ERP reconsidered: Is public cloud the only option?

Everyone knows that only public clouds can deliver the system flexibility and scalability a business needs, at a price point it can afford. Right? Not so fast. Recent technological improvements have revved up computing power and driven down operating costs. Is it time to take a second look at in-house ERP?

The drumbeat for cloud-adoption has become deafening in recent years. Internal sourcing is inefficient, unaffordable and, well, unnecessary — or so the conventional wisdom goes. Increasingly, however, the cloud-only drumbeat is not the only sound CIOs hear. Hardware vendors have dialed up computing power by turbocharging CPU, memory technologies and solid state storage. In doing so, they have made it possible for many IT organizations to run their current workloads, internally, with a lot less gear. Such improvements have breathed new life into the idea of running internal ERP systems — and led some to question if public clouds and external sourcing are, in fact, the only game in town.

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Generating compute power and storage is not my core competency.

I need economies of scale and flexibility. Why do I need to run the engine when I can subscribe the power?

By running new ERP engine technology internally, you can get more for less.

Running the systems engine in-house may now be affordable. Plus, it can offer capabilities you can’t source yet in cloud-based solutions. In fact, you may achieve more flexibility and agility than had before.

I need scalability.

Our company is growing, as is our IT service portfolio. Public clouds offer the kind of scalability we need at a price we can afford.

A private cloud can be economical and powerful.

Running critical applications from an internally managed private cloud can provide the scalability you need. It can also offer a higher degree of security and control.

Soon, everything will be offered in the cloud.

Even the big legacy system vendors are offering cloud-based products now.

Cloud offerings may not support a complex environment.

Emerging cloud-based ERP packages typically have limited capabilities. If you need mature, highly configurable business automation, you will likely not find a sufficient native cloud solution right now.

I’m waiting to upgrade my on-premise investment.

Why should I invest in internal systems if soon everything will be available in the cloud, at a lower price point?

Technology enhancements may have lowered the price tag for improving systems.

The new engine technology could lower the cost of refreshing infrastructure. How?  With upgrades, your current gear may be able to do three times as much work.

Candice Philbrick
Principal, Deloitte Consulting LLP

A point often overlooked in the hype surrounding the cloud is that currently many cloud-based offerings do not offer sufficient capabilities to meet the IT demands of most complex business environments. Younger companies or those with relatively simple business models may well be able to subscribe everything they need from a SaaS provider. Not so for larger, more complicated organizations. Many cloud-based offerings are in their infancy and do not yet possess the functional maturity these companies require. Moreover, it may be several years before they do.  As much as established companies may wish to turn over the mundane responsibilities of maintaining infrastructure, servers and storage to cloud-service providers so they focus more intently on app functionality and configuration, they can’t completely ? at least not yet.

This leaves some CIOs wondering if they should bother investing in on-premise legacy systems that may soon be replaced. Recently, hardware vendors have answered that question in a way that defies conventional wisdom about the inevitability of migrating to the cloud. These vendors have overhauled some traditional IT components ? high-performance CPU, advanced memory technologies, enhanced storage, among others ? to create more powerful system engines that use less power and cost less money. This has given ERP and other large enterprise systems ? those high-cost, complex tools that many companies would ideally like to source externally ? a new lease on life. The ability to pay less for a more powerful systems engine makes it possible to implement and support additional capabilities that deliver new levels of agility and innovation. If you thought you would have to settle for an evolving, cloud-based ERP package with limited functionality, think again. Fully mature, on-premise ERP is still a viable option.

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