A recent prediction by Gartner that most Cloud ERP Systems are doomed for failure by 2018 has stirred a hornet’s nest.

Gartner: Most cloud ERP systems are doomed to fail by 2018

There are angry reactions from Cloud evangelists for obvious reasons. They are outraged. But, it’s not the first time that IT industry’s obsessive ideas might bite the dust.

Recall the first dot.com bust. Naysayers like this author always wondered how could the so-called ‘eyeballs’ result in revenue unless there is a value proposition or physical delivery of goods and services.

Think deeply about highly inflated valuations riding on new age dot.coms viz. e-commerce companies that are basically dot.com integrated with brick & mortar. The e-commerce model is the model of present and future. But, is the overhyped excitement of venture capitalists and valuation justified? Just like Yahoo, we are bound to see these valuations become realistic as some more big names turn turtle or give up the fight by selling off. Is betting investor money on imagined profit for years a good proposition? We need to see through the mystical screen of IT marketing geniuses.

Cloud is a great idea. It’s the future, its green, its money saving and a great leveller. IaaS and PaaS will survive and grow in a big way as Gartner has recently predicted.  (Read Here)

Similarly,the cloud model for Software-as-a-Service is a wonderful idea that is gaining momentum in a big way. However, can we really deliver a complex industry solution on cloud and is the customer buying into it?

A host of companies are evangelising for ERP on Cloud. It didn’t start now. It began much earlier. I know of many such histories, beginning with our own ‘Makess-on-the-Net’ offering followed by other biggies like Oracle and SAP.  With better technologies we saw the advent of truly Cloud based Cloud ERP's like NetSuite, Open ERP, India’s own Ramco and Tata Ion. But, are they really successful? Are they making money? Or are they surviving on investor’s confidence who is putting his money on these offerings? I doubt.  People treat ERP on Cloud as we taste ice cream, then walk out. As of now, trickle in is higher than trickle out. Can such numbers help ERP as cloud survive?

Talking to clients we find the issues that bother them about ERP as cloud, we find a few mind blocks or fears – 1. Securityandconfidentiality. 2. Doubts about getting a complex system like ERP configured to their requirements on a multi-tenancy model of cloud.  3. Customization as per their business process, in case the standard ERP doesn’t provide such a functionality. 4. Integration with third party software or tools.

While the first point about security and confidentiality is being tackled by vendors by sharing how they secure a client, real life experience of multi-tenancy model of possible hacking scares the prospective clients. You will, therefore, find no middle or large industry going for ERP on Cloud as cloud. Even smaller organizationswhich are too worried about their innovative products or products that thrive on confidential recipes, etc. are wary of this issue.

The secondpoint of configuring acomplex software like ERP that works across the entire organization is a serious issue. Users who walk out of cloud do so because they find limitations in using as-is-where-is ERP Solutions. Supposed help for complex configuration is either remote or very costly.

Request for customization is generally negated, rightly so, by Cloud vendors as they never promised it. For a cloud vendor with hundreds of clients sharing the same software, providing client-specific customization is a serious problem. A client gets customization as and when the vendor introduces it and as per its schedules.

A new trend of using different software and equipments with best for operations of an organization is catching up. For on-premise implementation, System Integrators and ERP vendors provide interfaces. Clients expect that the Cloudvendor will also provide such an interface, but it doesn’t generally happen.

SaaS is fine for limited functionality or areas where industry works on similar processes, say Sales Force Automation. But, ERP doesn’t fit into this kind of operation.

So, what is the alternative? How does client take advantage of new Cloud technology but still be in control of his ERP implementation and usage? Eastern Software Systems (ESS) has provided an answer by implementing for individual clients and co-hosting its ERP System on private cloud. This hybrid approach has appealed to the client and this is the option that will slowly pick up.  And, we may find that ERP on Cloud may still survive despite the dire warning of Gartner.

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