The Recently Declining Future of Cloud ERP

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Posted by: briansittley Comments: 0 0 Post Date: March 27, 2014

Cloud-ERP-GraphA recent article from Panorama Consulting  [link may require registration] points out that the adoption rate for so-called cloud-based ERP systems is declining at a rather precipitous rate.  According to Panorama’s just released “2014 ERP Report” the percent of cloud and Software-as-a-Service (SaaS) ERP adoptions declined by almost 50%, from 26% of all implementations in 2012 to just 15% in 2013.
Our pie chart above, courtesy of Panorama graphically displays the overwhelming continued prevalence of on-premise (traditional) based systems.
Frankly, we’re not surprised.  We’re actually more surprised by how seldom we’re even asked the question, let alone fielding serious prospect or customer inquiries.  As Panorama’s CEO Eric Kimberling himself pointed out in a recent article, “This data point also conflicts with the continuing industry hype proclaiming the death of on premise ERP and touting cloud and SaaS ERP as the greatest thing since sliced bread, so what could possibly explain the disconnect?”
Panorama’s conclusion in part is that many of the cloud ERP vendors have not done a very good job of promoting their offerings, or of reducing user fears about security issues, or perhaps of simply educating potential customers about their options.
We would add to that the fact that in many instances, there are serious drawbacks to cloud based systems when it comes to ERP.  Few vendors offer true multi-threaded, multi-tenant implementations.  Modifications are often difficult, if even possible.  Security fears still persist.  And in most companies we see – at least in the smaller to mid-size space — the promised cost savings don’t necessarily play out as well as expected on an amortized basis over a range of years.  Like most “choices” the one between on-premise and cloud, or SaaS, is neither simple nor one-sided.
The jury is still out as to the viability of these kinds of solutions.   Our own specialty areas which include manufacturing seem to our way of thinking thus far to be a rather poor fit for the highly customized requirements of many in the manufacturing sector.  When you add to that a dearth of options, limited customizability, and a lack of education or muddled marketing from vendors, it’s not hard to see why the blue section of the today’s chart (the so-called “traditional” model) is still the largest, and according to Panorama, apparently a still growing share of the pie.

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