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Written by Natalie Moyce, Xledger UK
Since joining Xledger I have been learning about the customer journey for ERP Cloud buyers in the UK. What is cloud, then the whole host of on-premise hybrids that have ensued since cloud started to take off. What is a hosted solution? And what is a ‘true cloud’ solution?
This holy grail of cloud definitions is enough to put anyone off at the first hurdle. So let’s try to demystify and break down the complications and present the options here. While investment in cloud-based ERP systems more than doubled in 2016 (SelectHub.com), reaching £60bn in global software and services, the host of information (and noise) out there on cloud is confusing and even daunting to the uninitiated.
On-premise software is being left behind for newer cloud systems. Since the tide turned, some on-premise ERP sellers tried to prolong the life cycle of their products by disguising them as hybrid or hosted cloud solutions. This has confused today’s ERP buyers, complicating their customer journey – with a lot of hype and noise. What distinguishes private, public, and hybrid cloud? Is hybrid really the best of both worlds? What is a ‘hosted’ solution? What is a ‘true’ cloud-based solution? And which option is best for the average to complex business needs of a medium size organisation?
1. PRIVATE CLOUD
A private cloud is known as a single-tenant environment in which your company and no other lives in this space, has access control and maintains hardware. As a customer you will purchase your own licensed copy of the software. Post-purchase you use internal IT resources or hired consultants to upgrade and customise the software for your needs. Even though it lacks economy of scale and other cloud advantages, some clients choose private cloud because it affords them a greater sense of control over their data.
2. PUBLIC CLOUD
A public cloud is multi-tenant. This means your company subscribes to software access and space on an existing cloud server environment. Multi-tenant suppliers host multiple ‘virtual’ systems on the same physical machine. The public cloud operates like a utility, with each client paying for the resources they use. In the ERP market, public cloud systems offer increased flexibility, lower cost, quicker implementation, and the ability to scale capacity up and down based on your needs. This is true cloud.
According to Louis Columbus in his paper “Cloud ERP: Who’s winning and why“, the ERP market size is estimated to grow from $18.5bn (2016) to $29.84bn by 2021, at an estimated Compound Annual Growth Rate of 10.0%. Cloud ERP systems are now over 20% of all ERP systems sold and deployed based on the consensus estimates from industry analysis firms including Apps Run The World, IDC, Forrester, Gartner, and others. This figure is clearly growing fast.
3. HYBRID CLOUD
Hybrid cloud is an orchestration between local installation meets private and public cloud services. Hybrid sellers claim private and public clouds together provide greater flexibility and superior deployment options. They claim to supply modules at low cost and high benefit. According to them, the ability to disperse functions among environments makes the hybrid cloud ideal for varying degrees of sensitivity. Yet beneath this veneer what actually lurks?
In the hybrid model you could be less secure as your organisation must secure full API (Application Programming Interface) compatibility and robust network links. What this can mean though is connections using RAD (Rapid Application Development), a form of coding designed for speed at the expense of integrity, unity, and security.
According to Alert Logic’s 2017 Cloud Security Report, hybrid solutions draw many more security attacks than other ERP cloud platforms, saying hybrid cloud has suffered 141% more security incidents than the average customer running applications on public cloud platforms.
Haynes et al (Gartner 2013) warns of greater risk of fragmentation and value dilution in hybrid solutions and that clients risk making poorly informed strategic choices. A solution’s value for any specific customer hinges on the alignment between its business objectives and ERP strategy, an alignment which hybrid cloud is unlikely to facilitate. Hybrid solutions ground your core functions in the private cloud. Hybrid suppliers will not have the resources to update unique single-tenant structures in their hundreds or thousands.
4. HOSTED CLOUD
This gets confusing. This is on-premise products that sellers have pasted into private, third-party cloud.
When on-premise solutions near the end of their life cycle, their sellers at times attempt to ‘cloud-wash’ them. A third-party reseller agrees to ‘host’ the aging system in a single-tenant (private) cloud. Clients pay for all available resources which may be more than they actually use, and pay more whenever they exceed an upper limit. Hybrid sellers say this enables you to upgrade at your own pace. But you will have to write much of the code on your own – this will be expensive.
The model poses risks, from upgrades to integration. Hosted solutions might come through a provider like SAP, but that does not mean they have SAP’s security and durability behind them. Instead, you must rely on the reseller, one of hundreds of companies SAP has contracted to host its software. Each reseller has to spend substantial resources to keep hosted stacks running.
Clients of hosted cloud are often unable to upgrade and maintain heavily customised systems. The system does not scale with you, you and only you occupy it, and each instance requires a separate infrastructure. Furthermore, it is highly unlikely that this hosting can achieve the same level of security as the public cloud.
Why true (public) cloud ERP solutions suit ambitious organisations
True cloud is public and multi-tenant. Built from the ground up on a web-based platform within a shared cloud infrastructure. Private cloud solutions can’t really compete with the public cloud financially and operationally while hybrid providers struggle to marry the two. It doesn’t make sense to invest in private cloud or in solutions that contain it. Everything relating to a private cloud is less secure and more expensive.
What this means for the customer is you get a single instance of the given application, as it serves multiple clients, or tenants. In other words, all customers are on the same instance, or version, of the ERP application. If there is ever an error, bug or security issue in the system, the seller owns that problem and can fix it at once, in one place, and with the necessary security upgrade. All fixes will apply to all customers. Multi-tenancy also means that all customers run on the latest version of software.
Not all hosted software offerings are equal and there are some relative ‘fake’ clouds out there. Multi tenancy, public (true cloud) matters. Why not avoid painful product upgrades, costly integrations, customisations, downtime, inadequate security and support and expensive bills?
So yes. True Cloud ERP matters. Be wary of anything other than true cloud.
XLEDGER IS A TRUE CLOUD ERP OPTION
To learn more about Xledger, the most automated ERP solution on the market, contact our team of experts to see our solution in action or to find out more.
Thanks to Xledger Staff Writers Geir Tonnessen and Hudson Jungck in the USA for original source material used for the purposes of this blog to our UK audiences.