Why doesn’t cloud ERP just work?

There are signs that the take-up of cloud-based ERP is already waning, so how should CIOs proceed?

“The most important driver [for cloud ERP] should not be time or budget, it should be business value,” argues Robert W. Starinsky, managing principal/owner of Chicago-based Tradewinds Group. “While it is true that most ERP (and other packages) produce no ROI themselves, they can and do influence other business processes in positive, measurable ways.”

As useful as these comments are on a more practical level, we still need to look at what ERP really seeks to achieve to be able to know which metrics will gauge its effectiveness. Which wheels and cogs of the business does ERP seek to grease? If we can answer this question then we may be able to get a direct feel for which measurable factors really translate to that always-intangible thing called ‘business value’.

In a debate on the Toolbox.com practitioner discussion forum on this exact subject, user Fernando Granier has said that ERP metrics could include inventory stock reduction, reduced purchasing cost, faster month end closing, improved equipment availability, 
lower cost of maintenance, improved cash flow etc.  Let’s remember what ERP stands for - Granier has a point i.e. these are all “enterprise resources” in motion.

ERP is actually quite complex Jim Plourde,  VP of cloud services at enterprise software specialist Infor, suggests the early spike the market saw in cloud ERP adoption may have been an anomaly. “ERP in general is more complex than most enterprise solutions… and the manufacturing vertical is fairly conservative. Both of these factors have led to the belief that ERP will move to the cloud more slowly than many other solutions.” 

Plourde reminds us that early ERP SaaS providers have not been as ‘functionally deep’ as the traditional on premise providers. He tells us that his firm is now positively addressing the shift and moving its ‘deep functionality’ solutions to the cloud, aggregated in CloudSuites and tuned for what the company refers to as ‘micro-vertical’ markets.]

Applications here include tools such as Reconciliation Management, Human Capital Management and Distribution Management products and sub-modules for Infor’s specialised market focus, which include the non-profit, financial, hospitality and healthcare sectors. The hope here is that this will allow smaller sized ERP customers to adopt a cloud deployment option without having to make a trade-off in functionality.  

However, other companies report a different story. NetSuite’s EMEA president, Pete Daffern is ebullient about what he claims is “consistent adoption” of cloud ERP among businesses of all sizes over the last 15 years.

 For Daffern the key is a post-cloud ERP product, as opposed to a pre-Internet one, "Many software companies simply stick the C-word in front of hosted versions of older on-premise solutions without adding any of the proven business benefits that come with a true cloud offering," he says. "True cloud ERP provides executives the real-time competitive advantage of being able to have a 360 view of their business, built into KPIs."

The difference between old ERP (with a C-cloud word in front) and true cloud ERP is clearly the real-time connected nature of a cloud-based system, integrated data intelligence that knows what information can be used for analytics and what will remain comparatively unstructured and, also, this 360-degree view that comes from the “interconnectedness” of a full-blown SaaS-based deployment.

Is there any hope for the smaller business attempting to plug into cloud-based ERP right now? The answer is no, but yes, eventually.

Enterprise cloud ERP will remain the initial focus of all the big players because cloud ERP is complex and life is difficult. But it will get easier, and smaller ERP morsels will emerge, tailored for cloud.

As NetSuite’s Daffern has said, cloud ERP is “just the beginning” here. There is an expectation from the users that business systems should work in the same way their consumer products work. Users expect to be able to host data, share information, communicate and collaborate in the cloud. At the moment, it all seems to be one step too far but cloud ERP's time will come.