ERP vendors are very keen for their customers to move to the cloud. Both Oracle and SAP are limiting their innovations to their SaaS services, while making their on-premise solutions less-enticing to their customers. SAP has gone a step further and set a deadline of 2025 for its on-premise customers: no more support for those not using S/4HANA.
Why are they so keen? A number of reasons, some selfish, some not. Moving their customers to the cloud can mean moving to an in-memory solution that will be much faster, and any updates will be applied automatically, keeping customers secure. But at the same time, it means higher and more predictable revenues as customers pay regularly for their use of SaaS. It also means customers that used to be able to use third-party support have to move back to official channels, and the additional costs that involves.
Efforts to convince customers to move from on-premise ERP to the cloud have not proved to be completely successful. SAP has already moved its deadline as it was proving unrealistic to many of its customers, and Oracle no longer reports its cloud revenue separately, making it tricky to tell just how well it’s doing in convincing its customers to make the leap to SaaS.
This isn’t entirely surprising. Shifting ERP to the cloud has its benefits, but it’s expensive and time-consuming. It can also mean losing a great deal of flexibility, including bespoke software and specialist support. So is it possible to keep this flexibility while moving to the cloud, or are the two incompatible?
What you want vs what the vendor wants
The path that a vendor will lay out to the cloud will be the one that they would prefer. It’s also the “easiest”, or at least is regarded as such: to move to vendor cloud. As the most profitable set up for the vendor—they make money for both the ERP and the cloud infrastructure—it’s what organisations will be steered towards.
But there are other options beyond the default of vendor cloud. Both Oracle’s Fusion and SAP’s S/4HANA can be installed on private cloud infrastructure—something that may actually be necessary thanks to regulatory demands. Multi-tenant cloud might actually be impossible thanks to the sensitivity of data.
When planning a cloud migration, it’s important to keep at the top of mind at all times what’s best for the organisation. ERP vendors, particularly Oracle, incentivise their cloud offerings and bundle them to create tempting deals. But moving to the cloud can take years, often far longer than expected. Systems have to be moved in an order than makes sense, integrated with other systems, and lots of iterative work. We’ve seen cloud migrations that were initially planned to take just one year, slip by two years.
If public cloud is the best option, even then it’s not necessary to choose vendor cloud. Oracle was actually pretty late to launch its cloud product, and it’s more common to move to Amazon AWS.
Cloud migration of ERP can mean better security, better performance, better analytics, and make remote access. But all of these must be balanced against what can be lost.
Once migrated to a vendor cloud solution, it can be very difficult to move away. We’ve seen instances of an organisation being given zero support beyond what was absolutely necessary when the decisions were made to move from vendor cloud to Amazon AWS. The organisation had to do all the heavy lifting while the ERP vendor claimed that it couldn’t help without giving away proprietary information.
But potential problems go beyond vendor lock-in. It’s not uncommon for organisations to run modified ERP systems that meet their exact needs. Moving to a SaaS solution means losing these modifications and settling for a one-size-fits-all solution. Vendor cloud solutions also make it impossible to use third-party support that may understand your organisation and offer a better service at a better price. Vendor cloud means opting in to everything that the vendor offers.
The key consideration is balancing what could be gained by SaaS, against instead taking current on-premise software and moving it to the cloud. ERP software is not known for its great leaps in innovation, and security can be handled through virtual rather than official patches. If a business decides to stay with the current iteration of its ERP software, will anything be lost?
One of the biggest advantages of moving to the cloud is that it is a flexible technology, but in moving to ERP vendor cloud, a great deal of business flexibility can be lost as options as closed off. By taking the path of least resistance, the advantages of moving to the cloud may be completely overshadowed by what’s lost.