Cloud ERP: 9 Emerging Options - InformationWeek
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1/28/2015
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Kevin Casey
Kevin Casey
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Cloud ERP: 9 Emerging Options

ERP no longer equals on-premises. Is the ultimate legacy software ready to drive the next wave of cloud adoption?
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(Credit: George Thomas, Flickr)

Enterprise resource planning software is the ultimate legacy application. On the downside, ERP has earned a reputation for costly, time-consuming deployments and maintenance, outdated user interfaces, and general inflexibility. On the plus side, ERP is software that very often runs the business, from manufacturing to financials to sales, and it's often highly customized to serve specific company needs. The category, at least until recently, has also been synonymous with on-premises implementations, in part because of concerns that the cloud couldn't deliver the reliability, speed, and data control companies wanted from such a crucial system.

Despite the huge investment companies made in ERP, the software has long had something of an image problem. A 2014 survey funded by cloud ERP vendor Epicor found that the majority of companies who used an ERP application rated it as "basic" or "adequate." Not exactly the buzzwords of tech innovation.

While other business application categories such as CRM and email have shifted heavily toward cloud deployments, ERP has been seen as the last to move. It's not that cloud-based ERP hasn't existed; it just hasn't enjoyed the same interest and adoption as early drivers like CRM.

That appears poised to change. Users and IT want faster deployments and less maintenance. Meanwhile, cloud use -- especially in the form of software as a service (SaaS) -- has gone from new and trendy to mundane. InformationWeek's 2014 State of Cloud report found that 64% of companies (all with 50 or more employees) using some form of cloud technology have at least one SaaS app in the mix. Companies' widespread embrace of SaaS -- as well as cloud infrastructure services-- seem ready to finally bring ERP into the fold in the coming years.

Research firm Gartner predicted last year that at least 30% of service-oriented businesses will move the majority of their ERP applications to the cloud by 2018. Gartner expects that over the next decade and beyond, the ERP norm will switch from on-premises to cloud. It said that heavily customized, on-premises ERP deployments will be commonly thought of as "legacy ERP" beginning in 2016.

The good news for CIOs and their teams considering moving some or all ERP functions online: Vendors have been prepping for this shift, and there's already plenty of choice. The conventional ERP heavyweights -- Microsoft, Oracle, and SAP -- are also in on the trend. You may have noticed how much all three, each in their own way, talked up cloud across the board in 2014.

Oracle in particular spent a good bit of time discussing -- at the highest executive levels -- its cloud endeavors and future plans, sure signs that the entrenched on-premises approaches to ERP are getting a cloud makeover, even if such shifts will take much more time than, say, getting off that old Exchange server for email.

Add in cloud-from-the-start companies such as Netsuite and Workday, plus a variety of other options, and it's apparent that ERP cloud advocates will have a range of choices. Moreover, expect 2015 to bring much added functionality related to mobile and remote access (which was one of the key complaints in the survey mentioned above), social business, big data and analytics integration, and more.

Read on for nine emerging options, in alphabetical order, for ERP in the cloud, which finally stands to join its front-office counterparts online. Note that we focused only on companies with pure SaaS ERP offerings in their cloud portfolio. Hosted versions of traditional ERP applications didn't qualify.

Kevin Casey is a writer based in North Carolina who writes about technology for small and mid-size businesses. View Full Bio

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TerryB
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TerryB,
User Rank: Ninja
1/29/2015 | 12:29:49 PM
Re: Missing the point
Doug (and Charlie), the answers to your questions would take a book to fully explain, not something I can easily pack into this forum comment. I invite both of you to come visit us here in Appleton WI and see for yourself. It's lovely this time of year.  :-)

Maybe if I tell you what we make, you'll gain some understanding. This unit uses upcasting to combine copper, zinc and other metals into 50+ different alloys. We then form those castings into different wire sizes with different mechanical properties to meet the specifications of our end customers. Businesses like Duracell (P&G), Eveready, Rayovac in the battery market. We have customers in Cold Heading markets that make everything from zippers to screws. We make wire for auto market, for things like brakes, ignition systems or even to make the welding rods they put cars together with. We send wire to the ordanace market to make civilian ammunition. We make wire for the photovoltaic market to build solar panels with. Our newest venture is to actually do the first phase of ammo cartridge creation, what they call a Cup, and send that to our ammo customers who are capacity constrained on that type of machining. All this is integrated in one system, with support for al the differences of each market/product.

My software supports this business end-to-end. From shop floor to lab to sales to purchasing to technical to accounting. It is integrated with Wonderware PLC data on shop floor, real time browser dashboard on shop floor using Ext JS talking to i5 server RPG at backend. Wonderware pushes data to me on i5, I merge with context data like what item/shop order is running and show if machine is running at speed. Customer documents (RFQ, PO, Sales Order Ack, Sales Invoice, Packing List. B/L, Certificate of Compliance [to cust spec, shows the actual lab tests from shipped material]) can be automatically faxed or emailed (as PDF) to customers/vendors.

I implemented free Sharepoint as intranet to connect office and shop floor. It is integrated with an i5 based Controlled ISO Document system I wrote that controls document revision approval and publish. It integrates with email to make sure office people who need to read that doc in that area get link to read, and have to acknowlege they read it. On shop floor, new ISO docs pertaining to that area are presented to shop floor guys when they log into their production shift, and they have to ack they read it. Published docs are automatically sent to Sharepoint from i5 for access at any time, and coded for what area they pertain to.

One thing Charlie said I just don't get though. The core of ERP is back office, accounting, purchasing, A/P, A/R, and Sales Order processing. How much of that has changed in 30 years, much less 10 years? You still use Chart of Accounts, do 3 way match in A/P to PO's, send invoices to get paid, apply payments to A/R. Sure you see stuff added like multi-lingual, multi-currency, web EDI hooks instead of old school EDI. If you need that, by all means upgrade. If you don't, what the heck exactly are you upgrading for? Because of backwards compatibility, very little actually changes in core ERP. If it did you would have one heck of a lot of furious customers, because there is no business value added to by messing around with back office stuff to get same work done you were doing before.

We aren't talking about cutting bodies here with upgrades, we have one A/P clerk, 3 accountants (including Controller and A/R function), 2 inside sales, 2 in Purchasing, 2 in outside sales, 3 in lab. But we have 6 floor supervisors, 5 (CAD) engineers, 5 process engineers/metallurgists. We operate 3 separate mfg facilities in Appleton area. So we have to be efficient. We don't employ a single person who is a Data Entry clerk. When I started this work in late 90's, we had several.

And we are completely end-to-end integrated. I do not allow Sales to print shipping paperwork unless everything in shipment has complete chemistry/mechanical tests in spec. We implement a complete cast to pack unit level inventory we call the Store. Shop floor guys pick input units from Store, produce output unit into Store. It supports bar coding, although getting them to actually use scan guns is another story. They prefer just to pick from list or key the 4/5 digit bar code number. I wrote a system that tracks our internal scrap processing at the unit level. Both WIP and Scrap unit level are integrated with accounting's book inventory.

I wrote a Physical Inventory system to use at year end which counts (and records weight) the detailed inventory, generates PI tags for units for auditors. We only use paper tags to count raw material like copper cathode we use in casting. Code in that system allows accounts to analyze with Excel as front end and, when ready, roll the count into the new book and detailed inventory. We ship 35 million lbs per year. Since I wrote this system we get a year end pickup in book inventory of about 100,000 lbs, that's how well we track our production and scrap.

And most importantly, we make money (millions) every single year. Even in the depression year of 2008/2009 we broke even with 1/2 of our normal sales volume and not a single layoff in office. We did have to layoff on shop floor, although all that employment has come back. About 80 guys man 3 shifts 24/7.

We are make to order shop, we have tools I wrote that turn sales demand (including forecasts) into capacity plans for both casting and other work centers, complete with lead time offsets. We routinely hit 90-95% on time delivery. Our quality returns are a fraction of pct of monthly shipped lbs.

I could go on and on, but hopefully you get the point. Just because I don't send invoices using Twitter doesn't mean I'm not modern, even though technically I could send i5 msgs to Twitter if I wanted to. Send me link to either on premise or cloud based ERP that does what I described above.

So if you wonder why I'm a little skeptical an off the shelf cloud system can do this and make us better, hopefully you get my position now. And I'm serious, you are welcome to come visit and see for yourself. We are Luvata Appleton, you can find our global Corp parent site on internet. Worst case is you prove me wrong, and that would only make us better. My job isn't dependent on any particular system, I've seen a lot come and go in my career. 
D. Henschen
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D. Henschen,
User Rank: Author
1/28/2015 | 6:00:16 PM
Re: Missing the point
ERP includes a lot of components. I'm guessing you're using very basic, non-changing components or that your business unusually stable. What does you ERP system handle at your business, just sales transactions, just manufacturing? Is it multiple lines of business in multiple countries? Sounds like this system has no interaction with things subject to changing laws, and that the business doesn't encounter many changes, either. What sorts of things have to be customized and how frequently? The "KoolAid" from the cloud can would say they do that with configuration (settings) not customization (code).
Charlie Babcock
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Charlie Babcock,
User Rank: Author
1/28/2015 | 5:28:10 PM
Can SaaS ERP be customized to suit individual customers?
TerryB, if your goal is avoiding an upgrade until a decades has elapsed, then you've sort of argued in favor of Doug's point. The business is going to change a lot over a decade. Moving ERP into the cloud would allow companies to use a different kind of ERP system. Instead of a hard to maintain, monolithic system on premises, it's possible it would be composed of hudreds of small services that could be maintained separately and customized by the customer. It would be wise to customize via a compatible platform as a service, like Salesforce's SaaS and Force.com The goal would be to modify ERP to meet the changing needs of the business. Updates to monolithic systems are avoided because of the known risk of bringing the whole system down. In an ideal DevOps world, which doesn't yet exist, linked services can be maintained one at a time by small teams.
TerryB
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TerryB,
User Rank: Ninja
1/28/2015 | 2:57:42 PM
Re: Missing the point
Au Contraire, Doug. I single handily do this now and have for many, many years.

Infrastructure:  If ERP server is ONLY server you use, I'll give you that point. But if it is one of many you have anyway, is it big deal? If Windows, patches are automated. We use IBM i5 server, I change that hardware out every 6-7 years. You don't need to patch i5 once it stable, and it usually stable right from IBM. But Windows Server usually just another VM in SAN now. So if you truly want NO infrastructure work, you better put your file and print serving in cloud also. And you still have network equipment to maintain, you don't put that in cloud. Plus you have end user devices which have to consume the ERP, cloud or not.

ERP updates: Once you get ERP working for YOU, you are better off not touching it. What exactly are you patching? I've seen patches break more things than help anything, unless you are getting patch to fix a known problem for YOU. Even outside ERP patching is dangerous. My stupid iPhone picked up some patch and now will not charge from this iPod speaker dock I've used for YEARS. Thanks Apple.

Full ERP Upgrade: This is an extremely rare event. There has to be adarn good reason to even mess with that. Let's say every decade. Now what is cheaper, paying rent every month per user or maybe paying someone to help you upgrade every ten years? If you already employ someone like me who can do it, costs nothing but time. Even in cloud, you have user training expense because they probably change the UI. If they didn't, why did you upgrade? Only exception is when underlying o/s becomes obsolete, when you have to run on new o/s. Very rare event.

You are drinking their Kool Aid, my friend. I'm not saying every single case should be on premise. But it is far from a no brainer decision. If you have IT staff and do customization for the business on premise, then on premise is usually better way to go. If you are paying $200-$300 per hour to outside parties to get ANY business app work done, well you are pretty much screwed anyway. Good luck with Continuous Improvement when the smallest change needs ROI justification from user.

There is a reason out of 20+ business units in our global company that our unit is the best, and by far most cost effective. The only one even close is a unit running on premise SAP and they have IT staff of 12.

I do this single handily for a unit which sells globally with $35 million in annual sales. We use Infor's BPCS (now called ERP LX). We still run version implemented in late 90's. I have their latest version on system for testing. In most cases, they haven't updated a single relevant line of code for us. Doubtful we even bother to move to it, users sure aren't pushing it.
D. Henschen
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D. Henschen,
User Rank: Author
1/28/2015 | 2:24:43 PM
Re: Missing the point
TerryB, you're failing to mention all the headaches associated with running ERP on-premises. All the running of infrastructure, the patches, the periodic updates, and, worst of all, the inevitble full-system software upgrades. With a true SaaS service (not hosting of conventional software) you sidestep all of that. What's more, you can't count on on-premises stabilty. The world changes -- laws, regulatory requirements, etc. -- and business changes -- users, departments, products, partners, etc. -- so "stability" is a myth.

Our company just did a E-Business Suite upgrade, and every week, it seems, we're still getting multiple emails from IT about service outages and planned downtime for maintenance and administrative tasks. SaaS services aren't perfrect, but I'd wager vendors under pressure from hundreds to ensure SLAs are better able to do it than most IT departments under pressure from one employer or shared-services honcho.
TerryB
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TerryB,
User Rank: Ninja
1/28/2015 | 1:33:40 PM
Missing the point
Kevin, is the cost of implementing on premise server(s) really the problem in ERP? You still have to configure, customize and integrate. How does cloud make that any easier?

You talk about getting new versions quicker as perk. How often do they really add anything relevant to your business? With ERP, you want "legacy" because that equates to "stable". You make and sell "legacy" products, why can't your software be legacy also that supports it?

The final argument is whether you really want to depend on internet to run your shop floor. What exactly does that remove locally? You still need routers, switches, Cat 5 runs, etc.

This all about vendors knowing getting rent is more lucrative than maintenance fees. If they are pushing it as good idea, you think that is because good for us? Airlines said consolidation would improve the consumer experience, how is that working out?
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