The majority of enterprise resource planning (ERP) systems -- in fact, the majority of all applications in use in enterprises of all sizes today -- are server-based. The burden of maintaining and managing these systems represents a significant percentage of company time and revenue.
What kinds of results might be expected if a few companies that used the same application combined their resources?
In addition to the obvious benefits, including reduced staffing resulting from fewer overall hours devoted to maintenance tasks, there are some interesting side benefits that may not be completely obvious. Sure, the ability to share and collaborate seamlessly on documents and other files is a compelling benefit. But at least as important is the ability to go beyond file sharing.
For some applications, this commonality of format is a given. A great example is Microsoft Word’s .doc/.docx format. The application is so ubiquitous that any word processor wanting to exist in the market needs to read and write these file types. But the issues get more complex when companies want to share a portion of their ERP data with other organizations. Some enterprise users complain that the loss of customization and the requirement that every connection use the same format and data layout is restrictive and limits their business practices.
The primary example of ERP data exchange is the transfer of the purchase order from a retailer to one of its suppliers. This is most commonly accomplished by sending the purchase order in the form of an EDI (electronic data interchange) document. Of course, the ERP that created the purchase order does not format the document to the recipient company’s ERP system’s requirements, nor to the formats accepted by possibly thousands of other suppliers.
The translation of those orders to acceptable formats between the trading partners is the job of the EDI translator software. And the EDI translator is one of the types of applications increasingly finding its way to the cloud.
Traditional EDI translator applications are installed within enterprise firewalls, linking trading partners via FTP, Internet, and a variety of other connection protocols. As implied earlier, one of the main tasks of maintaining the translator is to create and update the map that converts the formats of the incoming EDI document to match the requirements of the receiving company’s ERP.
Changes do in fact occur frequently, and that means that every supplier to a company like Wal-Mart or JCPenney needs to update its translator as required by its customer in order to properly accept an incoming purchase order. Even if the task takes only one hour per company, the accumulated work amounts to thousands of hours devoted to making the changes. And that only accounts for those changes that were implemented correctly. It does not take into consideration errors and revisions.
The cloud-based alternative to the locally installed translator removes the tasks and costs associated with a translator installed on a server within the enterprise. And because updates to maps are handled in a centralized system that serves thousands of trading partners, the work of maintaining those maps is done only once in the cloud application and deployed without any additional work on the part of the connected trading partners.
Centrally maintaining EDI maps in the cloud, accessible by all trading partners, is the next logical step in expanding the reach of these systems. The result of this centralized update mechanism is that one supplier has the ability to connect with any number of retailers without the need to do any work other than identifying the trading partner and enabling the connection through their online dashboard.
At a still higher level, cloud-based ERP systems allow enterprise customers to simply identify their trading partners and work out their business relationships, then begin trading.
Cloud-based ERP offers the prospect of reducing the IT workload required to maintain the various systems in a supply chain. And the resulting ease of deployment and reduction in expense will spell the end for locally installed enterprise applications in favor of cloud-based systems.
— Scott Koegler was a CIO for 15 years and has been writing about technology for the last 18 years. He is editor of www.ec-bp.org, a newsletter that addresses supply chain technologies, and manages other newsletters at www.YourCompanyNewsletter.com. You can contact him at scott@koegler.net.
When we consider using the cloud for mission critical systems, are we considering all the risks and advantages, natural disasters, social change, civil and political upheaval, economic collapse, acquisitions and mergers, etc.? If your cloud does not have multiple geographically separate locations, then you need multiple clouds. Your employees have to be able to physically get to the cloud locations so you can retrieve all copies of your data if necessary. The more countries that are involved where you conduct your business, the more regulations you have to follow.
Think of the worst thing that could happen and know that it will happen sometime to someone. You can't protect against everything, but you have to try. Calculate the possible costs if something goes wrong and calculate the costs of prevention, then make the decision always making sure the board, management team and your staff is aware of the risks and recovery procedures.
but I'm old enough to remember timesharing and how wonderful everyone thought it was when you actually got to have your own computer that you controlled, rather than have to depend on someone else's security and maintenance and so on. Funny how the pendulum keeps shifting.
I personally think there are lots of things which ERP systems should eliminate in order to make things a bit simpler for the user. I know everything is done based on user requirements but certain things can be done in a much more less complex-ed manner. I feel by moving towards cloud will simplify these matters and will be good for ERP and its users.
"The changes will come from companies that identify and resolve the issues associated with cloud based ERP systems and act as disruptors to the existing model. That said, there will never be a 100% shift. There are always reasons (some valid, some not valid) for not changing. Just look at the number of companies still using Windows 95 or 2000 on desktop systems."
Many companies in the past have made big investment in their EPR systems. So one can understand why some of these companies are just not to enthused to move to a cloud-based EPR system. Besides EPR is a core asset to any business and as a result moving it to the cloud to be manage by a thrd party has its own complexities and fears.
For companies considering the switch to a cloud-based EPR system, are there critical factors they should have to bear in mind? People keep talking about the savings to be gain by a subscription pricing model but is this really the case?
I do think that a portion of ERP systems/companies will move to the cloud. Not all are ready, and not all will ever be ready. The majority of ERP providers are well entrenched in the way they provide their systems and the revenue streams that accrue from their installed base.
The changes will come from companies that identify and resolve the issues associated with cloud based ERP systems and act as disruptors to the existing model. That said, there will never be a 100% shift. There are always reasons (some valid, some not valid) for not changing. Just look at the number of companies still using Windows 95 or 2000 on desktop systems.
"Some experts believe it is unlikely ERP will move wholesale into the cloud. The major ERP systems tend to be architected as large homogenous IT systems, which may not be such a good fit for delivery via the internet cloud. Licensing major ERP systems to deploy via the cloud is still immature. Instead, niche software companies are likely to build cloud-based services that do many of the functions of ERP."
Do you believe in the above assertion that only a slice of EPR will eventually move to the cloud? With the many benefits you have cited in your post, one may think that EPR suppliers would be very enthused to the idea of moving EPR to the cloud but that seems not to be the case.
For example: Data centers are located around the world. A company signs up for a cloud-based ERP system. The ERP provider uses servers in India. The Feds smack the company with a huge fine. Why? Their sensitive data is being stored outside the confines of the U.S.
Scott, I think by moving ERP to cloud accessibility and availability can be increased. More over another most important advantage is in terms of cost effectiveness. The maintenance expenses can be reduced drastically.
I believe that the external business processes Scott talks about are highly cloud-eligible. Frankly, EDI can't do the job fast enough (like sending documents between vendors) and ERP was never designed to do that. Cloud can do this.
However, I also believe that large enterprises have too much intellectual capital invested in their ERP systems when it comes to internal corporate processes. Here, ERP functions like a "drive train" for the organization and for security, business rules, operational customization--I think companies will not be eager to jettison it all for the cloud.
One exception to this might be cases of business acquisitions--where it simply is too burdensome to integrate a new organization into the corporate ERP. Here, Cloud might be a cheaper, faster alternative.
I agree this transition will not be simple or fast. But the issues are being dealt with. Even the US government is planning the move. Netsuite seems to have a decent start and some significant traction.
I saw much the same kind of detraction when both CRM and EDI were proposed as cloud (actually SaaS) based systems, and that train has already left the station. The rest are following at their own appropriate paces - but are certainly moving in that direction.
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Many CIOs are findng themselves in the midst of a "cloud honeymoon," with little empirical data available about how cloud should perform and with other C-level executives just happy to have cloud. But this is likely to end in the next 18 months, when the hard questions about cost savings, agility, and speed of deployment begin to emerge.
Today, most sites manually create scripts for virtual system image and deployment in the cloud. This consumes time and can introduce error. Now, systems vendors are coming to the rescue with new automation tools that expedite and bulletproof the process. This is good news for the cloud.
New York's Metropolitan Transit Authority is conducting a pilot test of digital kiosks to guide subway users to where they want to go more efficiently and at lower cost.
The whole Amazon.reader debate is a double-stupid. It's stupid to think that there's any e-book buyer who doesn't know Amazon's URL, and it was stupider to let ICANN launch the whole free-form TLD initiative to start with.
While NFC's original goal was to enhance mobile commerce applications, it is finding its way into a number of other uses, which is creating both opportunity as well as challenges for IT departments.
Enterprises would like to move to cloud computing but are hesitant because they are concerned about providers’ ability to secure company data. Here are some tips that help to ensure that if breaches occur, the business is not left holding the bag.
Edmunds separates customers into segments based on the info it collects on its site and from partners, and uses that to push out custom content, said Brian Baron, director of business analytics for Edmunds.com, at Predictive Analytics Innovation Summit.
The automotive website uses propensity modeling to target ads and customer registration forms, said Brian Baron, director of business analytics for Edmunds.com, at Predictive Analytics Innovation Summit.
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