Or would you have stuck to what was comfortable, and risk getting relegated to the sidelines in the wake of the communications revolution that was to follow?

I’ve zeroed in on the fax-email dynamic quite intentionally. Just as enterprise email servers and messaging software have relegated fax machines to the sidelines, so too have they begun to be replaced by cloud-based, SaaS enterprise mail, such as those from Microsoft and Google.

Having been a technology writer for the better part of a decade, I see a couple of trends in enterprise-class messaging that I think may be relevant indicators that describe the relationship between on-premise and Cloud ERP.

Two growth areas for Messaging SaaS

There have been two broad groups of organizations that have embraced cloud enterprise mail.

The first group are major companies like GalxoSmithKline, who have found it more cost effective to convert their mail, calendaring, and contacts functions to a subscription service via the cloud with Microsoft Office 365, rather than to maintaining the hardware and software needed to do these in-house.

It also frees up their IT people to focus on more high-impact IT projects, rather than to patch, update, and otherwise manage a global deployment of enterprise mail.

Says Alastair Robertson, VP of Information Workplace at GSK : “Moving to Online Services will enable us to reduce our IT operational costs by roughly 30% of what we’re currently spending. The ability to introduce a variable cost subscription model for these collaborative technologies allows us to more rapidly scale or divest our investment as necessary.”

The second group is made up of small and medium-sized enterprises that could not or did not want to part with the funds and resources needed to set up on-premise enterprise-class messaging.

That all changed with the cloud – in what represents a major evolution for SMBs, enterprise-class messaging became something that even start-ups could count on, along with Internet connectivity, power, and other utilities that are taken for granted in many parts of the world.

Where Cloud Messaging goes, Cloud ERP might follow

The two categories of Cloud Messaging adopters also, somewhat coincidentally, represent two major markets for Cloud ERP. Similar patterns can be discerned here.

Cloud ERP in the Enterprise

For instance, there is the large enterprise that has grown weary of being locked in by a costly ERP vendor with a pricey maintenance package, and where innovation has taken place at a pace somewhat slower than other enterprise solutions. And then there is the growing SME that is availing itself to cost-competitive ERP SaaS for the first time.

At this time, we should acknowledge that it’s not easy for a major company with an existing ERP system to move to a cloud-based one. It’s a challenging decision and process, but with planning and preparation, and the right partner, this is entirely doable.

Cloud ERP software in the SMB market

The SME has fewer constraints. Often, they can be quite eager to embrace the ERP Cloud to optimize for growth, and leave behind the need to juggle spreadsheets.

For these smaller companies new to ERP, SaaS and the ERP Cloud are highly viable and affordable alternatives to on-premise ERP.

In fact, in a survey conducted in 2011 with over 300 SMEs each posting less than $500 million in annual revenue, Aberdeen Research found that 77% of the SMEs interviewed have already implemented an ERP solution.

A significant number of these SMEs reported adopting an ERP solution due to the expectation of strong growth despite the uncertain economy, with almost four in 10 adding that they were doing so due to lower cost options, like the SaaS and the ERP cloud.

Summary

Naturally, the comparison between different SaaS products is not a perfect one, but the parallels between how Cloud Enterprise Messaging has evolved, and how Cloud ERP will evolve, are ones that any business and technology decision maker would do well to heed.

In today’s blog, I wanted to touch on how a made-to-order manufacturer finally decided to commit to moving their ERP to the cloud after a black swan event that has shaken up the organization. This was a tip-off that we received from one of the Cloud ERP vendors that we partner with.

So – how is this manufacturer currently managing the many complex and distributed ways its business is running?

With pen and paper. Seriously. Good old-fashioned pen. And paper.

Could have, should have, gone with SaaS

Here’s the backstory. The manufacturer’s previous on-premise ERP system had been hacked, which disrupted its ability to function and exposed its business to significant risks. To add insult to injury, the hacker or hackers encrypted all of the compromised files and data, effectively locking the manufacturer out of them.

With no other means to continue operations, the company has had to resort to the technologically primitive stopgap measure of taking orders, managing manufacturing, and ensuring fulfillment with paper forms – and lots of legwork, calls, and faxing.

Starting over with SaaS

At the same time, its team has had to rebuild. So they are now reviewing a new SaaS ERP solution because in their minds, not only would this mean less work for their IT people, it would even be more SECURE than their previous on-premise set up.

And while they are planning a cloud ERP system from the ground up, they are also taking the opportunity to load up on a few extras.

On top of the accounting package with BOM, inventory control, OE, Purchase Order and payroll modules, they are also planning for future upgrades such as bar code functionality and serial number allocation to the BOM to minimize errors, as well as a way to create RFQ’s in the purchasing module that would convert the RFQ into a new PO.

Conclusion – Changing Views of Security

Perceptions around security and Cloud ERP and SaaS have come a long way. Four years ago, security perceptions were the number one reason that customers elected not to go to the Cloud. In a 2010 Aberdeen research survey, the desire to control upgrades surpassed security as the number one concern for ERP buyers. As more articles on cloud ERP security are published, customers are overcoming inaccurate perceptions of security. Advice to companies with on-premise servers – perhaps it might not be a bad idea to start planning for a transition to a Cloud ERP solution before a black swan comes a-calling!

If you’re not happy with the service that you receive, take your business elsewhere. That’s pretty much what Amazon CTO Werner Vogels said at an event organized by the company’s Amazon Web Services recently.

His exact words were: “You should keep your providers on their toes every day. If we are not delivering the right quality of services, you should be able to walk away. You, the consumer of these services, should be in full control. That is core to our philosophy.”

That comment created quite a stir in the cloud community. Most people agreed that, philosophically, Vogels was right – nobody wants to be pay big bucks just to be held hostage to a cloud vendor, regardless of whether it was for IaaS, Paas, or SaaS. For that matter, nobody wants to have to pay big bucks to break free, either!

A one-way SaaS ticket?

However, at least one commentator took issue with Vogels. In an article on GigaOm , Barb Darrow pointed out that those who have tightly integrated their SaaS applications, such as with ERP Cloud for instance, with AWS would have a much harder time switching IaaS providers.

Darrow quoted the CMO of VoltDB, Fred Holahan as saying: “Depending on the level at which you’re building software, you might be quite insulated from the details of the underlying infrastructure, but part of the objective of a platform vendor is to provide you with tantalizing services that lock you in.”

While many of the new AWS services do result in more tightly coupled scenarios between AWS and its customer data centers, there are ways to avoid vendor lock-in by planning ahead, both in the Cloud in general, but also in the ERP Cloud in particular.

Planning ahead to keep SaaS portable

Ensuring your organization’s ability to switch providers whenever it makes sense to do so entails a couple of things: planning ahead, and picking a provider that is committed to an open, interoperable framework.

With proper planning, your organization could turn the lights on for its alternative cloud so that it can run in parallel with the legacy provider, and have data written to both databases at the same time. That would allow a smoother transition for when there is a need to do so.

The other thing to consider is to drill down with the service providers of choice, and make sure that they take an open approach and are set up to compete based on the best product, the best service levels, and the best value over the long term, rather than luring you in with sweeteners, but making it painful to leave. This is especially relevant for SaaS applications and the ERP Cloud.

It might be a bit of a pipedream, but perhaps the open service provider that already has that perfect mix of product, service and value might just be able to turn openness and interoperability into a fourth competitive advantage!

Many vendors are moving their applications to the cloud to capitalize on press opportunities. Recent announcements from EMC, Lawson, and Epicor repeat the same message – don’t upgrade your application, upgrade your infrastructure. At ERP Cloud News, we believe that you need to upgrade your application to take full advantage of all the benefits that cloud technologies can offer.

EMC says private cloud

At EMC World, EMC CEO Joe Tucci explained that businesses will not be willing to give up their existing investments in custom ERP applications. Further, enterprises will not be willing to invest in solutions which could lock them in to a particular vendor or cloud provider. For these reasons, he concludes that the way to the cloud is via a virtualized datacenter. More details are provided by Jason Hiner in his article EMC: Enterprise data centers won’t all flock to the cloud in ZDnet.

EMC’s Market

EMC is targeting large enterprise customers with legacy systems – the same customers that purchase a lot of EMC products today, but might be tempted to move to something different. Unfortunately, the indirect message is keep running your same old applications that are built for the 1990′s in a new data center.

Lawson says public and private cloud

According to David Stodder in Intelligent Enterprise, Lawson Software uses Amazon Web Services to run its suite of enterprise applications so customers can benefit from the cloud. This implementation is similar to the EMC vision, where your existing application is run on a cloud services provider which is managed through virtual private servers.

Lawson’s Market

Lawson is targeting businesses with $50M-$250M in revenue that do not have IT expertise with this offering. For customers in the $250M-$750M range, Lawson offers an internal cloud based on VMware virtualization technologies. These moves preempt customers who may think of moving to an application that was written for the cloud. The message is keep running your same old applications that are built for the 1990′s in a new data center.

Epicor says public and private cloud

According to Chris Kanaracus in PC World, Epicor launched a new multi-tenant SaaS application based on it’s existing Epicor 9 software. The Epicor SaaS version only contains a subset of features available via the on-premise offering in order to simplify implementation. The Epicor press release, stops short of saying that the application has been re-written to eliminate client software and the maintenance hassles associated with it.

Epicor’s Market

Epicor is targeting manufacturers willing to spend $400-$1,000/month with this SaaS offering. In the future, according to Chad Meyer, Epicor’s Director of Product Marketing, Epicor plans to court larger customers with SaaS offerings as well as different verticals. Epicor 9 is a new release, but the indirect message is keep running your same old applications that are built for the 1990′s in a new data center.

Benefits when applications are written for the cloud

Moving ERP to the Cloud

Placing a web and cloud engineered application on the cloud provides benefits which are not available from moving a legacy ERP application to the cloud. Some of these benefits are described in the table below.

Related articles

• It’s time to re-write ERP (ERPcloudNews.com)

SaaS scales applications. In the SaaS world, companies can scale applications. Because SaaS implies outsourcing, this means that the SaaS provider can easily scale application(s) that they manage for customers. Savings are obtained by aggregating computing patterns across multiple customers.

Clouds scale computing resources. In the cloud computing world, companies can scale computing resources. Unlike SaaS, clouds can be managed internally (private clouds), externally (outsourced clouds), or using a combination of internal and external clouds. Savings are obtained in two ways – first by aggregating computing patterns across applications and second by aggregating computing patterns across customers (external clouds).

Relating this to Accounting, ERP, and CRM

When looking at accounting, ERP, and CRM applications, we agree with Larry Augustin, CEO of SugarCRM, who in a recent blog post in SFGate says “the need for data ownership, control, customization, and integration with core systems will drive the need for private clouds.” He goes on to predict that “Cloud computing is obsoleting SaaS as defined by Salesforce, NetSuite, and single-vendor solutions.”

Recommendation

For applications such as ERP which may require customization and compliance with regulations, select an application that is built to be run on internal and external clouds. SaaS is a great option, but make sure that you do not get locked into a single vendor which will limit your options in the long run.

Saving money is a key component of cloud computing.

Cloud computing can be implemented internally or externally. As mentioned in several articles, cloud computing can benefit businesses through rapid scaling, paying for only the services that you use, reducing hardware purchases, and dynamically allocating computing loads.

Running applications on a cloud computing service can save you money – but your needs change over time.  As mentioned by Dennis Quan (Director of Business Development, IBM Software Group) in ITBusinessEdge, it’s critical that you manage and control your applications and deployment so you can balance loads and move them between internal and external clouds.

The Lessons:

Enterprises need to be careful not to purchase applications from a vendor which offers only an external cloud locks. This locks you into a single architecture and prevents you from reaping the benefits of managing your applications across both internal and external networks.  In this scenario, the external-cloud-only vendor saves money, but they are not likely to pass all the savings on to you. Also, if you try to “scale down” your application, you may not be allowed to do it until your 1 year contract is over.