Alan Sher, director of HansaWorld South Africa, talks about the impact of cloud on ERP (enterprise resource planning) software and what the market can expect down the line.
What are the trends that you are witnessing in ERP?
Far from being the staid uncle at the IT party, ERP is experiencing some remarkable developments. Cloud computing is obviously the big buzz, because it puts fully-functional ERP systems within the reach of far more businesses than ever before. That’s thanks to the fact that there is no longer any need for substantial capital expenditure and the associated operational costs of maintenance and support of on-site systems. Mobility is the other big one; today, some ERP systems extend all the way to tablets and smartphones, with apps available that present data in the appropriate format for handsets. Trends like ‘Bring Your Own Device’ are having an effect, too – perhaps incredibly, people are willingly working at home in their own private time, using their own laptops and smartphones. The notion of ‘FOMO’, fear of missing out, seems to apply even when it comes to work.
What are the emerging technologies that are affecting ERP?
The emergence of mobile devices coupled with powerful services at reasonable prices is unprecedented. The development of apps means it is today possible for even a tiny business to get practically complete ERP functionality, including Accounts, Bookkeeping, CRM, Contracts, Expenses, Invoices, POS, Projects, Rentals and more, and run their operation from a smartphone or tablet.
How are they affecting ERP?
For a few hundred rand a month, small and medium sized companies now have access to systems and processes which once belonged only to large businesses with large bank accounts. This also means these business owners can familiarise themselves with the concepts and processes used in bigger companies, providing a personal growth path which better equips the entrepreneur to become a ‘big business’ owner and operator.
Of course, there is a potential down side: constant access to company data adds to the digital fascination which seems to have overtaken the population in general. It can be very distracting to have such ready access to company information at all times.
How will the big ERP vendors who are not embracing the cloud still remain relevant?
The consequences could be serious and possibly manifest in terms of losing market share. The problem some vendors have is that their systems simply weren’t designed for the cloud and may require complete rewriting. But those legacy systems consist of millions upon millions of lines of code; rewriting them is not a trivial process. However, these vendors tend to be well-entrenched in the market and have considerable resources. Add to that, the cloud is not the ‘be all and end all’ just yet – so to what extent they will be affected is difficult to say.
What are the disadvantages or advantages of cloud solutions to ERP vendors?
Probably the biggest advantage is that the market opens up considerably. With the necessity for capex reduced or eliminated, as clients can simply procure and provision a server from, say, Amazon Web Services rather than buying a physical one, it is far more affordable for any company to implement ERP. Vendors and resellers also don’t have to spend time quoting on hardware and can instead focus on the ERP software and its configuration, making deployment timeframes much shorter. Then there is the annuitized revenue streams which result from ‘as a service’ models.
A possible disadvantage is that the ‘lump sum’ sales are disappearing. And there is the risk that the day a cloud server crashes and data is lost, there will be an outcry (not that this sort of thing hasn’t happened –a lot – with traditional on-site models).
Will the cloud be the ultimate threat to the domination of a few big ERP vendors?
There is more competition in the market as a result of cloud and the market is changing, with an increased focus from most vendors on the mid to entry level as there are more potential clients at this level of the market. Most of the big vendors, whether they have solutions for the cloud or not, are doing something about it to protect their interests. Of course, just how well they can execute, particularly given potential limitations presented by legacy architectures, remains to be seen. Be sure, however, that they will not go down without a fight – and those with diversified businesses also tend to have substantial resources.
Why aren’t all ERP vendors adopting a cloud strategy?
Some simply don’t have technology that lends itself to running in the cloud. If your system was designed for on-site deployment, it typically ‘expects’ a LAN or WAN to provide the bandwidth to exchange data. The internet, while improving rapidly, still suffers from constraints and perhaps obviously, the lower the bandwidth requirement, the better the application will run. As mentioned, rewriting systems comes at a major cost (and risk). In some cases, this may not be feasible. In other cases, the vendors may be relying on customers who don’t want a cloud model.
What do the big ERP vendors have at stake?
The farm. They could start losing market share in the face of systems which are more affordable, faster to deploy, easier to maintain and more flexible to meet changing business requirements.
What are the main challenges facing organisations making use of cloud ERP solutions and how can they overcome them?
Probably most important is to be sure the system runs fast enough. If it can be demonstrated that the proposed cloud ERP system is capable of operating in a low bandwidth environment, which you are bound to encounter especially in distributed organisations at some point in time, there is little reason not to consider cloud. After all, the savings in capex can be substantial – hundreds of thousands or even millions of rands. That means no expensive server hardware, no operating system maintenance, data centre-quality hosting and backups. Any business today, especially those considering ERP for the first time, which doesn’t at least examine a cloud solution as a potential option, is doing itself a major disservice.
