The website technologyevaluation.com recently wrote about why, despite all the chatter these days (good and bad) about The Cloud, manufacturers are not rushing into SaaS (Software as a Service) based enterprise resource planning (ERP) products. Their points are worth noting, which we’ll do today in brief, adding our own commentary where appropriate.
- Multiple modification requirements. Manufacturing is complex, often including high volumes of unique transactions. ERP systems for manufacturers almost always must include consideration for unique customizations. While some cloud ERP products can accommodate low-level changes, the SaaS model in general is the antithesis of a customizable solution. While software publishers may hope you buy in – so they can host and serve the same software once across many paying customers – the model is not such a good fit for most manufacturers. A system with ‘standard’ functionality will usually not meet the demanding requirements of today’s manufacturer.
- Data ownership and overall increased dependency on a third party. From temporary outages to “the theoretical possibility that a provider might file for bankruptcy” (in the words of com), along with the simple logistical concerns about the availability of one’s data, cloud solutions pose a distinct risk to manufacturers. You’re putting your company data in the hands of an entity you do not control. On the other hand, you may already be sharing lots of your company data with your bank, creditors, suppliers or others, and thus already sharing to some degree.
- Strict compliance requirements. Cloud ERP providers may or may not be able to accommodate any unique compliance regulation relevant to your particular niche. Your requirements may simply not match up well with a provider’s infrastructure, deployment method or, for example, a requirement to use separate servers for separate functionalities.
- Security concerns. Cloud providers will increasingly be heard boasting about security that’s even higher than on-premise solutions, and increasingly those boasts will ring true. However, it’s always been the case with security that the weakest link is not in the data center – whether that be on-premise or off-premise – but rather, with the user. On-premise systems can in some cases provide high–levels of field or record level data security; some cloud providers may offer this with their Service Level Agreements, but not all do, and it can be expensive.
- Leasing vs. Purchasing. Although leasing a la cloud offerings seems cost-effective in the short run (and it is), it’s often just the reverse in the long-run, that is, when taking a total cost of ownership (TCO) view. Think of it this way: Are you the kind of auto buyer who likes a steady ongoing lease payment that never ends, or are you more inclined to buy on payment terms, content in the knowledge after a few years that ‘now I own it’ and the payments have ended?
- Integration with other corporate applications. ERP systems frequently need to integrate, usually in some data reach-out or back-door manner, with other internal systems. Your ERP system will likely need to integrate with other cloud and on-premise systems. This is almost always true in manufacturing firms. The total cost of doing so will often be higher in the cloud deployment model than might be the case in a strictly on-premise environment.
While some or all of these considerations can be mitigated by cloud solutions, the real question is the cost and complexity of doing so. In all cases, special due diligence is highly recommended.
As the old saying goes: You know who the pioneers are, right? They’re the ones up front with the arrows in their backs. Proceed accordingly.