The Cloud’s Future Is So Bright, So Why Are You So Glum?
August 17, 2022 Alex Woodie
It’s tough not to be excited about the cloud, that amalgamation of servers that Gartner says will account for half of enterprise IT spending by 2025. The cloud is where the action is; it’s where everyone is headed. So what’s holding you back? The cloud, it turns out, is not so rosy for those without a clear path to get there.
We’re in the steep part of the public cloud’s growth phase at the moment, thanks in part to COVID-19, which turbo-charged digital transformation projects, Gartner declared in a report earlier this year. The cloud’s growth comes at the expense of traditional IT, which is currently growing at a fraction of the rate (4 percent in 2022) that cloud is (17 percent).
The line separating enterprise IT spending in the cloud from on-prem will finally cross in 2025. That predicted event generated a warning from the Connecticut analyst firm: “Technology and service providers that fail to adapt to the pace of cloud shift face increasing risk of becoming obsolete or, at best, being relegated to low-growth markets,” Michael Warrilow, a research vice president at Gartner, said in the report.
Gartner in February predicted enterprise IT revenue in the cloud would surpass on-prem in three years.
Technology companies in the enterprise computing market have gotten that message loud and clear. ERP vendors like Oracle, SAP, and Infor are encouraging their customers to move to the cloud, and have been for years. Some ERP vendors, such as SAP, have even set end-of-support dates for older on-prem products in a bid to force customers to move to new cloud-based suites. Enhancements to older, on-prem products is being scaled back, if it hasn’t already been ended.
However, not everyone is embracing the new cloud-only world of enterprise computing. As the CEO of Doppio Group, a Chicago, Illinois based provider of services to Infor M3 customers, William C. Kragie ultimately is beholden to the consulting needs of his 60 or so clients, many of which are Windows-based M3 shops with a smattering of IBM i-based M3 customers located throughout North America.
Infor has strongly encouraged M3 customers (both Windows and IBM i) to move to the multi-tenant cloud offering that it launched several years ago. However, many of Doppio’s customers are reluctant to leave their working on-prem ERP systems and move to the cloud, Kragie says.
“They say ‘Move to the cloud! Move to the cloud!’ Well, there needs to be an interim step,” Kragie says. “By maintaining installation, administration and debugging skills in-house, we’re showing commitment to our long-term customers who have no immediate interest in moving to the cloud.”
The reasons that Doppio (pronounced “doh-peo,” meaning a double-shot of espresso) customers give for their objection to the cloud are varied. Two to three years ago, security considerations were a big impediment, Kragie says, but that resistance seems to have ebbed.
Some are skeptical of Infor, which developed a multi-tenant M3 offering several years ago to replace a single-tenant hosted solution introduced around 2013. “Folks were burned in the past by adopting products and deployments that are immature, so they don’t want to be a first mover,” Kragie says.
Kragie also sees personal reasons, including the lack of energy with late career IT professionals to embark upon an ERP migration project. “If you’ve spent decades implementing, enhancing, and supporting a homegrown system in your manufacturing business,” Kragie ponders. “How likely are you to want to rip it out and replace it before retiring from the company?”
Ownership is another factor. When company ownership changes more frequently than a typical ERP implementation project would take, then it’s easier for the current owners to pass on a long and potentially expensive transition to the cloud.
“A lot of our projects are spurred by M&A activity,” Kragie tells IT Jungle. “If you’re a private equity investor and you’re expecting ROI on a four-to-six-year timeframe, maybe there’ a business case to put in a digital solution and invest in ERP. On the flip side, maybe there’s a business case to maintain current systems as they are and shift the burden to support or modernize to someone else.”
The current hiring crunch provides another reason not to make a big move. One of Kragie’s largest customers, a Windows M3 shop in California, is manned by a “shrewd” CIO who has been at the helm for 20 years.
“If they can barely hire someone to show up in the office three to four days a week as a business analyst, are they really ready to staff up for application transformation project,” he asks. “They’re not.”
Yet another reason for not moving off a legacy ERP system and embracing the cloud will likely sound familiar to the IBM i installed base: highly customized code. While M3 was migrated off RPG many years ago, the same old problems are cropping up in the Java code that underlies M3 today.
Kragie has customers running modified M3 packages on-prem that still pay maintenance fees to Infor, for no apparent benefit, even though they’re running the latest release of the on-prem software from Infor.
“We’ve had two customers that have dropped their Infor managed services support agreement,” he says. “They say ‘Hey Doppio Group can you support this? Because every time we raise a ticket with Infor, their response is you’re not in the cloud, we can’t help you, and you have modified code.’”
All roads lead to cloud in 2022.
In some cases, the use of modified code compounds the problems over time, leading to being stuck on older releases of the operating system and ultimately older hardware. Finding a path forward for these types of companies is providing exceedingly difficult — sometimes leading his customers to go on the hunt for used servers of a certain vintage — but Kragie is determined to find a way.
“The gap that I’m not currently able to fill as a service provider is, we understand you want to upgrade your version and upgrade the application you’re running. But what’s becoming a limitation now is, they don’t have a clear upgrade path even with the on-premise software,” he says. “It also appears to me . . . they’re lacking the ability to upgrade their hardware.”
Kragie is open to potential partnerships with companies in the IBM i and M3 ecosystems to find a solution that helps his customers move forward. The cloud certainly doesn’t solve his customers’ problems, and the current fragmentation in professional services resources makes it difficult to keep the software running on-prem.
“We’re seeing Infor really drop the ball in terms of covering those customers, therefore these support opportunities flow to us as the de-facto M3 technology experts,” Kragie says. “A lot of these customers will continue running their on-premises systems for two to five years and rely on their relationships with independent consultants to do successfully.”
Infor M3 users are not the only ERP customers facing these types of decisions. Nearly every major ERP software vendor now has a cloud version of their software that they’re selling subscriptions to. For customers that prefer change to come slowly and methodically, the accelerated journey to the cloud is proving to be a bumpy ride.
The question is: What motivation do ERP vendors have to smooth things out for startled passengers?
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