Like many of you, I have had a crazy busy year at work and am finally settled down at home with some downtime to reflect on the past and plan for the future. This has been another year of significant change in technology – perhaps even a watershed moment for those of us operating ERP software as mobile applications became a mainstream method of doing business, cloud computing changed the roles of IT departments once again, and big data became the key to competitive advantage.
The technology is exciting. And yet, at times, part of me has wanted to hold back on the changes sweeping the landscape. I grew up, a baby boomer child of a steel mill laborer / adjunct carpenter / adjunct car mechanic and a stay-at-home mom who were the original recyclers. They could find a way to re-use or fix anything. The spirit of innovation was alive and well as dad found new uses for our broken hair dryers, lamps, furniture, vacuum cleaners along with remnants of building projects, coffee grounds and newspaper. Mom and dad left this world indebted to no one and with a small inheritance for each of their five children.
So, as an aficionado of SAP Human Capital Management, I have been skeptical about the idea of ignoring the software we already own for another version of technology to be managed in “the cloud.” What could cloud-based software give me that my own shelf-ware from SAP could not give me?
As I have shared with Michael Krigsman and Greg Chase at the SAPPHIRE-ASUG annual conference and Bonnie Graham, on SAP Radio’s Coffee Break with Game Changers, I think the idea of the cloud is not so startling and impossible to justify as some might think. Haven’t we all been doing a lot
of things “in the cloud” for at least two decades? I mean, I used to have a set of Britannica Encyclopedias (you know, the actual physicalbooks – all 26 of them) setting on my bookshelf for my school research projects. But I get increasingly more authentic and up-to-the-minute data from applications in “the cloud” without the costs of having to replace or update my Britannica Encyclopedia book set. The data is just as good as – possibly even better than — my owned encyclopedia set. The ease with which I can retrieve and share the information is expedited. And the cost to me is nominal compared to the old set of encyclopedias.
I spent much of this past year exploring the option of cloud via SAP SuccessFactors for HCM Talent Management. And as 2012 draws to a close, I have an increasing appreciation for what cloud can offer the enterprise. What is less clear at this particular moment in time is a clear-cut value equation for cloud
over on-premise. The answer truly is, “it depends.” It depends much on each individual enterprise’s size, culture, balance sheet, business outlook, sales forecast, profit margin, existing technology, available resources, cost-benefit assessments, and strategy for funding technology. In other words: this is an individual choice, just as much as my parents’ frugality was their own lifestyle choice, choosing cloud versus on-premise should be an individual choice that the best consultants and SAP representatives will help each customer define.
For small to medium sized businesses, the value equation may clearly fall in the advantages of being able to access enterprise-worthy software at lower costs since the servers and development teams do not need to be in-house. For larger organizations, the value of cloud may be in a reduction in IT or business man-hours to develop and maintain a new system. This, of course, will hold only if the organization resists the urge to customize the cloud product, and it is not true for all organizations, many of whom have already downsized significantly and have precious few resources from which they can garner further savings.
In the case of SuccessFactors, of course, there is the question of how long SAP will continue to develop on-premise solutions, especially for Talent Management. The reality is that if a customer owns SAP ERP, they already own an HCM Talent Management solution that is viable for at least the next seven years. (The SAP Business Suite is supported thru 2020, at which time, it’s anyone’s guess what version of software SAP will put forth.) And seven years can be a lifetime in technology years.
So, is there a clear choice for cloud versus on-premise? My inner baby boomer says “why wouldn’t you use what you already own?” But the
technology geek in me wants to have my hands on the new stuff to see what it is and what it can do and what it can change for me personally, for business,
and for the world economy as we know it.
My expectation is that cloud software will sweep the business world just as ERP software led us all away from a myriad of software products used to run our businesses 20 years ago. When the tipping point is reached, organizations that did not seriously consider Cloud will be left scrambling to catch up.
At the same time, with finite dollars available to invest in technology, enterprises will be driven to shift investment dollars towards enabling technology
that will give them the most competitive edge, the greatest ROI and/or cost-effective efficiencies. I look at on-premise software that is already owned and say “why not?” And I see cloud as the next frontier we will all ride through eventually. One thing is certain: with so much new technology at the forefront, the choice of where to invest first will require a carefully planned IT strategy. And the time for that strategy is now.