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Are cloud ERP systems cost effective if you're just buying a portion, like best of breed solutions?
Is there an advantage to moving just a portion of ERP to the cloud, like with a best of breed solution? Is it cost-effective? This question was asked during the Focus Webcast 'Executive Panel: How to Use Cloud-Based ERP to Unify Your Business'
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5 Answers
One of the most common examples of this is a "best of breed" web store, or CRM if the ERP system doesn't have one. The downside is the increased difficulty of integration, which applies to all best of breed solutions vs. a fully integrated suite. If the BOB solution is in the cloud, you usually have less control over integration than you would have in-house, but this is not always the case. It depends on the specific solutions. Not all of them are the same. There are lots of different cloud based BOB's, from SAAS to PAAS to IAAS approaches. Same thing regarding cost, you would have to compare the numbers. Its hard to generalize.
Okay, at the risk of sounding like I'm stuck in the back woods, I'm opposed to "cloud" versions of mission critical applications.
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It all depends on how you define "Cost Effective"
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If it is purely a matter of sheer dollars, then they probably are. However if you evaluate the risks you might want to consider some specialized type of insurance.
No matter how much hype is out there about the "cloud" apps being secure, etc., that is little more than a panacea. Banks and large, sophisticated corporations have techno-espionage done on them all the time. Several times a year we hear about thousands, tens of thousands, or even hundreds of thousands of credit cards or personal data records being stolen or compromised.
There are also constant rumors of banks being hacked into and then "blackmailed" into paying to keep it quiet. If the public perception of the security of their money, bank accounts, and the banks themselves were badly damaged it would be a disaster but it DOES happen. More often than they care to admit.
I just "LOVE" it when I see no notice or indication of fraud on my credit card account, and my card is nowhere near its expiration date, and suddenly I get a new credit card from my bank and my old one will soon be terminated.
The first major corporation that puts mission critical apps "in the cloud" and then has a huge "data spill" will be one to answer the question about whether the cost savings were offset by the risk.
Flexibility is critical in the arena of supply chain collaboration. In this particular area, a cloud-based or loosely coupled solution is advisable.
Even now, Japan is in the throes of their earthquake/tsunami and like the SARS event of China a few years back, suppliers who did not have closely-coupled / inward-only facing systems tend to find new suppliers much more easily. Manufacturers who need to switch suppliers from primary to their secondary even further down need to couple quickly. Closely coupled systems tend to take weeks if not months to be reconfigured, all the while hoping that their situation is temporary so they can return to their primary suppliers.
In summary, a completely monolithic internal system would not serve a large client well. In my opinion, suites give up feature sets to achieve a "common-look". Like office productivity suites, vendors don't use a common code set and have to cobble together systems to look like a common suite. Ergo, there is often little to distinguish a BOB (best of breed) solution from a monolithic one.
Bill, I have to disagree. I think you have to specify which cloud service you are talking about rather than making a generalization. Do you keep your money in your house or in your bank? Why should your information assets be different?
Okay, I could see low value, "commodity" type IT infrastructure outsourced into the "cloud." Just like I see low value, repetitive IT tasks, or "commodity" tasks as candidates for outsourcing.
However I believe there is a significant risk, not to mention that cost associated with that risk, for any mission critical app like an ERP system to be "out in the cloud."
How often do we see Microsoft issuing security patches. Recently, although without nearly as much press Linux has been subject to hacks and attacks. Not to mention Apple's mobile OS subject to PDF and other exploits.
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Linux and Apple users were known to "brag" about how bulletproof their apps were. That all changed as they began to gain in popularity and became targets. Just as the cloud evangelists today underestimate both the actual cost and the risk associated costs of the cloud.
Just wait, the holes and exploits will come as more and more companies adopt a "cloud" mentality.
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Check out this other Focus question related to the risks of the cloud. In spite of the techie / media hype there are plenty of detractors who are fully aware of the risks...
http://www.focus.com/questions/information-technology/what-is-a-good-reason-f...
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