March 29, 2017 | Kurt Moydell | Vice President, Sales – Americas
My answer is no . . . but here’s a little background on the question and my thoughts on the matter.
I work to stay in tune with Oracle and SAP cloud ERP strategies. Vendor roadmaps are a frequent topic of conversation amongst Spinnaker Support’s customers and prospects alike. The savings third-party support offers is extremely appealing, but no one wants to miss out on “the next big thing”, which today is “cloud ERP”. Like everyone else in our industry we all agree the “cloud ERP” is inevitable, so the discussion focuses on when and how to make the shift, not if.
If one listened to Oracle and SAP you would hear, do it now. The problem is, of course, neither SAP or Oracle cloud ERP solutions are mature or proven. For example, there are very few customer testimonials regarding successful implementations across Oracle ERP product offerings. Per Gartner, about 90 percent of organizations rolling out “post-modern ERP” will succumb to the traditional ERP headaches of higher costs, greater complexity, and failed cloud integration by 2018. You should be asking yourself, “why now?”
Oracle’s push to convert its on-premise ERP customers into Oracle Cloud solutions has ratcheted up over the past 18 months. But, while reading a recent article on Oracle’s cloud progress entitled “Oracle Cloud World – SaaS momentum continues” (Den Howlett, Diginomica.com, January 27, 2017), I was once again struck by the incongruity between Oracle’s trumpeting of rapid cloud adoption rates versus the hard evidence that I hear and see while conducting everyday business.
What Oracle Says
It’s understood that SAP and Oracle need to protect their highly profitable customers and therefore put highly optimistic spin on cloud ERP solution maturity and adoption rates. As an example, Oracle’s website marketing copy says, “A modern cloud suite provides complete software for your entire business so that you can subscribe to certain SaaS applications as needed, such as: accounting, HR, procurement, project management, service, sales management, marketing, transportation management, and supply chain.” They go on to use the word “complete” when further describing their solution.
Industry Experts’ Takeaways
Oracle can’t get away with such spin when speaking to industry experts. As the Diginomica.com article highlights, Oracle’s vision of SaaS ERP is yet to be realized, slowing their SaaS adoption rate. To build excitement (and sales) Oracle speaks in the context of growth, 50% year-over-year sounds impressive. But when viewed as a percentage of total customer base, Oracle’s 13,000 SaaS customers comprise just 3% of its massive 240,000 customer base. In a 2016 Diginomica.com article, Oracle CEO Mark Hurd shared similar SaaS customer statistics (11,000 – reported March 16, 2016) and provided an insightful statistic on Oracle’s Cloud ERP customer base pegging it at 1.6% (1,800) of its applications customer base. Hardly a compelling adoption rate.
What is Oracle to do? Oracle needs to protect its base and get customers bought (or locked) into its cloud vision.
Oracle’s Current Cloud Offering
A common strategy to lock in customers with on-premise ERP licenses is to push the false cloud, a.k.a. Oracle’s Applications Managed Cloud Service. This “solution” lets you choose the deployment model that’s best for your business and your budget. Oracle will manage your applications (i.e. on-premise licenses) onsite, through Oracle’s partners, or at one of its data centers. Oracle says you can also choose a hybrid model for different elements of your IT environment.
My first thought is this: Oracle’s Application Managed Cloud fails to meet the popular definition of a true cloud solution, even Oracle’s. My second thought is, one could achieve this same “cloud” state by moving the on-premise license set to a best-in-class hosting and managed services provider and achieve greater cost saving without lock in.
How Spinnaker Support Can Help You on Your Journey to the Cloud
“Although it appears the cloud is everywhere today, the fact is that the overwhelming majority of companies are still in the early stages of their journeys to cloud.” Steve Daheb, Senior Vice President, Oracle Cloud PaaS and IaaS
As you embark on this journey, innovations in traditional on-premise software will diminish (they already are) as SAP and Oracle invest in their cloud visions. SAP is not investing in enhancements for ECC6, and Oracle has not scheduled any new major releases for JD Edwards, as easy examples.
As companies look to put more of the application infrastructure into the public cloud, many of the objectives of lower costs, faster time to deploy, and better scalability to respond to business demands are not being met. You will see a much greater shift over the next few years as companies try to balance simplifying their integrations and IT infrastructure from on-premise to cloud based integrations, in some form of a hybrid model.
I recommend that company’s running SAP or Oracle should consider third-party maintenance and support services from Spinnaker Support as a viable alternative to SAP and Oracle software support while planning and executing cloud migration strategies. Our third-party support delivers superior service at a fraction of the cost. The direct savings, averaging 62% over OEM annual support fee, should be invested in an innovation fund and utilized to move a company down its own path to best-of-class cloud solutions as they mature.
Leverage third-party software support and maintenance to fund and accelerate your cloud vision!