I don't know what the facts really are, but the author doesn't cite any evidence to support the notion that partners are abandoning on-premise ERP vendors. Was that part of the partnership announcements? Are they exclusive deals? It would be surprising if they were? Most partnership announcements are just marketing and PR. Businesses are always anxious for opportunities to expand their customer base, but there are plenty of partnership announcements made each week that never result in any significant business for the parties involved.
A successful ERP deployment means thoroughly understanding the business that it will support, including current business and production processes. The ERP server can go almost anywhere. Putting the server in the cloud might or might not be more cost effective than an on-premises installation, but in itself it won't boost the chances for a successful deployment.
A company that uses an ERP system doesn't exist in the clouds. A vendor can't help much unless they spend significant time at the company's work sites, including witnesses existing processes in their warehouses and factory floors.
Big Trouble Brewing for On-Premise ERP Firms
Last night, NetSuite made a number of announcements at their SuiteCloud 2010 event here in San Francisco. Specifically, these announcements covered a number of deals they’ve recently inked with major SI, accounting and outsourcing firms.
Genpact, the General Electric spinoff, has made a big splash over the years bringing back office BPO (business process outsourcing) to the world. Genpact has large numbers of process black belts on staff that help design more efficient and effective ways of delivering back office processes and software. Last night, it was announced that Genpact will create a new BPO practice solution around NetSuite cloud applications. This business will cater to mid-market and larger firms.
Wipro, one of the world’s largest outsourcers, announced that they were building a NetSuite practice focused on NetSuite technologies.
Hein & Associates LLP, a top 50 accounting and tax firm, announced that they were building out service offerings around NetSuite applications.
(Fujitsu Japan previously had a relationship with NetSuite.)
Why is this occurring? System integrators and outsourcers understand that they need to find lower cost solutions to bring to clients. These same firms are seeing clients moving to cloud based solutions and they want to hitch their stars to the perceived and potential market leaders in the space. Similarly, these service providers get the economic advantage true cloud based solutions possess over on-premise applications. What these service providers are signaling is a shift in the market preferences of clients.
On-premise providers that previously dismissed cloud applications as a phase or fad should be scared now. The service firms that supported and enlarged the markets for those on-premise solutions are now abandoning an old market segment for something more market relevant and more economically attractive to clients/customers.
These recent moves by Genpact, Wipro, et.al. will likely presage many more announcements by other consultancies, systems integrators and outsourcers. The services ecosystem is changing and the on-premise solution providers won’t be able to stop it.
