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ERP on Cloud – Clearing the Fog

Cloud is the latest mantra, and rightly so. It is a force multiplier, green alternative and an answer to rising costs of Information Technology implementation across the globe.  Huge corporations and mid-size organizations have drawn benefits from Cloud based technologies to reduce their costs and carbon footprint decisively by utilizing IaaS (Infrastructure as a Service) and PaaS (Platform as a Service) and Many software vendors have been able to gain new markets and large client base offering their services on SaaS (Software as a Service) platform.

Key points on favour of Cloud based offerings are – Flexibility of resources, Quick allocation and re-allocation, Transparent billing and Economical Disaster Management for an organization

When it comes to SaaS, the race to offer any and every software solution over SaaS has been on for some time. Simple softwares where standard offerings can be adopted with minor adjustments by users and flow of process is universally accepted have been successfully. However, complex enterprise solutions like ERP have found it difficult to find client acceptance vis a vis investment in development and marketing of the idea.

CXOs are increasingly interested in cloud computing because of its potential to deliver lower total cost of ownership (TCO), higher return on investment (ROI), increased efficiency and pay-as-you-go services. Analyst firm IDC says that cloud services will outpace traditional IT spending over the next five years and will represent $44.2 billion by 2013.

Yet IT professionals see risks in entrusting information assets to the cloud, according to the survey of 1,809 US IT professionals who are members of ISACA. The IT Risk/Reward Barometer found that only 10 percent of respondents’ organizations plan to use cloud computing for mission-critical IT services and one in four (26 percent) do not plan to use it for any IT services.

Here in lies the crux of the matter. People see risk in putting their information asset on cloud for fear of risk of losing or piracy. This looks more threatening when you think of putting the entire organizational data on multi-tenanted SaaS based  ERP. Threat of hacking feels very real. Even a mistake in password can sometimes result in a user getting into another organization, as a client once confided to me.

Another serious problem is the myth of universalized parameters for ERP implementation across various industries and user organizations. ERP is a living system that enables ones business run more efficiently and grow seamlessly. Organization is a living entity, not just a steel framework.  ERP has to adopt to individual organizational culture rather than organization fitting itself into a steel framework of a given ERP. Infact, many a failures in ERP implementation can be attributed to the urge of consultants to somehow fit an organization into its own ERP design.

SaaS based ERP face the same dilemma. Client must wriggle itself into the given ERP design, and wait for the vendor to provide new updates which would be available to all the tenants of the system as and when vendor offers such updates.  This wait is more a hope than a clear cut assurance.

This lack of flexibility of a SaaS based ERP solution is one of the key reasons why the idea not really catching on in the way experts envisaged.

Is there an alternative? Short answer is ‘Yes’! Realizing this mind-block, we at ESS have been offering ‘Co-hosted’ ERP solution on ‘private cloud’ which is not shared by any other ‘tenant’ client. Thus, the client gets all the benefits of Cloud based tenancy  model in addition to taking care of her/his concern about privacy and security.  In addition, if there is requirement of customization that too is handled well as it has been exclusively hosted.

ESS has further fine-tuned the offering by providing a buy-back option to user who wishes to go back to on-premise hosting and also own the license of the ERP after a pre-defined period. User is no more tied to the vendor, nor does he/she get only database if he discontinues SaaS but software license also. Thus, the client gets best of both the worlds at an insignificant additional cost as compared to SaaS costs.

The message for people looking for Cloud based ERP solutions is that there are better ways to move onto Cloud without worrying about security, ownership and flexibility.

About the Author:

Ratan Sharda is Chief Consultant with Eastern Software Systems (ESS) and has been associated with ESS for 10+ years. He has a rich industry experience of 33+ years of which 21+ years have been in IT. He is a Post Graduate Alumini of St. Xavier’s College, Mumbai and has written and edited several books on social and management topics. To check his LinkedIn Profile, please click here and to connect with him on Facebook, please click here