By: Karan Kirpalani
The movement of cloud ERP to the mainstream seems to be global. Analysts expect the global cloud ERP market to grow rapidly, with market size projections varying between USD 25 bn to USD 30 bn over the next four or five years.
While the concept has been around for some time, organizational mindsets towards cloud based ERP have changed dramatically of late, and in the last 18-24 months we have seen widespread adoption of ERP on the cloud – whether it’s Microsoft Dynamics / Navision, or SAP HANA / ECC on HANA. A number of factors are responsible for this shift.
Much of the Application Ecosystem is Already on the Cloud
Cloud-based applications are steadily replacing on-premise legacy systems across the entire spectrum of business processes – customer-facing web applications, CRM, HRM, documentation, reporting and analytics, project management, are applications that are steadily being migrated from on-premise environments to the Cloud.
In fact, organizations that may have already moved these ‘less mission-critical’ web-centric applications into the cloud, it makes great sense to have their ERP follow suit to ensure minimum latency between applications, improve analytics and reporting, leverage common security protocols and drive greater cost and performance efficiencies.
And while it still makes sense for some applications to stay on-premise (for cost, compliance, or legacy reasons) it’s equally sensible to move web-enabled applications to the cloud. Working with a CSP that provides a seamless, extensible Hybrid Cloud allows customers the best of both worlds.
Understanding that Process Standardization Enables Evolution
When we talk about process standardization, it’s important to understand the distinction between cloud-based ERPs (such as typically offered by SaaS providers like Salesforce and Azure) versus legacy ERP applications that are now cloud-ready. The former involves a wholesale adoption of your Cloud ERP provider’s processes and systems, while the latter allows organizations to maintain a large amount of autonomy and customization in their processes and workflows while still being able to leverage benefits of the Cloud.
Both approaches come with their own individual set of benefits and constraints, but business leaders are quickly realizing that process transformation or standardization is a small price to pay to ensure that their business models evolve quickly and keep up with market dynamics. The benefit of operational agility, cost efficiencies and technology access outweigh the initial pain of having to migrate from legacy systems.
A Stronger, More Credible CSP Ecosystem
Leading ERP companies such as SAP are playing their part by certifying CSPs and OEMs. For
many organizations, certified architecture gives them the much needed assurance from their CSP’s on availability, security, compliance and performance. With a stronger, more reliable and vendor-supported CSP infrastructure, organizations have started migrating mission-critical applications like ERP into the Cloud.
CIOs are now content to validate a CSPs credentials, ensure adequate SLAs around uptime, security and performance, and then plunge in. This is a sound strategy provided you have (a) adequately validated the CSPs credentials within the community, and (b) ensured that you’ve signed a contract that truly affords you with the benefits of the cloud – pay-per-use, no lock-ins, elasticity, and access to a wide range of that can be consumed a-la-carte.
Cloud-Based ERP has Proven Benefits, and Fewer Concerns Today
Over the last two years we’ve seen fewer conversational roadblocks when CIOs and CSPs discuss security and performance in the Cloud. Developments in security technology and increasing customer awareness have seen clichéd security concerns largely addressed.
CIOs are now content to validate a CSPs credentials, ensure adequate SLAs around uptime, security and performance, and then plunge in. This is a sound strategy provided you have (a) adequately validated the CSPs credentials within the community and (b) ensured that you’ve signed a contract that truly affords you with the benefits of the Cloud – pay-per-use, no lock-ins, elasticity, and access to a wide range of that can be consumed a-la-carte.
These fundamentals remain the same regardless of the application that’s moving into the cloud. Sure, a mission-critical application like ERP would involve greater due diligence than something peripheral like say, HR, but the basic requirements remain largely the same.
CSPs are providing new-generation services like SAP HANA in an on-demand, flexible, pay-per-use model that allows organizations to accelerate their time to market without having to invest up front in complex hardware and software licenses. CSPs like Netmagic offer a SAP HANA ‘TDI’ (Tailored Datacenter Integration, a fancy name for what is essentially an on-demand, pay-per-use SAP HANA model that select CSPs can offer after being certified by SAP to do so) model alongside the more traditional HANA Appliance model, thus allowing customers the option of going the appliance route, the Cloud route, or a Hybrid amalgamation of both.
Customers with existing SAP deployments can leverage additional capacity on Netmagic’s TDI grid using Cloud extensions to add to existing capabilities seamlessly and without being bound to long term contracts. Of course, a mission-critical application like ERP would involve greater due diligence and security controls compared to a peripheral application. However, best-in-class CSPs today more than adequately address enterprise concerns around security, availability, integration and configurability, even for complex, mission critical applications like ERPs.
The benefits of ERP on cloud, of course, are significant. Cloud-based ERPs are proving to be much ahead of on-premise ERPs in many other areas such as scalability, upgrades and time-to-market. With better user experiences, seamless upgrades and extended features like mobile compatibility, cloud-based ERP deployments are catching up quickly with their on-premise counterparts.