Over the past decade or so, ERP became part of the fabric of big business and increasingly permeated the small to medium business sector. As such, ERP became part of the plumbing of business, with tentacles reaching into every facet of operations. In short, an inside-out kind of approach. That was then, when every company had its own centralised computer systems and staff consuming significant resources.
Today, every company wants to mitigate costs without compromising quality, and is looking at the cloud. At this roundtable, we investigate how major ERP vendors are incorporating cloud-based thinking into their existing product lines and adjusting their pricing policies to be more in tune with the new computing reality.
We also assess vendor strategies for embracing mobility in the form of smartphones and tablets, and ask one of the key questions: how far are South African companies from a reality in which ERP as a service is the norm rather than the exception?
For Simon Griffiths, product and industry marketing consultant at Syspro, businesses operating in Africa have been slow to embrace cloud technology, which he positions as a prerequisite to procuring ERP as a service. But, he says, it’s beginning now and his company has seen a number of multinational customers looking seriously at the cloud.
“Any customer willing to accept a preconfigured solution with limited adaptability can use a cloud offering to its advantage.”
Johan Hanekom, business unit manager for ERP at Datacentrix, makes a good point when he suggests that large multinationals would probably choose to implement private cloud technology rather than what he calls “a true cloud offering”.
Lise Hagen, research manager: software & IT services, Africa at IDC, asks about software implications: “We have the delivery implication software around the private cloud, public cloud, etc. What’s the software implication? Do we have to reject what we have already? Do we have to rewrite [it]?”
ERP in the cloud
She refers to the fact that extending ERP software to the cloud, particularly the public cloud, is, by definition, extending access to a wide range of potentially highly disruptive mobile devices. This has serious implications for the basic software design.
Griffiths says Syspro has tackled this challenge by considering it a two-part equation: server and client. On the server side, the company has, he explains, restricted itself to a private cloud-type platform. The client side is more complicated, adds Griffiths, and must be easy to use and deploy, and must support the whole gamut of mobile devices.
However, Reg Barry, executive for projects at UCS Solutions, suspects that the major ERP vendors would prefer not to change the core software, rather using add-ons to enable access via the cloud. He expects ERP in a cloud to be targeted more at the SME environment, which he says hasn’t really taken off in South Africa as yet.
Any customer willing to accept a preconfigured solution with limited adaptability can use a cloud offering to its advantage, adds Barry.
He explains that conventional ERP products are capable of supporting a widely diverse range of businesses, whether they’re manufacturing airplanes or managing hospitals, for example. “It’s widely deployable, but it’s like cement: once you configure it for one specific industry, it can only work in that area,” says Barry.
Jeremy Waterman, MD of Sage ERP Africa & Middle East, agrees to an extent and notes that the core of any ERP system is fairly standard. However, he asserts that there are very few companies that do not regard their IT as a competitive edge.
“Now, if your IT is a competitive edge, by definition it can’t be the same [as that of a competitor],” he says.
A different model
According to Rudie Raath, chief technologist and country pre-sales manager, HP Enterprise Group, large ERP vendors lately have come to realise that ERP itself has changed with the advent of cloud technology. “It’s not about the ERP package anymore; it’s not about the label that’s on it; it’s about what the user can consume from that ERP package and the business decisions that can be impacted by it,” he comments.
Waterman brings the discussion back down to earth: “Everybody understands it’s a big opportunity for cloud. Unfortunately, it’s about 10% of the revenue now; you can’t switch and say, ‘let’s put all our money on the cloud’, because 90% of your revenue is coming out of the existing system. Secondly, the existing system has probably cost you a million man hours to make; you can’t rewrite it.”
Ian Huntly, MD of Rifle-Shot Performance Holdings, notes that many large organisations are embracing cloud, but in a piecemeal kind of way. “We’ve got several deployed now, but what they’re all doing is mixing and matching [ad-ons to their core ERP systems],” he says.
Daniel Hall, VP of sales and marketing at Magic Software SA, appears to agree when he says an ERP system may not have all the functionality a customer requires, in which case they may go for a best-of-breed third-party application and create an interface between the two systems to get them to talk to each other. “Putting it into the cloud doesn’t necessarily do away with that problem, because now you’re sitting with a cloud-based situation,” he says, the implication being that it too needs to be integrated into the core ERP system.
“And when you go mobile, it’s even worse,” he adds.
Hall contends that many ERP vendors announce plans to mobilise their applications and what they really do is simply provide some screens to users to allow them to carry out some tasks or work in a certain way. The problem, he explains, is that it takes away the process-centred view and only provides a small window into the ERP application rather than a big-picture understanding of the business process involved.
An integrated solution
Griffiths says he has never seen a company with only one system or application. “There are always multiple packages, especially in a manufacturing and distribution environment, and there’s always been an issue of integration. The thing about ‘on-premises’ is that it’s been easier to do than integration,” he comments.
One of the problems in the cloud, he adds, is to integrate the cloud-based software with on-premises software. “So this thing about everyone being able to go all on cloud is not just the issue of cost; it’s other things as well,” says Griffiths.
This is particularly true of vertical industries such as mining. According to Lizelle Pauw, project director at Barnstone Corporate Services, non-mission-focused systems such as ERP are very often an afterthought and grudge purchase, particularly among the newer entrants into the industry.
“Everybody understands it’s a big opportunity for cloud. Unfortunately, it’s about 10% of the revenue now.”
On the plus side, she says cloud-based solutions are welcomed for a variety of reasons, primarily because they don’t require enormous capital expenditure and do not require a massive footprint on site. “They don’t know what’s cloud… they just don’t want to see it standing on their site; they don’t want to report it, they don’t want to maintain it, they don’t even want to know about it,” she says.
Raath agrees, noting that many customers want vanilla solutions that simply work. “They don’t want to know how it works at the back-end; they just want it in a functional way, and that’s where the ecosystem of partners makes a difference,” he says.
“We lack that in South Africa. We want to sell them as much as possible upfront. You know, we’re going to sell you lots of capacity, you’re going to definitely use it in five years,” adds Raath.
He contends that local solution providers should be prepared to invest in their customers, developing their product offering to deliver services much like mobile network operators have done all over Africa. “We can learn from what they’ve done to grow their market share,” he says.
By Brian Bakker, journalist.
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