Achieving business agility between ERP and Cloud

An intense debate between two CEOs ensued while I was listening with concentration to them; there was no debate on the need for every business to leverage technology to stay ahead of industry growth curve. Both had experienced success, but there was indeed a bone of contention. One of the leaders vehemently recounted the inability of ERP solutions and vendors to address the market dynamics. He cited many instances where the ERP vendor as well as his IT organization took longer time than business could afford; small solace that his competitors also used the same solutions and thus had similar issues.

The other CEO countered with an equal number of scenarios when the specific ERP had indeed been ahead of others. Now every ERP solution provides a complex array of parameters and settings that can be manipulated to provide functionality for most business processes. This complexity also becomes a bottleneck when any change is required. It is rarely as agile as other smaller solutions that can quickly be customized. CIOs have had difficult discussions on this aspect with Business and Vendor alike. The monolithic nature of the solutions indeed poses a challenge. Not that there are too many options, so the technology ecosystem has created multiple layers to manage the agility requirements.

Grudging acknowledgements later, both glared at me as if to validate their arguments and then turned back to each other. Before they could continue, I pitched in with thoughts on the new opportunity that has everyone confused and wondering with benefit statements ranging from better ROI to TCO, time to market, productivity, and the panacea to all ills that face every enterprise that uses technology.

This brought a smile to the face of the second CEO who began to lecture on the future being cloudy and why current IT models will no longer survive. He elucidated the benefits of the new disruptive paradigm the Cloud is and why enterprises should be embracing this. Now the other looked imploringly at me to help him and I could not refuse the request. After all I had broached the subject so I had to provide a perspective.

Differing flavours of clouds offer different value propositions; the viewpoint put across by the CEO related to Application and Software as a Service. Both offer an easy way to deploy and get started on any new business area or process. The most widely accepted scenarios are sales force automation and collaboration; for SME the benefit is limited upfront investments and no worries about managing complex technology. Beyond these mainstream business process remain firmly grounded in corporate data centres.

Irrespective of their physical location, the big ERP remains the same animal, big monolithic and complex. Separating processes like sales force or collaboration (read email, chat, etc.) does not in any way create an opportunity for agile business process alignment for the rest of the enterprise. In fact with the cloud, the base expectation is that business processes are standard and can thus be uniform across multiple companies. Clouds provide faster start points, but the change ability remains similarly constrained. A question from the audience inquired about ROI models for evaluating Clouds; that is another story for another day.

The two CEOs representing a large business house and a leading global ERP vendor acknowledged the reality and it was time to move on. The CEOs and CIOs listening to the interaction went away with both sides of the coin clear (?) to create their own agenda and discussion in their enterprises.

Do Clouds really save money ?

The beginning of the monsoon season in Mumbai inspired me to push the boundaries again in quest of the silver lining in the Cloud. Recent events around outages and security across multiple global Cloud pioneers poses doubts on the movement of even non-mission critical applications outside of the corporate data centres. We are not just talking about Infrastructure or Platform as a service, but everything that is the manifestation of the Public Cloud.

Over the last couple of years every offering saw two shifts, first it had to have a Cloud flavour and second around social networking (that is another story); some termed this new euphoria as bubble 2.0 tinted by valuations achieved in recent IPOs. So everyone justified how this time it is different and why it is sustainable. Many large and small enterprise found efficiencies (at least short term), in moving field functions like sales and service, and collaboration on the move, to the Cloud.

 

Leaving aside the debate between public, hybrid and private clouds, the real issue is about the promise of the Cloud irrespective of the vendor, type of cloud offering, or engagement model. The big benefit that every type of Cloud offered was savings, real quantifiable savings or better Total Cost of Ownership. CFOs would agree that TCO is always a good measure for any financial model if all other dimensions remain unchanged.

 

Cloud service providers financial models are contingent on multiple customers adopting their base solutions which give them the efficiency of scale and repeatability. As the number increased, beyond a threshold they start making money. Non-concurrency improves yields, but prices remain the same for customers. So the financial models attempted to capture some efficiency based gains making them look attractive to the prospects.

 

Most discussions got off to a good start with worksheets providing easy decisions. The newness of the paradigm left some questions unanswered, but during the slowdown, these were brushed aside. Some of these were 

1. What happens if the SLA is not met ?
2. Is my data as secure as it is in my current state ?
3. Can I move off to another Cloud if I don’t like something ? How easy is the transition going to be ?
4. As I upgrade internal systems, how do I ensure integration with the external systems does not break ?
5. What recourse do I have if the Cloud Service Provider goes bust ? ...

I will stop here, the list is a bit longer, but you get the point.

 

Business impact due to recent outages and security breaches for some of the smaller customers was significant. Some of them just had to wait and watch with no option. A few had spread the risk across and thus the impact was limited. The big enterprise shrugged and moved on. How does one balance the adverse business impact against the cost savings ? To me this is a bad compromise as everything is subservient to business interest.