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At the beginning of the decade, most CIOs would have laughed if you’d suggested they run their business-critical enterprise resource planning (ERP) systems on a public cloud platform.
But in terms of enterprise-grade services, security and reliability, the offerings of public infrastructure-as-a-service (IaaS) providers have matured significantly in the intervening years, chiefly led by Amazon Web Services (AWS).
And while the big ERP providers typically offer their own cloud hosting services, for an increasing number of customers, the public cloud route is looking ever more attractive.
Angela Eager, research director at UK IT analyst house TechMarket View, believes gaining the benefits of cloud ERP is not primarily about whether you chose private or public, but about ensuring that the cloud you choose allows you to attain new levels of flexibility.
“Simply lifting and shifting an ERP system to the cloud will rarely bring sufficient benefits, especially when the cost and disruption of migration is factored in,” says Eagre. “A cloud ERP system needs to provide something other than replication of on-premise functionality. The real benefits come from the flexibility, be that access without infrastructure and hardware costs, or access from locations where local IT resources are limited.
“Digital transformation piles on the pressure for rapid and continual change within enterprises, but it is a struggle to adapt traditional on-premise ERP solutions quickly enough. The use of a third-party maintenance provider can reduce the cost of operating a legacy ERP system, freeing up budget for investment in digital extensions, using APIs [application programming interfaces] or microservices, for example,” she says.
“There will be a limit as to how far legacy systems can be stretched, but modernising extensions can extend the life of an ERP system. One important aspect to consider when taking this route is the management overhead and availability of tools and expertise to juggle multiple add-on components, potentially from multiple suppliers and in-house development.”
The SME’s view: Tailored ERP from specialist supplier beats the major providers
While the major ERP providers may be making overtures to small and medium-sized enterprises (SMEs) with software as a service (SaaS), in many cases they remain off the radar. For a lot of SMEs, major ERP suppliers are a no-go area – cloud or no cloud.
GB Willbond is an expanding plumber’s merchant in the north of England, employing 90 people. Its IT manager, Colin Hollowood, says it would never consider one of the majors for its ERP, but has opted for Epicor BisTrack, a specialist cloud-based ERP tailored to the merchant business. This replaced an old Windows-based ERP system from another specialist in its industry.
“The merchant business has many nuances that are not well catered for in more generic ERP,” says Hollowood. “Attempting to tailor these solutions to fit is generally cost-prohibitive and the providers themselves are unfamiliar with the industry as whole.”
Willbond wanted to leave its existing hosted Windows system because it knew the platform would not allow it to move the business forward in the way it wanted. Epicor offered greater visibility of sales order processes and stock, a well-featured business intelligence platform and an integrated document management system to facilitate access to key documents across the business.
The new system is hosted by Epicor in a Telstra private cloud, and Hollowood says it is unlikely the firm would consider deploying ERP on public cloud infrastructure because it does not have the in-house expertise, and just needs access to the functionality it requires as simply, efficiently and effectively as possible. “The current system removes the burden of managing critical systems and infrastructure with the reassurance private cloud hosting brings,” he says. “It is secure, stable, reliable and resilient.”
Gavan Horton, global director of corporate operations at giant Dutch dairy cooperative Royal Friesland Campina, says: “Yes, the leading ERP providers can offer similar prices and have reserved and non-reserved instances, but they don’t have a mart where I can buy pre-machine instances, or an exchange where I can buy or sell unused reserved instances. It’s the services that have made me decide to walk to AWS.”
You might think SAP and the other big providers would be fighting tooth and nail to keep customers within their own ecosystem and woo them onto their own clouds, but in fact they have realised that it makes sense to maintain and grow their customer base by letting businesses use their platform of choice. And if customers decide they want to migrate off on-premise hardware and onto AWS, Microsoft Azure or Google Cloud Platform, then so be it.
While the big ERP providers may try to steer you towards their own cloud offerings (some more aggressively than others), they are equally not shy about trumpeting their products’ suitability for public cloud deployment. Some of their websites even feature prominent testimonials and case studies from customers that have successfully got their ERP systems up and running on public clouds.
One of SAP’s poster boys, for example, is Kellogg’s, which started a major migration to AWS more than three years ago, beginning with its SAP application environment in the Asia-Pacific region.
“We have seen improved reliability, improved performance and dramatically faster replication of environments,” says Salvador Millan, Kellogg’s vice-president of infrastructure and operations at the time of the migration.
But how difficult is such a migration, and how should you go about it? Royal Friesland Campina, which employs 22,000 people and has offices in 33 countries, began its SAP cloud journey only about 18 months ago.
“Dairy is a low-margin business and we have to return a lot of money to our farmers, so we were looking for ways to maximise efficiencies and reduce costs,” says Horton. “The first thing we did was to move across nine archive SAP systems to AWS, using a mothballing solution that allowed the archives to exist as storage systems. We only pay for storage, but can start them from an image and query the data. When we shut them down again, they remain in their original state. That’s generated savings of €205,000 a year.”
Now the organisation is working with specialist consultancy Lemongrass to move its core production systems – 144 servers in a five-tier environment – to AWS. “We have already moved across three tiers – development, testing and acceptance – which have been running successfully for a number of months,” says Horton.
“In January, we will move over our user acceptance and pre-production environments, so we should be broadly finished by February, bar a handful of smaller systems. We could move faster if we wanted, but we’re moving a system that’s part of an ongoing SAP deployment, which makes things a bit more complex – and stretching out the migration a bit to minimise some of the risks.”
Although the organisation has stuck with SAP applications, it didn’t want to migrate to the company’s Hana cloud. “We’re in the middle of a roll-out and we need to squeeze the asset we have now,” says Horton. “SAP gave us some pushback, but we were clear we’d only talk to them about Hana if they could match AWS on service and price – and in the end, they chose not to compete.”
Royal Friesland Campina has also decided to ditch its current Oracle database for Sybase. “It’s significantly cheaper and easier to manage,” says Horton. “Also, we don’t get very good customer service from Oracle when there’s a problem, so we’re using another specialist consultancy, Rimini Street, to cover the gap.”
Read more about cloud ERP
- Enterprise applications has evolved into silos of software systems. The cloud is now offering a different approach to ERP.
- While cloud-based enterprise resource planning applications are more widely adopted in the Asia-Pacific region, some companies are still hanging on to on-premise systems that remain core to their business.
Since moving to the cloud, Horton says the company has naturally graduated towards specialist consultancies to support the journey rather than rely on the big beasts such as Accenture, Wipro and Capgemini.
“One of the key things we see moving into the cloud is the real value we get from specialists in such a rapidly evolving area,” he says. “We find we get a much better response than we did working with the one-stop shops. The latter claim to be able to do everything, yet they have such a large staff turnover that it’s very difficult for them and us to keep track of things.
“By contrast, the specialists we’ve used will tell you if they can’t do something and recommend someone else. It’s like the difference between going to a local butcher and Tesco to buy your meat – and I think we’re going to see a real shift in the market.”