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Resistance to all-in cloud ERP systems is large

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For many enterprises, ERP and HCM deployments may take the path of hybrid deployments, a trend that is supported by Hewlett Packard Enterprise’s quarterly earnings results.

The big vendors’ hopes that users will go all-in on cloud platforms may not be realistic; a more likely outcome is the use of hybrid models. The latest evidence in support of this theory is Hewlett Packard Enterprise’s new earnings.

HPE, in its report last week for the quarter ending July 31, posted a 4% revenue gain that reportedly exceeded analyst expectations. HPE’s largest segment is its hybrid IT, which increased 3% to $6.2 billion. HPE has built its future around hybrid cloud systems optimized to move data between cloud and on-premises systems.

The results from HPE point to user interest in hybrid environments. But it also speaks to the resistance of users in moving to all-in cloud ERP systems or any core system.

For users, changing back-office systems, like human capital management (HCM), “for the sake of change is usually a nonstarter,” said Jim Pettit, chair of the International Association for Human Resource Information Management.

“It’s the total cost of ownership which will drive organizations,” Pettit said. “With these large, multifunctional HCM systems, the transition cost is very large,” he said.

Enterprises aren’t fired up about all-in cloud migrations

Organizations “really aren’t all that fired up about migrating core back-end apps to the cloud,” said Melanie Posey, analyst at 451 Research. It’s the time and expense involved that stops them. The number of enterprises with this view may be large.

IDC estimated that 70% of core applications run on traditional IT platforms, which include on-premises systems, as well as those in colocation facilities. Of the remainder, about 23% are in private cloud, and 8% are in public cloud. This initial estimate was made in 2017, but the IDC analyst who worked on this, Ashish Nadkarni, doesn’t believe these numbers have changed that much.

Oracle and SAP are working hard to convince users that they will get their best value from cloud ERP systems. But these sellers may be making it difficult for users along the way.

SAP, earlier this year, extended on-premises support for its HCM customers from 2025 to 2030. SAP said, at the time, that it had 14,000 on-premises users. But SAP’s support extension to 2030 means migrating to S/4HANA HCM. This has drawn criticism from users because this system won’t be available until 2023 and may be out of support in seven years.

Oracle was recently sued by a pension fund alleging that it misrepresented the growth in its cloud segment. The City of Sunrise Firefighters’ Pension Fund lawsuit also cited a Gartner report from May alleging that Oracle is using “high-pressure sales tactics,” including software audits, to put pressure on customers. “The suit has no merit, and Oracle will vigorously defend against these claims,” said Deborah Hellinger, an Oracle spokeswoman.

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Article Credit: TechTarget

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