There's incredible buzz around cloud ERP, in part due to the hard push from vendors to get customers to move to their cloud ERPs. However, for many of our clients who have taken the first steps on their cloud journey, the overwhelming response is that cloud ERP is not a viable alternative.
If you are feeling pressure to move to your vendor's cloud ERP, watch this short video (one of our Tech Talk series) for a deep dive into cloud ERP offerings from a perspective of functionally, as well as total cost of ownership.
Here's what we are hearing.
Cloud ERPs Are Immature
Internally deployed ERP software has been around for over two decades, and it is very robust and stable. Cloud ERP may look newer, but it is immature and will likely be under development for years to come. Rimini Street's Functional Support Services (FSS) group has done the analysis and found that cloud ERP simply does not yet replace all of the functionality and capabilities already available within SAP, Oracle EBS or even PeopleSoft.
For example, FSS performed an analysis of some of the most-talked-about ERP cloud systems and identified many applications that do not have a cloud version available today. If you do try to move to the cloud with these vendors, what you're going to end up with is a hybrid environment where a lot of your already- implemented ERP functionality is going to remain in place and you will only have selected cloud modules that you can take advantage of.
A hybrid architecture is not a bad thing - in fact, you're likely to find that it's a practical necessity. Even if your goal is to have everything in the cloud, it is likely to be a long, slow, phased rollout over many years before everything is converted.
That is a large chasm to overcome, and it translates to additional cost for other ERP cloud core application solutions to fill this gap. This is counter-intuitive and may be untenable if you already own that functionality in your ERP footprint.
Strategic Roadmaps May Not Match Vendor Roadmaps
"When a customer who is on-prem paying us support moved to the cloud, they pay us more money…. They don't pay us one to one, they don't pay us two to one, they pay us more like three to one. In some cases more than three to one."1 _ Oracle co-CEO
It is clear to us from the work we have done with functionality roadmaps that ERP vendors have redirected their development efforts to focus on cloud ERP, but they still have a long way to go before cloud is on par with traditional ERP. And on top of this, moving to the cloud means different things to different people.
Many of our clients, for example, have already embraced a hybrid IT environment and are utilizing best-of- breed cloud applications with their internally deployed ERP systems. We think this is a more viable alternative for most clients, rather than going down a single-vendor cloud path that locks your company in, putting you at the mercy of these ERP giants. That's the difference between following what we call a Business-Driven Roadmap approach, as opposed to a vendor's product roadmap.
Also, the most common argument these vendors make, that there is some new functionality embedded in their cloud offerings that ERP does not have, can be discredited by the plethora of exceptional third-party fully integrated solutions that perform better and cost much less than what the big software companies offer. It is clear to us that if cloud ERP adoption was accelerating as stated, these vendors would not be extending ERP support yet again. Instead, the data tells us there is no mass exodus from ERP to cloud ERP and that traditional ERP will continue to be used by many organizations all over the globe for many years to come.
The Cloud Is Not the Same Thing as SaaS
It's important to clarify that you don't move to SaaS ERP in order to gain the benefits of the cloud. You can migrate your existing ERP software to an infrastructure-as-a-service (IaaS) cloud platform - and you don't have to get that from your ERP vendor. You can also integrate your ERP with best-in-class SaaS products that were born in the cloud and are truly innovative.
SaaS is a totally different way of having your software delivered to you. You pay on a subscription basis instead of licensing software and pay for support either through a maintenance contract or by working with a third party such as Rimini Street.
How the Cloud and SaaS Shine Through
Many of our clients prefer to migrate to the cloud by lift and shift - moving their existing ERP software to an IaaS provider that offers efficiencies beyond what they can do in their own data center - and then add SaaS products that offer additional functionality in high-impact areas. This allows them to have the best of both worlds, while following their own Business-Driven Roadmap plan. For a fuller discussion of our research on SAP's plan for the cloud, read our white paper: "Examining SAP's Cloud Strategy."
Rimini Street is the leading third-party support provider for products such as SAP, Oracle, JD Edwards, PeopleSoft and more, with supplemental support for Salesforce® products as one of our newest offerings. That means customers can come to us for advice on how to innovate, making the best use of their installed base of technology and adding cloud resources where they make the most sense. We can do the research and give you more options than you may get from your ERP vendor alone.
1 Oracle's Cloud Strategy: Ruthless Or 'Byzantine,' Forbes, July 2017, retrieved Feb. 2019 from https://www.forbes.com/sites/jasonbloomberg/2017/07/11/oracles-cloud-strategy-ruthless-or-byzantine/
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Frank Reneke, VP, Functional Support Services
Mr. Reneke is responsible for helping clients and prospects maximize the value of their ERP systems. He leads a global team that articulates how customers’ business objectives can be met by partnering with Rimini Street. The team’s ERP experts propose functional application strategies, determine ways to overcome upgrade challenges, and advise on best practices for successful deployment of innovative technologies such as hybrid cloud infrastructure. For the last 20 years, Mr. Reneke has been a consultant specializing in implementing and upgrading large ERP systems.