Saying no to vendors' forced march to the cloud

You need to weigh up several criteria before you jump wholesale to the big vendors' SaaS propositions

If we ever needed a reminder, Oracle's investment in its cloud products emphasises how strategic the cloud is to the major tech vendors. This also has potential consequences for customers modernising their existing enterprise applications, as they are being advised that the SaaS cloud offerings of these vendors are the logical way to update these systems. However, enterprise customers should be wary of viewing it as a simple yes/no decision when deciding whether to move their ERP systems to their SaaS equivalent in the cloud.

There is a lot at stake. You may score points with your business leaders by being willing to embrace SaaS, but that warm glow will not last long if the outcome does more harm than good. Moving to the cloud is littered with lessons learned from over-ambitious ERP transformation projects which have had a direct impact negative on the bottom line - Under Armor and Haribo are just two examples from the last year or so. This year's Gartner Symposium in Barcelona presented a convincing argument, that there is another way. In the opening keynote Gartner analyst Val Sribar suggested that by 2021 three quarters of large global enterprises will implement a multi-cloud capable hybrid integration platform.

This approach enables organisations to avoid the risks of ‘big bang' implementations by staging the modernisation of their business applications. Creating a hybrid IT environment means that you can keep some applications internally deployed, lift and shift others to cloud hosting platforms, and move some to a SaaS environment for high-impact business transformation. Rather than relying on one vendor, moving to a multi-cloud model also minimises lock-in and increases choice, allowing enterprises to adopt those applications which offer the most value.

So, when your incumbent business applications provider comes knocking with a convincing argument for its SaaS platform why should you not succumb to the perceived benefits on offer? The simple answer is that you must weigh up several criteria before you jump wholesale to the big vendors' propositions.

Customisations and integrations

In our experience, Oracle and SAP suggest that when customers move to their version of SaaS they should adopt their definition of ‘best practice' in terms of application functionality and features. This means, though, that customers must often strip away the years of work on customisations and integrations in their existing internally deployed applications. Particularly with multi-tenant arrangements, customisations tend to be forbidden because they add complexity for the vendor or cloud service provider.

Product inequality

Connected to the point about customisations, the term ‘best practice' could also be a euphemism for ‘no differentiation'. You may be used to certain features in your internally deployed shop floor automation and supply chain management application, but there is no guarantee the SaaS version will necessarily have equivalent functionality. You also need to consider that over time your IT systems should evolve with the business. When you move to a SaaS platform you are reliant on your vendor both foreseeing these future requirements and being prepared to build them into their product roadmaps. If the priority is ‘best practice' then how will you guarantee your vendor will accommodate your requirements?

Control

SaaS is being sold to minimise the administrative and operational burden on your IT team, as you hand over responsibility for the management of your ERP applications to your SaaS provider. However, not only are you committing to the software and a technical architecture, but you are potentially giving the vendor control of your data, depending on the terms you sign up to. This leads to crucial questions. Can you download or export your data? Can you do so at will under your contract, or will you pay a surcharge to get access to your own data?

Also, with growing emphasis on the API economy, you will understandably want the freedom to integrate with the systems of your choice, even those of competing vendors. However, as the fallout from SAP's indirect licensing strategy has revealed, you must find out whether contract rules and surcharges will effectively restrict you to integrating with other products from the same vendor. Are you willing to bet the vendor's application is always the right answer for your organisation?

Consumption

When you move to a vendor's SaaS platform you should do so with your eyes wide open and a full understanding of the vendor's underlying business model.

In reality, you are abandoning the traditional perpetual software license you bought and essentially buying the software all over again on a continual annual basis. The model is driven by how much the vendor can get you to consume and there are a lot of considerations beyond the subscription cost. A survey looking at HR systems illustrated the point very clearly showing that once you take into account licensing, running and implementation costs, all sizes of organisation are paying more to use these applications provided as SaaS.

When you are evaluating your approach to SaaS it is important to remember that your ERP system is very much the ‘heart and soul' of your organisation. Making a wholesale switch to a vendor's SaaS ERP is akin to open heart surgery. Dramatic, complex and risky. Plus, the opportunity cost of open-heart surgery by moving to full SaaS ERP will steal from resources that could instead be strategically invested in SaaS that drives competitive advantage and growth.

Rather than take such drastic action I would recommend your organisation considers how it builds new muscles. By adopting a hybrid multi-cloud strategy, you have greater control over the modernisation of your business applications. For the highly customised systems such as HR, Payroll and Financials, which may not benefit from an immediate transition, you can choose to keep them internally deployed, lift and shift to the cloud, or outsource them altogether.

Moving them immediately may cause too much disruption as unpicking their complexity can outweigh the benefits of moving. You can take more time to plan and identify which applications will benefit from moving to SaaS, focusing on what will deliver the most value to the business. It may be that you choose the SaaS equivalents of your existing applications, but this approach is also an opportunity to explore the benefits of best-of-breed applications, which may come closer to replicating the customisations in your existing applications.

Ultimately, you should not be put on a forced march to SaaS platforms. Pick your spots and start taking advantage of SaaS technologies with the potential to make the greatest positive business impact. It's about taking a ‘business first' not a ‘cloud first' approach.

Mark Armstrong is GVP and EMEA GM at Rimini Street