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Tomorrow’s ERP cloud computing offers more than just SaaS

Alternative cloud computing models promise more deployment flexibility and collaboration benefits for ERP users.

Mention ERP cloud computing today, and many people will immediately picture a Software as a Service (SaaS) offering, the quick-win way to deliver an application’s capabilities without a lot of upfront cost.

It’s not surprising that SaaS commands so much mindshare. A study conducted by Kelton Research found that 68% of U.S. companies that have implemented clouds are SaaS users.

But analysts say that while “cloud” and “SaaS” may be synonymous to many organizations, this may change in coming years as other, more potent options become commonplace. Their advice: Take advantage of SaaS for manufacturing today if there’s a strong business case to be made, but make sure long-term cloud strategies also include Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and private-cloud models.

“I certainly see a trend where more and more companies will be buying a software license and then leveraging a [PaaS or IaaS] provider to run the application,” said Sandeep Walia, chief executive officer of Ignify Inc., a consulting firm and ERP implementer based in Cerritos, Calif. One reason is that by owning the licenses themselves, organizations can avoid the steep premiums sometimes charged by SaaS providers, Walia said.

More ERP cloud computing adopters might choose to avoid service providers altogether by building private clouds, according to Walia. With private clouds, they can continue to buy and maintain servers and software internally. But by taking advantage of virtualization technology, they can create “pools” of computing power that is shared throughout the company. This approach can reduce capital investments in physical servers and storage units by boosting hardware utilization rates. It also mitigates security concerns organizations may have about sending sensitive data outside their facilities. Some defense subcontractors are required to guarantee their data remains inside their home countries’ boundaries, Walia said.

The return of trading exchanges

In the years ahead, ERP cloud computing could also spur the return of trading exchanges, which were popular at the height of the e-commerce boom a decade ago.

Exchanges sought to streamline the interactions of buyers and sellers of everything from raw materials to finished components in the supply pipeline. But few of them were large enough to be sustainable, said Bob Parker, group vice president of research for IDC in Framingham, Mass. Cloud technology may be a game changer in part by making it economical for smaller, specialty exchanges to serve particular industry sectors instead of trying to accommodate the needs of every vertical in a single large marketplace.

Building ERP communities

One of the biggest cloud computing trends in the years ahead could be the rise of PaaS models and communities that sprout up around them. These “living, breathing systems” would consist of manufacturers, suppliers, customers, software developers and others whose common interests bond them in a professional community, said Matt Haller, principal at Chicago-based Baker Tilly, a consulting firm that helps manufacturers evaluate, customize and implement ERP systems.

The most extensive current example is a platform and community that are growing up around a leading sales-force automation application. But the model could work just as successfully for a popular ERP program. When a manufacturer entered a contract for ERP services, it would receive more than the core software. Developers who were dedicated to the platform would create plug-in modules and extensions exclusively for the application and make them available for purchase at the platform’s own app store. “You can put all those programs together in one cloud solution that’s made up of multiple vendors,” Haller said.

The common interests and close communication among community members could speed the rollout of new capabilities. “The pace of development is at an exponential scale compared to vendors of on-premise software,” he said.

Improved availability of new modules and features isn’t the only advantage. Because the platform would be built around a well-defined core application and set of interfaces, developers would know exactly what software “hooks” to write for. This eliminates the time and expense associated with the custom interfaces manufacturers often need to extend traditional applications. “Being able to connect to dozens of micro-capabilities all out there in the cloud is definitely where the industry is starting to go,” Haller said.

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