Richard Thurston looks at the emergence of cloud computing and asks how this might affect ERP and systems integration

The emergence of comprehensive and often innovative cloud computing services is set to revolutionise the retail industry. Many retailers are evaluating if they should make the jump to cloud computing. Their investigations are being motivated by the many promised benefits, not least the ability to cut costs, improve information access and service delivery and replace capital expenditure with a predictable level of operational expenditure.

Increasing access bandwidth and a weighty proliferation of vendor offerings are increasing their interest. Market statistics reflect the optimism. Analyst firm IDC calculates that UK cloud services will grow from a £745 million market in 2009 to £3.31 billion in 2014, an increase of 344 per cent.

Many retailers have already migrated some of their applications to the cloud. Top of the list are applications like email, voice or CRM. But ERP (Enterprise Resource Planning) software has been a much lower priority. Why should this be? There are many reasons.

Firstly, ERP systems tend to have a long lifetime, and over this lifetime many implementations tend to have sprawled across an organisation. It is not uncommon for businesses - and their suppliers - to fall short of fully understanding their own ERP installations. The problem is compounded by new applications being added to support new business processes created over time. The result is often a large unwieldy and poorly understood system that cannot easily be moved en bloc to the cloud.

Secondly, ERP software is business-critical. Many executives do not trust the cloud and are keen not to move any business-critical applications there. They are concerned that information may be inadvertently shared with other companies, that compliance legislation might be breached, or that vital business information might not always be accessible.

Thirdly, cloud computing applications tend to be available on an off-the-shelf basis, which may not suit the highly customised nature of most retailers’ ERP requirements.

Fourthly - in contrast with other software areas - many vendors in this space have not developed strong cloud offerings. This is because they are worried that they may cannibalise their existing strong revenues from upfront licenses in return for a lower, recurring fee.

Fifthly, somewhat inevitably for the technology industry, there are numerous offerings of vapourware from vendors: rehashed and rebranded services that are badged as being a cloud computing ‘solution’, but which offer little different to hosted offerings of three or four years ago.

Asked how cloud computing is affecting ERP installations, David Bradshaw, research manager for Software-as-a-Service (SaaS) and cloud services at IDC, warns that its impact has been small. “Not that much at the moment, simply because the main players have been slow to move into the cloud,” he says, naming Oracle and SAP. “They are doing very well in their existing business.”

Bradshaw adds that many IT departments were struggling with the state of their existing ERP implementations, but were concerned with the prospect of migrating it to the cloud. “People tend to have customised them (their ERP systems) into the ground and take a lot of time running them. (But) they are very wary of putting it into the cloud in case it breaks.”

Retail is no different to other sectors in the level of adoption of cloud services, Bradshaw said, adding he had found no statistically significant result in his comparison of vertical markets.

Ken Parmalee, director of applications at Antenna Software, is also mildly pessimistic of the prospects for putting ERP into the cloud, saying the tight way ERP was integrated across most businesses’ systems would make it difficult to migrate. “There are so many dependencies. I haven’t seen (companies) taking the full system so far,” he says.

Opportunities for a piecemeal migration

But even though an all-encompassing migration of ERP to the cloud might be difficult for most retailers, it is possible to migrate individual applications to the
cloud, while leaving the bulk of the software on-premise.

PoS or distribution systems could easily be migrated to the cloud early on, argued Steve Farr, product manager for ERP at Microsoft. “We’re not saying you have to alter your whole business,” he says. “Look at those areas that are utilities, not core competencies. These are the first things to move to the cloud.”

Farr adds: “The easiest areas to see rapid ROI and increased functionality through the cloud have been through things like Exchange Online and Sharepoint Online.” Those two offerings form part of Microsoft’s Business Productivity Online Standard Suite, or BPOS, a cloud computing offering that the software giant is heavily promoting.

Nick Coleman, a fellow of the British Computer Society (BCS), takes a different tack, and argues that the migration of any application - ERP or otherwise - is heavily dependent on the nature of the business in question and its particular workloads. So while cloud computing might work for one retailer, it may currently make no sense for another.

Yet Coleman adds that for some businesses, the ERP system could yield efficiencies by being placed in a private cloud. “Cloud is real and a lot of companies are doing something about it,” he says. “Cloud will offer us great potential, but we must manage the risk. It’s a great way to manage efficiency and get the speed of deployment (of applications) up. For major organisations, there are a lot of benefits to putting ERP in a private cloud.”

Of course without support from the major vendors, migration of ERP to the cloud will be more difficult. Given the inherent complications of most implementations, retailers may wish to consider moving other applications to the cloud first.

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