Statistics show that ERP Cloud is getting more and more popular. As you'd expect, from R7 to R13, Oracle ERP Cloud has become a more mature and capable offering. Oracle also provides some compelling arguments around flexibility and costs. However, there are multiple components that make up the total investment picture for an ERP software solution. IT decision-makers should have a closer look at them before running to the cloud just because it's trendy!
Upfront Investment, Agility and Flexibility
The start-up costs of an ERP Cloud are lower than an on-premises system because with cloud computing you don't have to buy, deploy and maintain IT assets. It also cuts down on the number of skilled IT workers you need.
Businesses can enter into new markets, accommodate new customers and avoid compliance penalties, without being distracted by non-core operations such maintaining fully-utilized hardware and networking resources.
For young companies or new applications, this is a strong reason to choose an ERP Cloud.
However, these arguments are not necessarily as strong for companies that have invested in data centers and equipment that is already bolted into racks and partially depreciated.
If these infrastructures are used efficiently, it makes sense to stay with an on-premises ERP. As a matter of fact, many companies don't do big upgrades to existing systems that are functioning well and run with the adage, "Don't change unless it is broken (or unsupported!)."
The implementation tends to cost less and be quicker with cloud than traditional on-premises solutions.
ERP Cloud is configured instead of customized. During on-premises implementations, consultants spend most of the time gathering business needs, writing specifications and developing a customized solution.
However, with cloud, you start with the baseline product and configure to get closer to the user processes or help people move to new processes. The whole process is much quicker and requires less documentation.
Cloud implementations will get even quicker and smoother every year as integrators' knowledge grows.
On the other side, this lack of customization in the cloud is also a significant obstacle for many companies.
Cloud implementation requires stronger change management. Without the possibility to customize, end users will lose some functionality and will have to adjust to new operating procedures.
Using an agile methodology can help in the process. More iterations, demos and feedback will definitively result in better user acceptance and preparedness for the new ERP. It also means resource commitment is even more important for ERP Cloud implementations. The time required from internal team members should not be neglected and is an expensive cost during the implementation.
The second issue is when you have invested significant time and money in in-depth customizations, you think twice before throwing everything away.
Moreover, some companies are not just attached to their ERP customizations, these enhancements are actually critical to the business. They might also need some features that are not yet available in the cloud, especially in supply chain.
Integration of your third-party products might also be a challenge. It will be important to make sure they can communicate with ERP Cloud, especially the business-critical products.
Finally, some business data is simply too sensitive to go to the cloud as it stands currently.
As per a recent survey by IDG Communications, nearly 60 percent of IT decision makers believe apps that touch critical data and systems must remain on-premises for security reasons, while 42 percent say they can't migrate off legacy systems because they're mission-critical and have security policies barring them from using cloud apps for certain functions.
For these reasons, even companies going to the cloud will sometimes have to keep their old ERP alive for archive or functions not moving to the cloud, negating some of the hardware and infrastructure benefits of going to the cloud.
Oracle ERP Cloud has a nicer user interface, which means it will reduce time and costs for training and adoption.
It will be a blessing for people who come from an ERP with less functionalities or are new to ERPs.
However, the cloud will definitively be painful in the beginning for people who are used to E-Business Suite 11i or R12. Therefore, change management cost should be anticipated.
On-premises systems require companies to pay a lot more for utilities, repairs, replacements and maintenance.
ERP Cloud doesn't require much maintenance as it gets automatic patches and upgrades.However, annual fees result in higher long-term cost for licenses and support.
Companies who have already invested in on-premises equipment aren't actually likely to realize a cost-savings by moving to the cloud until it becomes time to replace their existing equipment.
With Oracle ERP Cloud, you will need a dedicated team of testers, as Oracle releases new updates on a fairly regular basis. These updates aren't quite "automatic," however Oracle pushes hard for them to be implemented. This isn't always a bad thing, apart from the extra functionality and bug fixes provided, you know that you are close to the latest and greatest version, removing the need for a full project team to perform a major upgrade.
In saying this, major upgrades for EBS do seem to be less of an issue with Oracle dropping a 12.3 version and instead releasing newer versions of 12.2.x.
Before choosing between cloud and on-premises ERP deployment, you need to look at the bigger picture. It might be the best fit for your company – or not.
This TCO calculator can help you analyze the total cost of ownership for on-premises or ERP Cloud and decide which one would be the best for you.
Good news for the companies that don't want to – or can't – move to the cloud: Oracle has reaffirmed commitment toward Oracle EBS customers this year at Oracle OpenWorld!
Finally, you can have your EBS instance hosted by a provider as a cloud application (PAAS), this option can provide many of the benefits of moving to a cloud instance, without having to implement a whole new ERP system.
Author: Aurelie Mazieres, More4Apps
Aurelie is a presales product strategist at More4Apps. This company develops automation and integration solutions that enable Oracle EBS users to easily upload and download their Oracle data via API's and interfaces. https://more4apps.com/