This is probably the longest blog I’d ever post, because this one’s actually an assignment (or rather a part of it) which I thought would make an interesting read. The views expressed are my own; But I may not declare this as my stand as I was actually making points for just one side of the argument. Nonetheless, post your comments if you want to disagree.
Offering ERP as a service is indeed an impressive proposition and has its own set of advantages. With the service hosted by a third party, companies no longer need to wait for months or even weeks to see a working system. Not just the time for provisioning, the total cost of ownership also comes down to a great extent, as the hardware, software and the maintenance costs along with huge amounts spent on consulting and provisioning are all bundled up into the subscription costs that the consumers are well aware of in advance. Additionally, on a longer run, with a trusted third party vendor, scalability and reliability become less of a concern for growing businesses.
The advantages may be many; But the decision will be based on the answer to one pivotal question that a company has to answer- Can they trust an external private entity with such critical organizational data? As committed as the vendor may be to the security and confidentiality of customer data, it will be a huge leap for an organization, which is used to physically securing its servers and data centers with multiple layers of physical and network security, to decide to outsource critical systems that support functions like finance and accounting. Another equally important criterion that may drive this decision is whether the service supports the same level of customization as allowed by large ERP packages. It will be hard, if not impossible, for a generic ERP service to support the rich features and customizations, which are in most cases the reasons why businesses opt for the heavy and complex packages that come at a high price.
A hosted service model may be the best solution for small and in certain cases medium sized businesses that are looking for a minimal working system, at less cost, maintenance overheads and provisioning time. But the time when it can be looked at as a viable alternate to the sophisticated packages used by large enterprises is not very near.
What about SOA replacing ERP?
To look at SOA as a replacement for ERP packages is wrong at multiple levels. For starters, SOA is a software design paradigm while ERP refers to a specific software package. Bruce Richardson’s AMR research article predicted that traditional ERP packages would soon be replaced by loosely coupled applications built upon SOA principles. The reason for this is the general discontent among businesses in having to invest a lot of time, effort and money in customizing ERP applications to suit their needs. Therefore, an intuitive solution is to custom build all the required components individually on top of a basic ERP backbone. Doing so gives one the freedom of choice in deciding what their business needs and the flexibility to build it the way they want.
However, a solid ERP system still holds many points in its favor. Firstly, SOA components by no means are less complex or easier to implement than the customizations that are required on an ERP package. Hence claiming one as better than the other for enterprises, based on cost, time to provision, maintenance overheads, etc cannot hold true as a general thumb rule. Secondly, SOA may bestow the ability to easily interoperate between various components and the data backbone; But achieving end-to-end process integrity with a custom built SOA application is much tougher to achieve than a traditional ERP system, which is known for ensuring this.
Not that the major ERP players are unaware of the existing disadvantages in their systems. SAP for example has a clearly stated strategy of rearchitecting their application in order to support SOA. The current Enterprise SOA support addresses the financials primarily to be able to customize them for industry specific standards and their future release roadmap holds a lot of promise in this area.
Conclusion
Large ERP systems are here to stay; And for the good. Investment in ERP is a strategic decision driven by various factors. We may love to hate them for being huge, messy, expensive and time consuming. But no other alternative can offer the kind of business process integration and end-to-end visibility as a monolithic ERP system does as of today. The market landscape is evolving; Nonetheless large players like SAP and Oracle will be quick to adapt to trends: be it SaaS or SOA.
