ERP Upgrades: Love ‘Em or Leave ‘Em?

November 18, 2015 Alex Woodie

What is the value of an ERP system? At most companies that use them, the ERP suite is critical to daily functioning. Without a centralized place to run things like accounts payable and general ledger, the company simply couldn’t operate. But that line of reasoning does not appear to hold true when it comes to ERP upgrades, which companies are increasingly choosing not to perform.

A recent survey from Rimini Street shed some light on the situation surrounding ERP upgrades, specifically for Oracle customers. In its second-annual survey of Oracle customers around world, Rimini (which is a provider third-party maintenance and support for Oracle ERP and CRM customers) found that nearly half of Oracle licensees are running at least one version behind the latest application release.

A full 64 percent of the respondents said their existing on-premise Oracle apps meet their business needs, while 41 percent of them say upgrading would be too expensive, according to the study, which involved 443 current Oracle application customers. Rimini says 40 percent of the respondents were E-Business Suite users, 29 percent PeopleSoft users, 19 percent JD Edwards customers, 17 percent Siebel users.

To be sure, Rimini is no impartial observer here, as the company makes its living by selling maintenance and support services to Oracle customers that cost about half what Oracle charges. With the typical annual maintenance bill accounting for 22 percent of the initial ERP or CRM license, it’s safe to say that Rimini has taken tens of millions of dollars of support business away from Oracle. (The companies have also sued each other fairly extensively, but that’s another story.)

The study specifically calls out Fusion, Oracle’s next-generation ERP platform, as having a particularly rough row to hoe. According to Rimini, only 8 percent of the survey respondents were currently running Fusion, while 60 percent said they “see no strong business case” to migrate to Oracle’s Fusion or cloud applications. Slightly more, 62 percent, say high licensing and maintenance costs are the top reason why they’re not moving to Oracle Fusion or cloud. About 10 percent of the respondents are using one of Oracle’s cloud products.

David Rowe, senior VP and chief marketing officer for Rimini, says the survey results show that Oracle customers are happy with their existing ERP and CRM apps, and are looking elsewhere for apps that extend that core functionality. “IT decision makers no longer need to upgrade their ERP platforms to add new functionality such as mobility, analytics, social and digital capabilities,” he says.

This view meshes with the one held by Anthony Etzel, a solutions executive for Crossroads RMC, which provides manufacturing execution systems (MES) for customers running Infor MAPICS and BPCS environments. In Etzel’s view, the ERP innovation cycle has ebbed and flowed over the years, and is currently ebbing.

“I’ve been in this business before ERP packages even existed,” Etzel tells IT Jungle. “I was a programmer for manufacturing companies, and we wrote our own stuff. Then IBM created MAPICS and they were practically giving it away when you bought or leased a box, it was so cheap.”

ERP was the hot ticket to business automation in the mid to late 1990s, and it drove huge sales of servers and employed armies of implementation specialists. The ERP implementation cycle peaked around Y2K, and since then, as ERP matured, the amount of innovation has leveled off too.

“Over the past 30 years, ERP has improved,” Etzel says. “But there have been so many things added to it that there’s not much more you can do, except to modernize it, maybe tweak it here and there, or to make it more configurable based on the type of industry that you’re in.”

Much of the focus of ERP vendors like Oracle, Infor, and SAP historically has been on boosting front-office productivity, with snazzy iPhone interfaces and “social business” functions that let you track things in a Facebook-friendly way (“Where’s my #stapler?”).

That leaves room for companies like Crossroads RMC to innovate and improve back-office processes. “A lot of focus is given to financial software, all your accounting packages, your customer orders, your purchase order, your scheduling and planning–all those front-office people,” he says. “But when you talk about the shop floor, it’s become an orphan child in my opinion. How do we make it easier to deploy it to the floor and report back from the floor? That’s always been a neglected area, that’s why we’re successful with what we’ve done.”

ERP has had a great run, but it’s no longer the dominant force in the IT business that it once was. Much as the initial electrification of this country had a huge impact on daily life of Americans, ERP helped make American businesses more efficient. But ERP systems are stable today, business processes are automated, and businesses take ERP for granted. It’s become a cost center, not a profit center.

Instead, the game has shifted to the digitization of our lives, both business and personal, and that means businesses are competing to have the hottest website or mobile app, replete with big data-driven recommendations and personalization, all running in a super-scalable cloud fashion. In most cases, you can’t get that from an ERP upgrade.

ERP Investments Rising, Complexity Waits In The Shadows

Cloud ERP Deployments Declined In 2013, Panorama Says

Fear Or Freedom: IBM i ERP Upgrades

New ERP Installs Get Mixed Returns, Panorama Says

Manufacturing ERP Costs Remain High, Panorama Says

Cloud and SaaS ERP Surges, Along with Tier II Providers, Panorama Says

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Do the Math When Looking at IBM i Hosting for Cost Savings

COVID-19 has accelerated certain business trends that were already gaining strength prior to the start of the pandemic. E-commerce, telehealth, and video conferencing are some of the most obvious examples. One example that may not be as obvious to the general public but has a profound impact on business is the shift in strategy of IBM i infrastructure from traditional, on-premises environments to some form of remote configuration. These remote configurations and all of their variations are broadly referred to in the community as IBM i hosting.

“Hosting” in this context can mean different things to different people, and in general, hosting refers to one of two scenarios. In the first scenario, hosting can refer to a client owned machine that is housed in a co-location facility (commonly called a co-lo for short) where the data center provides traditional system administrator services, relieving the client of administrative and operational responsibilities. In the second scenario, hosting can refer to an MSP owned machine in which partition resources are provided to the client in an on-demand capacity. This scenario allows the client to completely outsource all aspects of Power Systems hardware and the IBM i operating system and database.

The scenario that is best for each business depends on a number of factors and is largely up for debate. In most cases, pursuing hosting purely as a cost saving strategy is a dead end. Furthermore, when you consider all of the costs associated with maintaining and IBM i environment, it is typically not a cost-effective option for the small to midsize market. The most cost-effective approach for these organizations is often a combination of a client owned and maintained system (either on-prem or in a co-lo) with cloud backup and disaster-recovery-as-a-service. Only in some cases of larger enterprise companies can a hosting strategy start to become a potentially cost-effective option.

However, cost savings is just one part of the story. As IBM i expertise becomes scarce and IT resources run tight, the only option for some firms may be to pursue hosting in some capacity. Whatever the driving force for pursing hosting may be, the key point is that it is not just simply an option for running your workload in a different location. There are many details to consider and it is to the best interest of the client to work with an experienced MSP in weighing the benefits and drawbacks of each option. As COVID-19 rolls on, time will tell if IBM i hosting strategies will follow the other strong business trends of the pandemic.

When we say do the math in the title above, it literally means that you need to do the math for your particular scenario. It is not about us doing the math for you, making a case for either staying on premises or for moving to the cloud. There is not one answer, but just different levels of cost to be reckoned which yield different answers. Most IBM i shops have fairly static workloads, at least measured against the larger mix of stuff on the public clouds of the world. How do you measure the value of controlling your own IT fate? That will only be fully recognized at the moment when it is sorely missed the most.

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Article featured in IT Jungle on April 5, 2021