Sramana Mitra’s summary

The interview uncovers several cloud computing trends. One of them is the case of early adopters pushing cloud vendors to address integration between on-premise and cloud services. Once there is significant adoption, this may not be a scalable proposition, and eventually we expect several new players and innovation by third parties and entrepreneurs to help the cloud providers and cloud adopters work out integration.

The acquisition of Cast Iron may have given IBM some edge in integration within its own cloud and on-premise offerings, but that leaves the playing field wide open for other players and innovative solutions. Another trend we spotted is the pricing model by ERP vendors whereby they share a percentage of sales as their fees. Last, cloud-based printing solutions and easing the real customer problem of not being able to access attachments via a BlackBerry are some of the blue-sky opportunities for entrepreneurs to explore.

ERP software in the cloud before CRM

Inteva started cloud adoption with ERP instead of CRM. Dennis says that once the ERP implementation is complete, business intelligence “might be next”. This example is interesting because it contradicts the standard industry adoption process where companies start their cloud experience with CRM and move their ERP to the cloud later. Standard industry adoption is supported by the fact that in 2008, Salesforce.com had 11% of the CRM market, while all web-based and SaaS vendors only accounted for 4% of the ERP market.

During the interview, Hodges describes HR software as an application that has been put “in the cloud”. Although to be fair, he says that this is really “outsourced” instead of cloud. ERP Cloud News comment: the fine line between outsourcing services and putting software and services in the cloud is a debatable topic. In a previous post we covered the differences between cloud, hosting, and SaaS.

Cloud ERP requires in-house business skills

Ms. Mitra skillfully leads Dennis Hodges to a discussion regarding the impact of cloud and SaaS on his internal resources:

If I look at the SAP model I do not have a stable of ABAPers, FICO experts, or anything like that. I have the finance business analysts, the purchasing business analysts, and they can work across more than one module.

The point is that cloud ERP still requires business expertise, but IT specific operational tasks become simple because they are outsourced. Not mentioned in the interview is the fact that the business experts need to be more computer savvy than the old days of dictated letters and day-long meetings.

Dashboards and reporting are important

At the close of the interview, dashboards and reporting features are seen as critical requirements for a business intelligence system. Dennis says that the ability to take a massive amount of data and make it simple or graphical so it can be read by a CEO or CFO is needed.

ERP Cloud News commentary

This interview is evidence that in 2010, the ERP market may begin catching up with CRM in terms of SaaS/cloud adoption. Critical information delivered by SaaS CRM (centralized views of sales, pipelines, and opportunities) also needs to be provided by business intelligence tools (centralized views of revenues, costs, cash, forecasts) to continue accelerating the adoption of cloud ERP. As adoption grows, organizations will need to change to favor business experts with a technical background over technical experts with a business background.

According to IDC, Forrester Research, Gartner, SMB Group, and many other analyst firms, cloud applications are the wave of the future and will comprise over 30% of deployments by 2014. However, today over 95% of ERP deployments are still running on premise. So how do we move from a world with fewer than 5% of ERP deployments as SaaS to a world with over 30% of deployments as SaaS?

Reasons for upgrading ERP

The first step in understanding how this will occur it to review some reasons why companies purchase or upgrade their ERP software.

1. Newer companies without an advanced accounting solution need manage growth and automate their business processes. These companies do not normally have an existing infrastructure (and existing software baggage), so a solution which minimizes hardware, software, and IT complexity is a natural choice. Newer company needs are well served by a web-based solution that is offered as SaaS so they can benefit from the latest technology without a large capital expenditure.
2. Companies with ERP software systems that are no longer supported will be forced to upgrade. In some cases, these companies migrate to a supported version of their current vendor’s software. But, in the majority of cases, the legacy vendor only offers an upgrade to another client-server solution. Since the upgrade is nearly as expensive as installing new software, companies often use this time to investigate vendors that offer more modern technology. Unlike newer businesses, these companies have experience running client-server technology and be adverse to the notion of a cloud-based solution.
3. Specific activities such as acquisitions, mergers, new regulations, or rapidly changing business requirements often force businesses to investigate new automation solutions. As business requirements change, companies try to adapt and customize their existing systems to meet the new challenges that they face. This often leads to a web of loosely connected systems (instead of a single centralized web-based system) with expanding complexity. After the typical ERP upgrade cycle of 5-7 years, the company sets aside money to fix the problems that have accumulated.

Change is the biggest driver

Business is not stagnant. Most businesses face growth, budget cutting, mergers, acquisitions, management turnover, and other events on an annual basis. These changes almost always create changing requirements which lead to stress on current processes and systems.

The cloud provides agile computing environments so companies can manage change more efficiently. This is a major factor that will drive growth of SaaS adoption as predicted by several analysts.

Preparing for Change

SaaS solutions enable businesses to efficiently manage most types of business expansion. But a SaaS solution that does not offer the ability to move on premise or to a different data center or cloud provider can result in the same problems as your original client-server solution. As your requirements, regulatory environment, and corporate structure change, many SaaS solutions will face the same 5-7 year upgrade cycle because the are not easy to customize and do not offer deployment flexibility.

Example 1. Assume you distribute health care equipment. By purchasing a SaaS distribution solution, you can get started quickly and access real-time data and reporting from all warehouses and offices. As your business grows, you decide to begin selling direct to clients, which necessitates tighter controls over confidential data. If your same software code and data can be moved on premise, you can easily manage this change.

Example 2. Assume you are a CPA firm and utilize a SaaS accounting solution to do client write-up and allow customers to quickly access financial reports. Some customer want to utilize SaaS, others want to use an on-premise solution.

Example 3. Assume you are a company that needs to upgrade your software. Your CEO is excited by the prospect of SaaS, but the IT department and operations folks are not ready to make the jump yet. A web-based ERP solution that provides the ability to move from on-premise to SaaS is just what you need to keep folks happy in the short term while preparing for the future.

Conclusion

Companies should purchase a software solution that allows them to run either on-premise or as SaaS. This flexibility ensures that the solution will fit the business to ensure the lowest priced solution, even as the business’s size, complexity, IT expertise, financial position, or regulatory position changes.

The Software as a Service (SaaS) market had worldwide revenues of $13.1 billion in 2009. IDC forecasts the market to reach $40.5 billion by 2014, representing a compound annual growth rate of 25.3%. By 2014, about 34% of all new business software purchases will be consumed via SaaS and SaaS delivery will constitute about 14.5% of worldwide software spending across all primary markets.

What about ERP software?

According to the IDC study, “applications will account for just over half of the market revenue.” The rest of the spending will occur on cloud platforms as businesses begin to purchase cloud services instead of hosted services.

ERP Cloud News Opinion:

Of the over $20B in application revenue, some will undoubtably be in ERP, while CRM, human resources, and other applications will continue to grow quickly as well. In addition, the size of the markets will be critical to cloud adoption. Small and medium sized businesses markets may develop quickly in the area of applications while larger businesses may develop more quickly in the area of infrastructure.

Managing a cloud service outage

Keep your options open

Ultimately enterprises need to have the freedom of choice so they can choose a deployment model that meets their price and uptime requirements. At ERP Cloud News, we advocate customer choice with regards to the deployment of cloud technologies. Vendors who create cloud software that is built for a single cloud infrastructure promote vendor lock-in and vulnerability to issues like service outages. Customers should be able to move transparently between cloud vendors and on-premise deployment options. The last thing any business needs is to be locked-in to a provider that cannot deliver service.

Option 1: In-House

The option to maintain complex ERP software on your premises is not for every business. Often this requires specialized knowledge and expensive IT resources and is not guaranteed to do better than trusting the experts running a SaaS solution. The on-premise option does prevent an outage if your internet service is interrupted and people are not trying to access the system remotely.

Option 2: SaaS with a Service Level Agreement (SLA)

If you elect to outsource your deployment, you might be able to save significant money on IT resources and hassles associated with software upgrades. If you elect to go this route, we recommend getting a service level agreement (SLA) and verifying the procedures in place to recover from an outage.

Option 3: SaaS and on-premise

Businesses with large budgets and IT expertise, can implement SaaS with an on-premises backup solution. This will provide a rapid way to recover from a service outage, but will increase the cost and hassle of running and maintaining your system. Most likely you would not implement an instant-failover arrangement, but store data as well as a copy of the application on premise. This arrangement is not possible with SaaS providers that run a single multi-tenant version of their software.

Software vendor or service provider?

Traditionally, there has been a separation of software providers and service providers. As more software companies move to the cloud, the lines between the software provider and the service provider have been muddied. The role of the software developer has expanded to include maintaining an operating environment, managing upgrades, tracking bandwidth, providing storage, providing customer service, purchasing hardware, and providing backups.

Software companies may outsource some or all of these features to a service provider. Some software vendors purchase collocation space and manage everything else. Others purchase infrastructure from a provider such as Amazon or GoGrid (power, hardware, bandwidth) and manage the rest. Still others purchase a platform from a provider such as Microsoft Windows Azure and only manage their application.

As software vendors begin to take on service provider responsibilities, mistakes are bound to be made. Developing software and managing data centers require different skill sets.

What is a multi-tenant architecture

Journalists and marketers are proclaiming that multi-tenant cloud architectures are the wave of the future. Let’s start by trying to define multi-tenant SaaS.

Wikipedia sums it up nicely by saying “the principle of multi-tenancy is not universally accepted and supported within the software industry.”

Under a strict definition, a multi-tenant application is a single piece of software that is shared by multiple users. But, there are many components which can be “multi-tenant” – these include the application code, operating system, data storage software, and computing resources. In an ERP application there are many varieties of multi-tenant depending on which of these resources are shared.

Even within the data storage, there are many different options. The ideas of separate databases, shared database – separate schema, and shared database – shared schema are well presented in an MSDN article on multi-tenant data architectures. The article discusses the trade-offs involving development time, economic savings, backups, scalability, security and regulatory concerns.

 

Different multi-tenant architectures are better suited to different types of ERP customers. Complete multi-tenant is best suited to small companies or specific vertical solutions which have highly repeatable and mostly standard processes. Multi-tenant options with single-tenant components are best suited to larger businesses with non-standard processes or significant integration requirements.

In the future, if there are well followed cloud ERP standards and a wealth of applications, the distinction between these models tends to erode. As all clouds interact seamlessly and more applications are available, the need for integration will become less and less. Of course, ERP Cloud News does not recommend waiting for this to happen, as standards and complete cooperation among worldwide vendors is not probable in the near future.

Ideal uses for multi-tenant

Multi-tenant applications, operating systems, data storage, and computing resources are tools that can be used to perform work. In the case of ERP, the work involves running a business with proper automation, accounting, and reporting. A good craftsman has many tools in his bag. Multi-tenancy is one of those tools. Just like a carpenter would not use a chain saw to cut molding, software engineers will not need to use multi-tenant applications in every ERP situation.

Multi-tenant is appropriate for business tasks that are common across many customers or divisions of a company. Just like it does not make sense for a gamer and a business user to share the same application (although there are probably scenarios where the two are not much different), it does not make sense for an at-home craft business to share the same application as a Fortune 100 company.

ERP customers need the following:

• Features that meet business needs
• Security and regulatory compliance
• Ability to modify application if business needs change
• Lowest possible price for all considerations above

The last point is perhaps the most important because both single and multi-tenant applications can be used to solve most problems, but with comparable features, price and security will be the deciding factors. The security issue is beyond the scope of this posting, but we may get to it in a future article.

Multi-tenant pricing

Multi-tenant ERP systems are generally priced competitively with their legacy system counterparts. This means that multi-tenant vendors are pocketing additional profits, not reaching critical mass, or not realizing the cost savings that have been promised.

Multi-tenant systems can gain economies of scale with regard to:

• Shared hardware costs (most talked about, least important)
• Shared IT resources
• Application and OS upgrades

The most talked about is the infrastructure savings, but the most important is the cost of IT resources and software updates. For many mid-sized ERP implementations the cost of hardware can be only 5% of the overall project cost – meaning that an additional 20% hardware efficiency will only save customers 1% of their overall project cost.

The savings from reducing IT staff by eliminating software installations and upgrades is far more compelling, but only on a case-by-case basis.

Multi-tenant systems are potentially more expensive because:

• Vendor lock-in – forced to use a single vendor
• Feature development – custom features have to be developed by specialized resources

Vendor lock-in can come in many forms such as limited support options, price increases, forced upgrades, and lack of customization features. Sometimes these issues can lead to higher out of pocket expenses and sometimes they lead to higher costs in terms of limited business processes.

The diagram below based on research Forrester Research, “SaaS Clients Face Growing Complexity,” April 2008 shows the top 8 reasons why CFOs pass on SaaS ERP.

 

Ideal multi-tenant applications

From a customer perspective, the ideal multi-tenant application is one where hardware costs are high relative to the application cost and where the application is a commodity to eliminate the opportunity for vendor lock-in.

Utility applications such as email and web-hosting fit these requirements and are well suited to a multi-tenant design. Implementing and maintaining email and web servers can be expensive, and sharing this cost across multiple customers will reduce costs tremendously. However, even simple applications like email and web hosting may require some customization. For example, different customers may want different firewall settings for their web server or different spam filters for email. In these cases, the email application will have to be adapted for multiple customers or a single-tenant component (firewall, spam filter) will have to be added and integrated.

ERP applications (the topic of this blog) have lagged behind others in terms of multi-tenant adoption. Small businesses with simple processes or enterprise departments have started taking advantage of this trend, but in many cases, ERP applications are highly customized programs with interfaces into multiple systems. While Salesforce.com attracted approximately 11% of the CRM market in 2008, the entire multi-tenant ERP market only accounted for less than 4%. This could be because the costs associated with customization tend to outweigh the benefits of multi-tenant, or because the larger businesses lag behind when it comes to adoption of new technologies.

Customer size matters – Multi-tenancy in larger businesses

When a customer is large enough to support a full time IT staff and uses enough resources to justify several servers, the benefits of multi-tenant become quite small. A business of this size can benefit from economies of scale without a shared multi-tenant architecture. The customer can install the application in-house or outsource the work depending on security considerations and business requirements.

However, businesses with multiple offices may still benefit from multi-tenant architectures through cost reductions associated application upgrades across different operating entities.

Multi-tenant ERP in the enterprise

Businesses running multi-tenant applications only have to update one application, while those running multiple copies of a single tenant version will have to do multiple upgrades. The same principle applies to the operating system. One operating system is easier to patch than multiple operating systems.

For example, a web-based architecture may allow a company to serve all divisions and entities using a single copy of the application. In the case of ERP, this means that the application needs to be able to manage multiple currencies, different business processes, and maintain separate reports for the different operating entities. In this scenario, the definition of multi-tenant is stretched to mean different operating units instead of different companies. By running multiple operating units on a single application, the enterprise can centralize operations and save costs.

Multi-customer versus multi-entity

Multi-tenant ERP versus multi-entity ERP

Small businesses with standard processes can use configuration tools, metadata options, and database schemas to customize a multi-customer architecture to their needs. Medium and large sized businesses with complex processes and multiple integration points would be best served by their own multi-tenant software license.

Managing your multi-tenant ERP architecture

There are two primary ways for businesses to purchase and manage a multi-tenant ERP architecture.

1. Option 1: Outsource everything (hardware, licensing, upgrades, configuration) to a single vendor who rents the software to you and manages all operations.
2. Option 2: Purchase a software license and enlist the services of a value added reseller (VAR) who understands your business and is an application expert.

This distinction is over-simplified because these options can be packaged many different ways, but this abstraction is useful for the discussion that follows.

The best option for your business depends on your cash flow requirements, operational expense versus capital expense, company IT resources, and your company culture. Companies wanting to preserve short term cash should utilize option 1 while companies who want to own their systems and depreciate them over time should utilize option 2. Companies with spare hardware and IT resources should purchase while companies with little IT expertise should select the rental option 1. For larger ERP customers, option 2 is usually the most cost effective over an extended period of time.

Utilizing a value added reseller (VAR) which understands both your business as well as ERP software is highly recommended. The hourly costs of value added resellers can appear high ($100 – $200/hour in the USA) but the customizations and modifications are critical to running your business properly. Most importantly, you can evaluate customizations on a case by case basis. For example, if it costs $5,000 to implement a customized interface between your bank and your ERP system, you can decide whether or not that is justified based on time savings and the benefit of having real-time information.

Conclusion

Multi-tenancy is a tool to add to your IT toolbox. This tool can save you money when used properly. However, flexibility is critical to your business operations. Your legal, regulatory, business, cost, and customization requirements can change, so make sure that your software can change with you.

Multi-tenancy can be delivered in different ways. When selecting a multi-tenant offering, avoid vendors which lock you in to their support and software because this may lead to rising prices and a lack of flexibility.

Medium and large sized businesses are best served by multi-tenant offerings which are not shared by several customers while smaller business with standard processes may find lower prices when vendors provide a facility for sharing costs across companies. Companies with little IT expertise should look for SaaS solutions with allow for outsourcing of hardware purchasing, software upgrades, monitoring, and backups.

If you have had experience, good or bad, with multi-tenant applications, we would enjoy hearing from you.

Cloud Infrastructure and it’s impact on Hosting and SaaS

Cloud technology enables SaaS and powerful new forms of hosting that can reduce the cost of service delivery. Note that cloud does not equal SaaS and cloud is not mutually exclusive from hosting.

How much cloud do you need?

Customers can purchase services with different amounts of “cloud” in the service delivery stack. Assume that we have four distinct layers of delivery: cloud infrastructure (hardware resources for the cloud), cloud platform (operating system resources for the cloud), cloud applications (application resources built for the cloud), and client resources (user interface to the cloud). This distinction helps us illustrate the way cloud services are offered in the diagram below.

Cloud Delivery Options

In this simplified diagram, we show three types of cloud services:

• Cloud Infrastructure (for example: Amazon, GoGrid) delivers an cloud infrastructure where you install and maintain a platform and an application.
• Cloud Platform (for example: Windows Azure) delivers a cloud platform where you install and maintain your applications without worrying about the operating environment.
• Cloud Application (for example: Salesforce.com) delivers a complete application, all you maintain is your client access program which is frequently a browser.

SaaS ERP and Cloud Models

Even legacy ERP vendors are moving to cloud technologies to offer software as a service to their customers. When vendors offer SaaS, the customer is only responsible for maintaining their client device (usually just a browser).

Vendors can offer SaaS utilizing all three cloud infrastructures above. Some vendors such as Acumatica offer all three types of services.

• Offering SaaS using a cloud application is straightforward. In this case the vendor builds an application which is tightly integrated with infrastructure and hardware so that the three components cannot be separated.
• Offering SaaS using a cloud platform means that the vendor must manage the application layer separately from the platform layer. This architecture gives the vendor the flexibility to move the application to a separate cloud platform provider.
• Offering SaaS using a cloud infrastructure is similar to a managed hosting scenario. In this case the vendor installs and manages both an operating system and their application on top of a multi-tenant hardware infrastructure. This technique provides maximum flexibility, but may increase overhead slightly.

Comparing SaaS Offering Options

Multi-tenant applications

Multi-tenant applications can be deployed in any scenario to reduce overhead associated with upgrading multiple customers and maintaining different versions of software. This implies that multi-tenancy reduces the flexibility to run an old version of software and limits customization and integration potential. Multi-tenant options should be priced lower to offset the loss of flexibility.

** Recommendation **

For a complex application such as enterprise resource planning (ERP), we advise selecting a vendor that can provide flexibility. ERP systems are not like CRM, email, or other cookie-cutter applications. Your ERP application needs to grow and change as your business changes.

Key questions that you need to ask:
1. Do you need significant customizations and interfaces with on-premise systems?
2. Will you need to move your ERP architecture on-premise in the future?
3. Do you need to own your operating environment and the location of your data?
4. Do you prefer to own software instead of renting it?

If you answered “yes” or “maybe” to any of these questions, you should consider the Cloud Platform or Cloud Infrastructure options. These options provide maximum flexibility as well as the option to own your software.

If you answered “no” to these questions, then a cloud application may provide price benefits that offset the vendor lock-in issues. Be careful that the price that the vendor quotes in year 1 is not going to change significantly in the future when it may be difficult to leave the platform.
 

The Original Launch

SAP Business ByDesign was formally launched on September 19, 2007 (see press release). At that time the pricing was $149/user with a 25 user minimum ($3,725/month). It’s reported by Michael Krigsman in Enterprise Irregulars that 100 customers were enrolled (50 implemented) on this offering prior to the redesign.

3 Years Later

As reported from the SAP SAPPHIRE conference by Doug Henschen in Information Week, SAP’s on-demand offering will launch in late July 2010.

This information was also reported by Thomas Wailgum in his CIO article SAP’s Business ByDesign: Finally Real, But a Tough Sell? Quoting co-CEO Jim Hagemann Snabe “Business By Design is not a fantasy. It’s a real product. We wanted to perfect the infrastructure. You only get one chance.” Ironically, this is SAP’s second attempt at a successful SaaS offering.

Features, features, features

So what is going to be different this time around? According to several sources, Business ByDesign is relaunching with new infrastructure technology and new features.

Tim Ferguson in Silicon.com article SAP: Business ByDesign is coming this year, mentions that new features such as in-memory analytics, support for specific mobile device scenarios, and Silverlight web development were announced at SAPPHIRE.

Dennis Howlett in his ZDnet Blog posts a video of Hasso Plattner describing SAP’s challenges in launching an on-demand offering. He describes technology challenges as well as the challenge of replicating every feature available in SAP’s traditional products in ByDesign.

Howlett’s video highlights the feature battle faced by SAP. The SAP sales teams are used to selling a solution that includes every possible feature. SAP customers will line up feature comparisons and demand that all features are supported in Business ByDesign. The sales process will be different and sales teams will have to evolve.

Vendors which pioneered on-demand services such as NetSuite, Intacct, and Acumatica were able to design a solution which was unencumbered by existing feature requirements, pricing models, and customer demands. The sales processes at these companies are designed to overcome hurdles such as a missing feature.

SaaS ERP is a reality

In our opinion, there will always be a variety of deployment models to meet different ERP customer needs. But most vendors are developing a SaaS solution or hosting their legacy on-premise application and spinning it as SaaS.

SaaS ERP is a reality, the question is, what percentage of ERP will be sold this way, both in the market and at SAP?

Software Advice, a website that reviews software for manufacturers, recently hosted a roundtable discussion on the state of the manufacturing ERP software industry. They teamed up with four ERP industry insiders to report on activity in the software as a service (SaaS) market, how vendors are adjusting prices to compensate for the economy, how offshoring influences spending and whether manufacturers are implementing integrated enterprise resource planning (ERP) systems or best-of-breed applications. Here is an overview of their findings:

• SaaS solutions are gaining momentum. Activity in the SaaS market is up among small- and medium-sized enterprises (SMEs). The main driver is the low barrier to implement web-based solutions. SMEs don’t have the same IT resources that their larger counterparts do.
• Software Vendors Adjust Prices to Compensate for the Recession. The recession created pent-up demand as many manufacturers delayed their ERP projects. This has placed pressure on software vendors’ revenues, which has prompted many to drop their prices. Additionally, most manufacturers have tighter IT budgets, so vendors are competing on a cost basis and are reducing both license and maintenance fees.
• Manufacturers Seek Integration Across Offshore Facilities. With more manufacturers looking to move facilities offshore, integration is becoming a greater – and often requisite – driver of ERP software acquisition. In some cases, small and medium-sized manufacturers are even acquiring ERP software just to make a business case for offshoring.
• More First-Time ERP Buyers Seek Integrated Suites. As the functional gaps between integrated and best-of-breed offerings narrows, most first-time ERP buyers are looking towards integrated suites rather than a best-of-breed system. This can be attributed to ERP vendors enhancing functionality of their modules and adding vertical depth by acquiring best-of-breed applications into their ERP suites. As Jonathan Gross points out, “deciding between ERP and best-of-breed applications is no longer an issue that involves a balancing of clear tradeoffs.”

To continue reading the rest of the report, visit: 2010 Manufacturing Software State of the Industry Roundtable – Part Two.

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)

Panorama Consulting recently published 2 statistics about ERP implementations that were worth repeating. The entire Panorama article, How Much Can You Afford to Lose With Your ERP Implementation is worth a read.

Ideas from ERP Cloud News

The statistics above imply that an expected ROI of 269% in year 1 will actually result in a break even scenario. But using cloud technology, SaaS options, and setting realistic goals, you can easily lower your risk by reducing the initial expense prior to measuring your results.

Cloud ERP technology

Using the cloud will help you reduce costs associated with hardware as well as implementation costs. You can start with a small system to see if you can really generate the benefits before sinking money into a fully redundant architecture. Using a cloud provider, you can scale up and down quickly, so you may never have to invest in hardware.

Realistic goals

Automating 100% of your management, accounting, billing, reporting, and business processes may not make sense on day one. Automate the 80% of your business and then go back and build interfaces to the remaining 20% later. A great portion of the cost of ERP is often included in ERP customizations. Read more about minimizing ERP customization costs.

SaaS Options

Purchasing a SaaS solution which is run on a cloud infrastructure will help you gauge the success of your ERP deployment before you make a full investment. Most mid-size SaaS ERP implementations can be implemented with costs of $100,000 or less in year one, including software, services, and maintenance. With a minimal up-front expense, you can decide to continue using SaaS or move to a full fledged on-premise deployment.

Important: do not get locked into a SaaS solution, otherwise your “inexpensive trial” can turn into a permanent solution with higher and higher ongoing costs. Pick a vendor which offers both on-premise and SaaS options as well as several support options.

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• Acumatica Brings Cloud ERP to Canada through Partnerships with CoRealize and SIPD (newswire.ca)