Business Issues, Cloud

Announcing the death of traditional ERP, shared services, and the owned datacenter?

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Several years ago, I decided to earn a second Master’s degree in strategic planning from the University of Southern California. One of the things we studied was futures research. In futures research, sometimes you try to determine where things are going by scouring the points that fall off the curve.

For me, I wanted to know what IT would like five years into the future. So I asked around and found a leading-edge organization to talk to. And I went to their architects. You know these folks; they are responsible for the current state and future state of IT. I started my questioning by asking, “What do you believe you will be buying in the future?” Instead of responding “servers, storage and networking equipment,” they said that they wanted to buy “IT.”

I asked them to tell me more. A few years earlier, this organization quickly jumped onto virtualization and as a part of this, they moved some of their production infrastructure and services to Amazon. They said this move resulted in an amazing outcome, it made on the political stuff on virtualization go away. In fact, it has gotten them to being 90% virtualization—they believe now that they can get to 100% virtualization and even more striking that they do not need in the future need to be in the datacenter business. In five years, this Fortune 500 organization says they will have no datacenters at all. So what does this say about enterprise architecture? They said that it remains really important, but eventually it will be important to far fewer people; you need enterprise architecture to prevent sprawl at someone else’s datacenter.

With this, I asked about services. They said the back office will be gone and much of the front office too. They said that enterprise resource planning (ERP) does not provide competitive advantage and will be consumed via software as a service (SaaS). In fact, they believe that all packaged apps will be consumed via SaaS. At the same time, they said that the only thing they will build will be things that relate to their business capabilities system and these will be provided via infrastructure as a service (IaaS).

So I asked, “Is there anything that will remain in a company’s data center?” The architects could only think of one application where owning a datacenter would continue to make sense—trading, and in particular high-frequency trading applications, where microseconds of latency really matter.

So where do you do you think the journey toward public, private and hybrid cloud will end. Will it end in the death of traditional ERP, shared services and finally the owned datacenter itself? Please share your opinion here.

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Discussion
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sunita1234
sunita Chaudhari 0 Points | Thu, 06/26/2014 - 10:23

Its fantastic to read something on ERP. ERP system focus on small and medium enterprises to solve the business requirements, function do very fine, the system is very flexible, also can second development, can adapt to the long-term development of the enterprise.

small business erp

myles.suer
Myles Suer 144 Points | Sat, 05/11/2013 - 20:05

We are agreed!

myles.suer
Myles Suer 144 Points | Fri, 05/10/2013 - 16:44

I agree with you, Don and Doug. Change always takes a while to happen. However, I thought it interesting to start to collect data points on the next step. Look for more these as I talk to more market leaders.

Goddardd
Doug Goddard 123 Points | Fri, 05/10/2013 - 19:36

I like your thoughts on ERP. One gets a sense that their business model can't last much longer.

myles.suer
Myles Suer 144 Points | Thu, 05/09/2013 - 15:36

Doug,

You are right. The move, at this moment, is to private cloud with a mix of public cloud.

I was trying to get a sense of where it goes from here. What does IT look like as a natural consequence of the move to virtualization and cloud.

As a former analyst, I would beat at minimum that shared services are endangered species if cloud providers provide SLAs with teeth to them. Does this make sense to you?

Goddardd
Doug Goddard 123 Points | Thu, 05/09/2013 - 18:47

Myles, the public Cloud vendors will have to provide SLAs with teeth, a more mature pricing model and a wider catalog of services, service unit types, towers, etc. to replace private Clouds or outsourcing, would be my guess. At the end of the transformation they will look very much like an outsourcer, selling Cloud based services. However, the outsourcing vendors may beat them to it.

The shared service groups I referred to below are being called business services. It seems they are providing a sort of combo BPO/ITO service. They in turn are creating their own supply chain, which in some cases means they are letting out large outsourcing contracts. Maybe they are the new IT department? Someone has to govern the outsourcing and Cloud vendor agreements. 

jdodge
John Dodge 1461 Points | Thu, 05/09/2013 - 15:52

There is great hesitation to move ERP to the cloud and some CIOs say it will be the last app to be ported. I separately interviewed GE Aviation supply CIO Jeannine Abele and GE Intelligent Platforms CIO Vince Campisi a few months ago and that's what they said. Being so large and diverse, GE still relies on shared services with no end of it in sight. Also, GE is heavily regulated by import/export regulations, safety certifications etc., which restricts (or slows) its ability to make sweeping changes.   

http://www.enterprisecioforum.com/en/blogs/jdodge/simplification-commonality-goals-ge-unit

http://www.enterprisecioforum.com/en/blogs/jdodge/change-management-biggest-challenge-ge-a

 

Goddardd
Doug Goddard 123 Points | Thu, 05/09/2013 - 14:25

This presents a very interesting vision. I have no idea if it is a trend or not but at the moment I am seeing more internal shared services and less IT department. The move is often associated with an "IT as a Business" strategy. They are still outsourcing, but the agreements have changed to where every service is usage based, so there are a lot of ARC-RRC multitier pricing schemes. It is as if they want a Cloud like or utility like service arrangement, but probably can't get it from the Cloud vendors themselves.

The traditional ERP vendors still seem to have a strong hold but there is lots of griping about their business model, which the ERP vendors seem to be either impervious or indifferent to. Maybe it is because they believe organizations still don’t have any alternatives and the idea of building these things themselves has been beaten out of them?