Cloud ERP is the next big thing in the cloud

Sharon Florentine | Cloud Computing

The Cloud ERP (enterprise resource planning) landscape is expanding, and competition is heating up. Back in July 2012, Web-based business software provider NetSuite’s Q2 revenue and earnings numbers were the first indicators of a growing trend in the Cloud ERP space.

As Ben Kepes reported in the Cloud Ave blog, NetSuite’s subscription and support revenues were $61 million, a 27 percent increase of Q2 2011. And NetSuite’s cash flow from operations was up 80 percent year-over-year to $15.2 million.

Don’t yawn – yes, earnings reports in and of themselves aren’t exactly riveting. But as Kepes said, the trend that these numbers indicate signals a very important shift in the ERP space.

Enterprise software isn’t “sexy,” but it continues to be a growth sector year-over-year, he said, because it’s directly monetisable – enterprise software companies deliver a service customers are very willing to pay for.

Couple it with the cost-saving, productivity-enhancing and efficiency-creating properties of the cloud, and it’s no surprise ERP in the cloud is becoming the next frontier for many enterprise software providers.

Brian Sommer, CEO TechVentive and research analyst with Vital Analysis, notes in his blog for ZDnet that there are a number of new developments and up-and-coming players emerging which point to a more competitive ERP landscape.

Sommer offers detailed run-downs of well-known players (Microsoft, SAP, NetSuite) and new start-ups (Kenandy, RootStock, Infor, Workday, to name a few), but what’s most interesting is his analysis of what this reinvigoration of the ERP landscape means.

Sommer believes that many of the “new guard” players may likely disrupt the leader board for ERP software. He recommends that, if your firm is selecting software from the same, ten-year-old short list, you might be making a mistake; it would be wise to investigate and consider a few of the new arrivals, he said.

Sommer hints that your chosen integrator might not be pleased with your choice to move ERP to the cloud. “Cloud ERP products don’t take anywhere near the time or cost to implement as on-premise apps. Integrators hate this reality,” Sommer said, but customers don’t.

Expect some resistance and some hard selling from integrators used to the lengthy, lucrative contracts required by traditional ERP solutions.

That said, Sommer admits that some of the newer cloud ERP solutions aren’t as ‘battle tested’ as many legacy applications. He recommends checking out a vendor’s PaaS, which may offer a deep, rich ecosystem of other products that serve up data, programmer communities, databases and apps to round out any functional holes in the solution.

On the other hand, avoid new solutions that simply mimic the functionality of older generation products.

Old ERP was designed when everything was constrained: bandwidth, disk storage, processing speed, CPU availability, disk storage, etc., Sommer said. For today’s needs, new solutions should look actions, inventory, etc. of external entities like suppliers, governments, customers, etc. — rather than just accounting transactions.

The new solutions should have been designed from the onset as externally aware and strategically (not just operationally) excellent. Get the best business thinking built-into a new solution (not old thinking in new code).

While ERP isn’t new by any stretch of the imagination, there’s certainly a shift happening in the landscape. And even though many ERP solutions have been available on the cloud in hosted or hybrid modes for a few years, it seems the next twelve to eighteen months could spark a new era of innovation in the space.

Lots of competition fuels innovation and choice for the buyer, Sommer said, and can offer you increased leverage as you negotiate with your current and future ERP provider.