ERP Software in the Cloud

In recent years, many ERP vendors have increased their investment in cloud and SaaS (Software as a Service) solutions in their marketing and sales organizations. This is now having an impact. The following statistics show the change in attitude towards cloud computing and enterprise adoption from 2013 to 2016

ERP software in the cloud vs. hosted software (on premise)

In recent years, many ERP vendors have increased their investment in cloud and SaaS (Software as a Service) solutions in their marketing and sales organizations. This is now having an impact. The following statistics show the change in attitudes toward cloud computing and enterprise adoption from 2013 to 2016.

Certainly, cloud and SaaS ERP systems have grown steadily in recent years, yet on-premises deployments (i.e., in-house computing infrastructure) are still the most common deployment models.

There are many reasons for this, which we hear again and again in discussions with our customers. Mostly it is a lack of trust in data security, an uneasiness to give one's own company data out of the house into foreign hands and also a general shyness about a possible instability of the internet or the data lines. There are many more individual arguments that we have heard. But these were the most frequent ones.

However, from our point of view - regardless of the critical arguments - it can change quickly. If the demand for IT specialists continues to increase, it may be that for this reason alone it will become very difficult to equip an own data center with the necessary personnel. This is especially true for medium-sized and smaller companies, which will have to make an enormous effort in the competition for specialists against the big brands.

An interesting phenomenon can be observed in the market: the large providers of ERP software are starting to develop their brand new flagship products anew - and precisely tailored to cloud solutions. The marketing machines are running: ERP software in the cloud - and most of the problems are solved. This may mean that other solutions are no longer possible at all. Adobe, for example, has completely abandoned the purchase model for their software and now only offers rental models. SAP is pushing SAP S4 HANA, while Oracle is pushing its Oracle Cloud solution and Microsoft Dynamics is building on Microsoft Dynamics 365 all-in. Infor is also using its CloudSuite solution as its flagship solution. Surely it will lead to other, smaller vendors following suit. As a result, there will be new questions with regard to the design of interfaces between programs that still run in-house and those that are operated in a cloud.

Cloud solutions are profitable for vendors.

Just because SaaS or cloud solutions are the most profitable for software vendors doesn't mean it's the best option for every business. It also doesn't mean it has to be a black and white, mutually exclusive decision you have to make.

5 steps to make sure you can choose the right decision:

1. educate yourself on the pros, cons, risks, and trade-offs of each solution.

No matter which path you take, there will always have to be risks and trade-offs. No solution is perfect. For example, SaaS and cloud solutions may be easier to deploy from a pure technology perspective, but they may also limit your flexibility. When selecting the right ERP solution, you need to prioritize your goals and evaluate the pros and cons of your options against those goals.

2. be aware that software salespeople are biased

and initially represent only the interests of their own software company. Salespeople and vendors are always biased to some degree - one reason why independent ERP consultants and ERP consulting are involved in such decision-making processes. Due to the increasing complexity of the software and the high integration of the software itself, decisions have to be prepared excellently. Risk management is an important component in this phase of ERP consulting.

That sales representatives of software houses communicate that their cloud solutions are the only ones that will be supported in the future happens again and again. However, upon closer examination, we often find that this is based more on self-interest than on truth or reality. This is where commission rules don't seem to miss their mark either. Vendors, value-added resellers (VARs) and systems integrators are focusing their sales staff significantly more on SaaS and cloud solutions than on self-hosted solutions, not because they are best for customers, but because they are most profitable for vendors.

It's important to recognize this approach to take some of the edge off the sales message and stay closer to reality.

3. Avoid being backed into a corner.

Even though certain salespeople and VAR sales reps may tell you that only one of their solutions is viable, there are always alternatives.

But there is always a way to acquire the software you want, even if the first attempt doesn't work. We know of plenty of systems integrators and VARs that continue to sell and support solutions like those from Microsoft Dynamics on Premise, Infor Syteline and other non-cloud solutions. These are all viable solutions, and while vendors won't always admit it, they have roadmaps that span ten or more years because of the large install base.

4. Consider hybrid options

Hybrid solutions are becoming more viable as enterprises realize that cloud versus on-premise is not an all-or-nothing proposition. Call it two-tier, post-modern ERP, best-of-breed or whatever you like. The key is to create a concept that allows you to have a lot of flexibility in how the different systems can be deployed.

In this context, there are different solutions such as hosting your own ERP with functions within financial accounting (FIBU) fixed asset accounting and also master data management makes sense. At the same time, however, to obtain cloud solutions such as CRM or payroll or design from the cloud.

It is important to consider all the options available to your company and take a technology-independent approach to defining your digital and IT strategy.

5. Don't start without a solid digital, IT and ERP strategy.

Every decision you make should be made in the context of an overarching digital, ERP and IT strategy. Take the time to define your strategy upfront, consider your alternatives, weigh the risks and tradeoffs, build a business case, define a business plan, and integrate other aspects of a successful strategy. Your decisions will be much easier within the framework of your overarching strategy and plan.

Most importantly, don't lose sight of customer requirements throughout the IT definition process. They are the reasons they make investments in ERP or IT systems.

If you keep these five points in mind, you will most likely find the right cloud, SaaS and or on-premise solutions that best fit your needs.