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Posts Tagged ‘cloud ERP’

It doesn’t get much clearer than that.  When the world’s leading information technology research company says in effect “be very careful” it might be time to pay attention.

In fact, it was last year when the giant research firm warned those considering “post-modern ERP” that they will not be immune to the “traditional ERP headaches of higher costs, greater complexity and failed integration by 2018.”

The “Achilles Hill,” suggests Gartner, will be the lack of a cloud application integration strategy and related skills.

Carol Hardcastle, Gartner research vice president, said in a statement: “This new environment promises more business agility, but only if the increased complexity is recognized and addressed. Twenty five or more years after ERP solutions entered the applications market, many ERP projects are still compromised in time, cost and more insidiously in business outcomes.”

These so-called post-modern ERP solutions are simply not the “Nirvana” that their cloud publishers want buyers to think they are.  What’s lacking is integration of all the parts, not to mention the skills to pull them altogether.

On-premise providers have had years, decades even, to launch all the necessary software ERP components to comprise a completely integrated suite of applications.  Even those who haven’t will usually have ecosystems of third party providers to provide the key components of those applications, things like accounting, workflows, production management, kitting, manufacturing, planning, purchasing, warehouse management or CRM.

Simply throwing software up onto a cloud service provider does not automatically make these things happen.  Even top tier players in the space we happen to work and live in – the small to midsize business – have mostly only managed to cobble together partial or incomplete ERP cloud versions of their systems, often lacking the full-featured capabilities of their earth-bound brethren.

An article in the UK’s “The Register” (byline: ‘Biting the hand that feeds IT’) noted last year, “Nobody was singled out by Gartner, but it’s been the iPad toting, cloud-friendly sales and executive classes who have driven uptake of business software providers such as Salesforce, side-lining the more considered counsel of those in IT who could have taken a more measured approach.  However, according to Gartner, vendors are also guilty, putting self-interest ahead of their customers.”

Ms. Hardcastle concludes… “The blame for this does not lie solely with end-user organizations that lack the experience and expertise to avoid many of the pitfalls. System integrators and ERP vendors have to be accountable to their customers in this respect.”

The solution, as always, includes the important precepts: Starting with a solid ERP plan… having full management buy-in… analyzing your processes before your begin… aligning people, processes and systems… planning your integrations carefully… and keeping your eyes on the big prize – that is, what you need to do to take your company to the level you dreamed and planned for in the first place.

A dream, Gartner Research might well add, that may not yet include any clouds.

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Cloud-ERP-GraphA recent article from Panorama Consulting  [link may require registration] points out that the adoption rate for so-called cloud-based ERP systems is declining at a rather precipitous rate.  According to Panorama’s just released “2014 ERP Report” the percent of cloud and Software-as-a-Service (SaaS) ERP adoptions declined by almost 50%, from 26% of all implementations in 2012 to just 15% in 2013.

Our pie chart above, courtesy of Panorama graphically displays the overwhelming continued prevalence of on-premise (traditional) based systems.

Frankly, we’re not surprised.  We’re actually more surprised by how seldom we’re even asked the question, let alone fielding serious prospect or customer inquiries.  As Panorama’s CEO Eric Kimberling himself pointed out in a recent article, “This data point also conflicts with the continuing industry hype proclaiming the death of on premise ERP and touting cloud and SaaS ERP as the greatest thing since sliced bread, so what could possibly explain the disconnect?”

Panorama’s conclusion in part is that many of the cloud ERP vendors have not done a very good job of promoting their offerings, or of reducing user fears about security issues, or perhaps of simply educating potential customers about their options.

We would add to that the fact that in many instances, there are serious drawbacks to cloud based systems when it comes to ERP.  Few vendors offer true multi-threaded, multi-tenant implementations.  Modifications are often difficult, if even possible.  Security fears still persist.  And in most companies we see – at least in the smaller to mid-size space — the promised cost savings don’t necessarily play out as well as expected on an amortized basis over a range of years.  Like most “choices” the one between on-premise and cloud, or SaaS, is neither simple nor one-sided.

The jury is still out as to the viability of these kinds of solutions.   Our own specialty areas which include manufacturing seem to our way of thinking thus far to be a rather poor fit for the highly customized requirements of many in the manufacturing sector.  When you add to that a dearth of options, limited customizability, and a lack of education or muddled marketing from vendors, it’s not hard to see why the blue section of the today’s chart (the so-called “traditional” model) is still the largest, and according to Panorama, apparently a still growing share of the pie.

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