ERP News

Users should stay grounded while ERP suppliers take to the cloud

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Enterprise resource planning (ERP) suppliers are in a difficult position. They have two masters to please – their customers and their investors – and the tension between these parties goes some way to explain their approach to cloud computing in recent years.

Suppliers of ERP software have heavily promoted the benefits of moving to the cloud with more standardised systems, while their customers, by and large, live with complex software portfolios, often customised to perform specific business processes.

While there are advantages customers can gain from the cloud computing model, suppliers are keen on the model because it benefits them too, says Christian Hestermann, Gartner research director.

“Suppliers no longer have to support multiple versions of the software. It is easier to support and that lowers costs. Do they give that as cost benefit back to the users? No,” he says.

Moreover, the subscription model can favour suppliers when compared with client access licences used to buy on-premise software. “This means the revenue and the margin is higher for the supplier, so the bottom line is higher when you charge for cloud software on subscription than software on-premise,” says Hestermann.

“Together, these are some of the reasons the investment community is so interested in suppliers adopting the cloud model.”

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