Enterprise Cloud Apps: Next Stop, ERP

InformationWeek Green - Aug, 2013

InformationWeek Green

The last 18 months have produced a lot of industry jockeying for cloud-based enterprise applications. SAP's high-priced acquisitions of SuccessFactors and Ariba -- it paid a combined $7.7 billion for less than $1 billion in cloud revenue -- carried a whiff of desperation. Oracle's many smaller cloud acquisitions -- RightNow, Taleo and Eloqua among them, amid the debut of its Fusion Apps suite -- likewise seemed like late recognition that the market had changed. For the latest evidence, see Oracle's recent alliances with rivals Salesforce.com, Microsoft and NetSuite.

SAP and Oracle have missed key financial projections in recent quarters, and their cloud competitors are clearly top of mind. During SAP's latest quarterly earnings call, for example, CEO Bill McDermott claimed that new bookings at fast-growing cloud rival Workday are decelerating, and he described SAP as the "only company with a consistent portfolio" in the cloud versus the "patchwork of partnerships and solutions" offered by others.

Our InformationWeek Enterprise Applications Survey has tracked the rise of the cloud for years. In our latest survey, conducted in June, 263 respondents were evenly split on software-as-a-service: 46% are using enterprise SaaS and 46% aren't. That's up from 38% using enterprise SaaS and 51% not using it in our April 2012 survey. (The rest in each survey "don't know.")

Given the gigantic installed base of on-premises applications, expect to see years of double-digit growth ahead for cloud vendors as they lure converts. But we'll never get to see a 100% cloud world; there's still plenty of demand for on-premises applications, particularly in highly regulated industries. Thus, hybrid strategies are becoming the new normal for the major enterprise application vendors.

But don't get too comfortable with the neat lines distinguishing cloud, hybrid and on-premises strategies, or with the idea that core apps stay on-premises and others go into the cloud. Creative IT leaders and aggressive vendors already are blurring those distinctions.

What's Next For Cloud Apps?

Cloud Software: Where Next?

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So which categories of enterprise applications are moving into the cloud most quickly?

When we asked the business technology pros in our survey to rate the likelihood their organizations will invest in nine cloud app categories over the next 12 to 24 months, the top three they chose were social networking/collaboration apps; email, calendaring and messaging; and CRM. Next came human capital management (HCM), sales-force automation, asset management, financial management, ERP and supply chain management.

Those priorities align with a 2012 report from IDC that classifies collaboration and sales-oriented CRM applications as "already moving into the cloud." Customer-service and contact-center CRM are "likely to move within two years," IDC said, as are certain ERP components: HCM, payroll, procurement, inventory management and financial performance. "Slower to move" into the cloud are financial accounting, logistics and production planning applications, IDC said.

To read the rest of the article,
download the InformationWeek August special issue on cloud's changing role in enterprise applications.