applications are built to minimize network communications. Going back to our postcard analogy … the goal of a cloud application is to get each instruction on a postcard. Most client-server applications are designed with the idea that there is a fast ethernet connection between the client and the server. Therefore the design didn’t worry about the amount of data being passed back and forth. When client-server applications are hosted – this is why the client’s remote desktop applications are usually co-located with the server.

Cloud application design involves different security considerations than client-server applications. Communications between the browser and the server are always untrusted. The underlying assumption is that the browser could be compromised or the connection between the browser and the server could be tapped. This means that all business data is verified by the server before being moved to the database. It also means that the transmission path is encrypted by design. Finally, each instant-postcard sent to the client will only contain data that is allowed by the security model. Each request received at the server will only be processed if allowed by the security model.

Conclusion 3: False – as explained above, the two architectures are very different

Summary and Outlook

The cloud will continue to grow and perceptions will continue to change. Fortunately, the three perceptions above are changing in a positive way … towards the truth. As adoption continues and education expands, false perceptions are gradually weeded out. In some cases vendor marketing can slow the process (as with perception 3 above), but the truth about cloud software progresses with time.

The ERP (Enterprise Resource Planning) system had a bad start in the 1990s but it may now be time to get rid of those preconceived ideas about it as a disaster, as it can now assist businesses as it is hosted in the cloud, or remotely. This means that the server does not have to have extra capacity and will not be overloaded, as multiple users can make use of the same application from any mobile device anywhere in the world. Today, you are in a position to get latest technology news of newest Cloud ERP software.

Cloud ERP software versus traditional ERP

Cloud ERP software is different from the ERP systems first launched years ago and is a cost-effective way of allowing multiple users to gaining access to the same resource without having to upgrade a server or spend a fortune on new equipment. You can work on a project with colleagues across the globe and share the information from all of them so that it is easily accessed wherever they are. You can access reports and take action on the data while on the move via a mobile device or in an office. There are advanced security features, so the threat of information getting into the wrong hands is minimized. And who knows what tomorrow will bring as there are new applications for Cloud ERP software appearing all the time. Now that the cloud can be tapped into, more applications are being designed with it in mind, so although it is largely a tool for businesses at the moment, you will undoubtedly soon see it in the field of entertainment as movies could be hosted in the cloud, so that they can be accessed by many people simultaneously.

Conclusion

It seems likely that we will all be using Cloud ERP software in the very near future as inventors are waking up to its potential.

About the Author:
M Zahid Rafiq is a technology expert who maintains Zahipedia.info where you can get the latest technology news.

Acumatica (a Cloud ERP software company) recently announced a partnership with Connect Global One (an EDI vendor with a cloud EDI solution). The press release includes the standard quotes, customer benefits of EDI and ERP software, and company value propositions, but there were two things of interest that can be inferred from the release.

Microsoft Windows Azure Meets Amazon EC2

Acumatica’s SaaS offering runs on Microsoft Windows Azure while Connect Global One runs its Mond Cloudware (EDI solution) on Amazon EC2. Through the application layer the two clouds are connected. This doesn’t mean that you can share computing resources between Amazon and Azure, but it does mean that you can conduct business between clouds. To take it one step further, a company running a solution that uses industry formats such as SAP IDoc, xCBL, etc. can connect with cloud systems through the application layer – provided the connection only requires exchange of standard business documents.

The scalability and efficiency of this type of technique should be acceptable for a large volume of transactions. Since cloud computing can rapidly scale, the only limiting factor would be the bandwidth to the cloud. Since EDI is intended to minimize bandwidth to facilitate rapid transaction processing, the solution should handle a large volume of transactions .

Time to Integrate

Connect different Clouds

The challenge comes if the standard format does not support a transaction that you want to perform. Let’s say that you have a special status for your orders called “transforming from car to machine” that is part of your standard shipping process or a critical field in your documents that is not part of the standard data set. In this case, you will have to customize your deployment or wait for all of the different standard to adopt your particular type of transaction.

Summary

A cloud-based electronic data interchange (EDI) service can help companies connect different cloud applications. This is especially true if you have standard business processes and ERP systems that map to standard business document exchange standards.

The fact of the matter is that SaaS ERP systems are still not as flexible as on-premise solutions. While this may change, it is generally more difficult to change SaaS offerings to fit your business.

Every ERP software provider claims “flexibility and customization” as a selling point – but what does it really mean to be customizable?

Every ERP can be Customized

I have never seen an ERP vendor advertise that they have a non-customizable system. The word ‘never’ is a strong one, but I think in this case it is justified.

There are two main drivers behind this.
(1) With enough time and money software can be changed/re-written to meet almost any client need.
(2) Sales people explain that their software can do anything. The ‘anything’ can involve a minor configuration or a major customization.

Some software is more customizable than others

Given that the above is true (any system can be customized with enough time and money), here are some key factors that can help buyers determine the feasibility of customizations.

(1) Configuration versus Coding

Software configuration is accomplished using the product interface and menus without writing new code. If your business requirements can be configured as part of the installation process, then costs and ongoing support for the system will be lower than a customized system.

Unfortunately, the definition of configuration is not always black and white. Some ERP software includes utilities that enable users to add database fields and modify business logic. If vendors call these types of changes “configurations,” then it’s clear that not all configurations are the same. A “configuration” involving adding fields to and modifying a business workflow is going to behave like a customization in terms of cost and implementation time.

Most ERP software solutions offer an application programming interface (API) to enable customizations outside the core code base. A well-documented API still requires coding so your definition of ‘flexible’ and ‘inexpensive’ may be stretched, but the good news is that product upgrades can be accomplished without breaking customizations (assuming APIs are backwardly compatible from release to release).

(2) SaaS versus Licensed Software

As Eric Kimberling from Panorama Consulting pointed out “SaaS ERP systems are still not as flexible as on-premise solutions.” This is primarily because many SaaS systems are shared across companies (see article on multi-tenant ERP software) on a single environment in order to drive down costs. The fact that many users share a single architecture means that some things can be customized, but these customizations are limited.

SaaS systems are hosted in an off-site datacenter. Therefore, communication with legacy on-premise systems requires a network connection. If the integration is a daily update of sales orders or invoices, then connectivity will not be an issues. However, if integration requires real-time communication of large inventory quantities and serial numbers, then bandwidth and timing should be considered.

(3) Access to Source Code

An ERP solution that provides access to source code will be more customizable than one that does not. The source code that is available should utilize industry standard tools to ensure competitive pricing for customizations. Higher level programming languages lower costs by providing pre-written code for common tasks (imagine how difficult it would be to write instructions in 0′s and 1′s), but proprietary tools and abstractions reduce the amount of flexibility available to third party programmers.

Other ERP Customization Considerations

Cloud software can be just as customizable as client-server or on-premise software. But before doing ERP customizations, weigh the costs (both one time and recurring) against any strategic advantage you may gain. Doing massive customizations because “that’s the way we have always done it” should raise a red-flag unless the “way you have always done it” helps you win in the marketplace. If you can modify your non-strategically important tasks to fit industry standards, then you will save money on implementation and have fewer long-term hassles as new releases become available.

Before customizing, make sure that your customizations are not locking you into the current version of the software. Ensure that your customizations are built so they do not break when the software vendor releases new versions of the software. With some changes there is always a risk, but most vendors will ensure backwards compatibility with updates done using their development tools.

I’ve heard many customers complain about an existing software vendor yet continue using their software due to the cost of switching. Customers are locked-in because they spend hundreds of thousands of dollars on custom code to fit specific company requirements. In some cases these requirements are mission critical, in other cases they are simply non-standard practices that add to the cost of software. Before implementing ERP software, buyers need to determine which customizations are required and which can be replaced by standard processes.

Feedback?
Are you in the middle of an ERP software customization? Have you successfully completed one? If so, please leave a reply below or contact us to tell us about your experience (positive or negative).

In the late 1800′s and early 1900′s the power revolution caused people to rethink the way that tasks were performed. Electrical creation, transmission, and delivery standards caused power to become more available and much less expensive. This encouraged the invention of new tools to perform everyday tasks such as washing clothes.

In a similar manner, broadband access and virtualization technology have made computing power more available and much less expensive. The era of developing cloud software tools to perform everyday computing tasks is underway.

Washing machines and ERP software

Around 1905 the electric washing machine was invented. Unlike the legacy washboard that you rub clothes against, the washing machine utilized an electric motor to do the work for you. But it wasn’t just a matter of taking a washboard and attaching it to a motor … the new technology afforded a number of new benefits and challenges.

Moving Legacy ERP to the Cloud is not Recommended

Suppose washing machines had only evolved to the point of mechanizing the scrubbing process. The process of setting each garment, getting water to the machine, adding detergent, and partially drying the clothes would still be done manually. The result would be a new technology with very little benefit.

This would be similar to the case of moving a legacy client-server ERP application to the Cloud. You gain some minor benefits from reduced computing costs and outsourced IT, but the majority of the problems (clunky client software, expensive maintenance, cumbersome remote access, lengthy deployments, etc) would be transferred to the new technology.

Designing Around Cloud Technology

Software developed for cloud computing environments, just like washing machines designed for power can include new features that were not possible using old technology.

Automatic water shut offs, spin drying, variable size loads, and many more features are included in modern washing machines. Access from anywhere, access from any device, enhanced collaboration, advanced security models, and connected/integrated applications are some of the benefits of today’s cloud ERP applications.

Most importantly, tomorrow will include even more features that we are still in the process of inventing. These features will only be available via web and cloud technology.

Technology Differences

Web-based technology lends itself to the cloud better than traditional client-server models. Just like electricity powered the motor in the new washing machine, web-technology powers the code in cloud-based applications. XML and web-services standards make it possible to use the cloud from anywhere on a wide variety of devices just like power standards such as voltage and frequency made it possible for various electrical devices to plug into the power grid.

Cloud based applications are stateless. This makes them usable over the Internet and makes them more scalable, more secure, and more reliable than legacy applications. Each request from a stateless application is self-contained and includes all authentication and task information. This makes it possible for multiple users to utilize the same application without reserving specific resources on the server. Cloud efficiencies make it possible to serve more users with the same amount of server resources.

Collaboration among cloud applications

The self contained nature of stateless web requests opens up new possibilities with regard to collaboration among applications. Imagine a client-server system applying tax logic by downloading several tables every month, storing them locally and then calculating transactional taxes. In a cloud world, the ERP application can send a request to a tax application and almost instantly receive the proper taxes to apply. During holiday shopping, additional resources can be allocated to this interface to ensure that the additional requests are served in a timely manner.

Summary

Moving legacy applications to the cloud is like attaching a plug and a motor to a washboard. In both cases, you have upgraded the technology. But, the retro-fitted machine will only deliver a fraction of the benefits that the new technology can deliver and will migrate several old problems to the new technology. An ERP application designed with the Cloud in mind will deliver all the benefits of cloud as well as future innovations.