How Lock in Differs from On Premises ERP to Cloud ERP

Executive Summary

  • Cloud is thought to reduce locking. However ERP systems have very high lock in.
  • The question becomes what happens to ERP when it is cloud.

Introduction

On-premises software is the traditional enterprise software model where the software is taken by the implementing company after purchase and installed on the company’s servers, rather than the model where the software is “rented” and the software vendor hosts the software. The on-premises model is presently the dominant form of ERP software, and of course, has been since ERP was first introduced. However, many vendors provide SaaS or cloud-based ERP, and they use the term ERP even though their solutions are more limited in scope than on-premises ERP. This is not necessarily a bad thing, but it does confuse the issue somewhat when I want to use the term ERP; any number of SaaS-based ERP vendors could say that the conclusions in this book do not apply to them, and they would be right.

How the Lock In Level Differs

SaaS vendors don’t have the same ability to lock in customers as do on-premises vendors. They are still relatively new and do not have the same history as on-premises ERP solutions, so it cannot be expected that the research I will quote will apply to them. In addition, my project experience is 100 percent with on-premises solutions, so when it comes to SaaS ERP, I do not have the same personal experience upon which to draw. SaaS solutions currently represent about 4 percent of all enterprise software sales, but because the software is less expensive, this represents a higher percentage of “seats” served than this 4 percent value would indicate.

Conclusion

Oracle and SAP are examples of vendors that have historically offered on-premises ERP but which are now pushing cloud ERP. The concept of cloud is that the lock in is less, but many on-premises vendors only have experience with locking in customers. And if one looks at the ERP offerings of many vendors, they do not match cloud. Secondly, ERP systems are far more sticky than other types of applications like CRM. Therefore, cloud receives far fewer of the benefits from the supposed lower lock in of cloud systems.

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References

The Real Story on ERP

ERPThe Real Story Behind ERP: Separating Fiction From Reality

How This Book is Structured

This book combines a meta-analysis of all of the academic research on the benefits of ERP, coupled with on project experience.

ERP has had a remarkable impact on most companies that implemented it. Unplanned expenses for customization, failed implementations, integration, and applications to meet the business requirements that ERP could not–have added up to a higher Total Cost of Ownership for ERP were all unexpected, and account control, on the part of ERP vendors — is now a significant issue affecting IT performance.

Break the Bank for ERP?

Many companies that have broken the bank to implement ERP projects have seen their KPIs go down— but the question is why this is the case. Major consulting companies are some of the largest promoters of ERP systems, but given the massive profits they make on ERP implementations — can they be trusted to provide the real story on ERP? Probably not, however, written by the Managing Editor of SCM Focus, Shaun Snapp — an author with many years of experience with ERP system. A supply chain software expert and well known for providing authentic information on the topics he covers, you can trust this book to provide all the detail that no consulting firm will.

By reading this book you will:

  • Examine the high failure rates of ERP implementations.
  • Demystify the convincing arguments ERP vendors use to sell ERP.
  • See how ERP vendors take control of client accounts with ERP.
  • Understand why single-instance ERP is not typically feasible.
  • Calculate the total cost of ownership and return on investment for your ERP implementation.
  • Understand the alternatives to ERP.

Chapters

  • Chapter 1: Introduction to ERP Software
  • Chapter 2: The History of ERP
  • Chapter 3: Logical Fallacies and the Logics Used to Sell ERP
  • Chapter 4: The Best Practice Logic for ERP
  • Chapter 5: The Integration Benefits Logic for ERP
  • Chapter 6: Analyzing The Logic Used to Sell ERP
  • Chapter 7: The High TCO and Low ROI of ERP
  • Chapter 8: ERP and the Problem with Institutional Decision Making
  • Chapter 9: How ERP Creates Redundant Systems
  • Chapter 10: How ERP Distracts Companies from Implementing Better Functionality
  • Chapter 11: Alternatives to ERP or Adjusting the Current ERP System
  • Chapter 12: Conclusion