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 Wordís .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 companyís ERP systemís 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 companyís 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 firstname.lastname@example.org.