The Month IT & ERP Permanently Changed

The Month IT & ERP Permanently Changed

Summary: It's been a busy month of software events. But, taken together, they point to several major and permanent changes that will shape IT and ERP for decades. This seven part look at these changes spans hardware, HR software, the ERP leaderboard, changing buyer sophistication and more.

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Part 4 – The New Deployment Variants ERP Must Provide

Analysts and Influencers have some back-channel communication networks where we talk about new technologies, rumors and, sometimes, each other’s half-baked postings.  Recently, a pile of the Enterprise Irregulars got off on a veritable religious debate regarding my old friend: multi-tenancy.

On one camp we had the purists who advocate that the only good cloud solution is a full blown multi-tenant solution. The other camp argued that customers will want single-tenant solutions. These polarized perspectives were sort of interesting from an idealistic perspective but were now out-of-date.

When I waded into the discussion, I decided that both camps are only partly right/wrong. Businesses will want what they want and software companies will try to appease them. Here are some of my points:

“This argument isn't going to go away easily or quickly as vendors, in their quest to close every dollar/euro of business, will continue to find ways to 'deliver benefits and flexibility'.  It's for this reason we have purist vendors, SaaS-querade vendors, hosting companies, and more. Buyers, as I heard today at an analyst summit, are getting smarter by the day and are really seeing differences in products, architectures and deployment options. Sadly, some will still get fooled (cue the Who's "Won't Get Fooled Again").

If you want to really blow your mind, check out NorthgateArinso. They let customers stay as much as 2 versions back on their SaaS multi-tenant software. They've created mechanisms for large global firms to have different subsidiaries run the same multi-tenant cloud product but on different versions without a problem. When ERP (not just CRM or HR) goes full-blown cloud, this type of flexibility in cloud deployment may become a prerequisite.”

Yes, I can foresee ERP software buyers wanting flexibility in deciding if they’ll ever upgrade their software. Firms that want to forgo upgrades often have highly customized applications.

When I hear a firm saying they want to heavily customize their new ERP software, I know that they are:

  • probably not a good fit for cloud software; or,
  • unaware of how easily and powerfully most new cloud solutions can be tailored; or,
  • living under the delusion that they truly are ‘unique’. As a consultant who’s done a ton of software selections, it’s truly rare to find a firm whose fixed asset accounting is ‘unique’. (If it really is, I’m calling in the SEC to investigate.)

I can also foresee businesses wanting to decide when they upgrade their software. Some companies have specific business activities scheduled at the same time a multi-tenant cloud solution upgrade could occur. Almost every cloud solution provider I’ve dealt with knows this can happen and many offer a several week window to perform the upgrade. Some vendors even let a firm (or one of its subsidiaries) lag 1 or 2 upgrades.

Some software buyers don’t want flexibility in choosing update frequencies or timing. They want absolute control when and if these updates occur.  A process manufacturer or airline reservation service may not want their systems down for even a second to process an upgrade. Some applications like warehouse sortation or conveyor systems operate at speeds faster than the latency found in some internet based solutions. In these cases, a cloud application may not be appropriate. For some companies, they can afford some planned downtime for maintenance but it has to be on their operations schedule and not necessarily the schedule of a software vendor. For some time then we may see a number of companies moving their accounting, HR and other less time sensitive systems to cloud environments while some applications that require split second responses stay in-house. But, the move to the cloud will continue.

In some software customer interviews I did late last week, I heard from a couple of CIOs who are still lamenting their difficulty in getting super-fast Internet connections at all parts of their firm. Some locations in rural America or overseas are still pulling DSL or dial-up speeds. Yet, to the one, they all agreed that the coverage issues are declining and the trend of near ubiquitous, high-speed Internet connections will come to pass soon.

I also spoke at an ERP virtualization event recently. During down times, I spoke with large ERP customers and their migration plans to virtual and cloud environments. What I learned is that:

  • Most firms are already virtualizing at some level. Many firms reported long-time virtual Microsoft Exchange or SharePoint environments. They will continue to do more virtualization, too, as it is a big savings generator for disk storage, electricity, labor, etc.
  • With virtual environments, companies can speed up the creation and deployment of new test or production environments. This is seen as a great facilitator for firms to get many of their different subsidiaries/divisions onto the same version of their ERP software.
  • Modifications/enhancements to their ERP software are often the big holdup to more frequent upgrades and to companywide ERP standardization.
  • Moving to virtual environments and to a private cloud will help in their cloud migration efforts.
  • IT leaders, though, are definitely dealing with change management challenges in their organizations. Some of their staff, particularly those assigned to maintaining, patching and operating application software, may need to develop new skills if they are to remain relevant.  

What all this means is that some companies are taking a slower path to full-blown cloud solutions as their current environment cannot support a full-blown switch overnight. Interim steps like virtualization and private clouds may occur before they move to public cloud applications.

Bottom line #1: Cloud is coming to ERP and a data center near you. An IT group may not be able to implement it all just now but it is coming. Moreover, the transitions are occuring. Office automation, HR and CRM apps have gone to the cloud and more will follow as operational systems (like MRP) and some telco matters get sorted out.

Bottom line #2: Many different instantiation methods will be needed for short-term (and some long-term) customer needs. Purists who argue one extreme or another will look like, well, extremists as more rational and understandable solutions must be created to help firms bridge their way into cloud solutions. That said, fewer and fewer businesses will be able to justify an on-premise only way of operating going forward.

Continue to Part 5 – The Reality of Laggard IT Shops and the Cloud

Topic: Enterprise Software

About

Brian is currently CEO of TechVentive, a strategy consultancy serving technology providers and other firms. He is also a research analyst with Vital Analysis.

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  • An area where enterprise application vendors have missed the mark

    Hi Brian, Very good blog. I enjoyed reading it.
    Rkumarsmartrdocs