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Business Transformation in Action

Joe McKendrick

Survey: Companies Prefer to Keep ERP On-Premise, for Now

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Software as a Service and off-premise cloud computing may be the topic du jour among IT observers, but these approaches don't seem to hold much appeal for manufacturing executives.  At least not yet, anyway.

These observations were confirmed in a new survey commissioned by IFS North America, based on interviews with 325 manufacturing enterprises. I recently had the opportunity to speak with Chuck Rathmann, IFS industry analyst, about the results, which are scheduled for release later this month.

The survey found that about 19 percent report they are currently buying software through a SaaS model, and one-quarter of this group leases ERP functions. (So, about five percent of the total group use ERP via SaaS.)

CRM software, in fact, was mentioned most often (by 41 percent of the subsample using SaaS) as the type of software purchased this way. "People are talking a lot about software as a service right now, but when it comes to enterprise resource planning, enterprise asset management, on-premise is still by far the dominant way that people are getting their software," Chuck says.

Loss of control and security concerns are the two greatest obstacles to SaaS, survey respondents say.

Private cloud implementations, however, seem to be catching on in a big way for enterprise resource planning applications -- only many survey respondents don't realize they're doing "cloud computing." The survey found that the term "private cloud" is not well known among manufacturing executives, with only about six percent saying they are "very familiar" with this term, unprompted.

However, when the concept of private cloud is defined for the respondents, more than a fifth of the respondents, 22 percent, say that is what they're doing for their ERP solutions.  "We asked people about their perceptions of private cloud without defining it," Chuck explains. "In unaided recall, less than 10 percent said they were very familiar with the term. But when we defined it for them, a fifth of them said that they were actually using private cloud."

He observes that "private cloud is the dominant form of cloud computing for ERP.  It makes a good deal of sense, you can get a good deal more security and privacy and flexibility than you could under a joint tenancy model."

Private cloud got higher marks in the survey than Software as a Service, which presumably means using services provided by outside firms. Fifty-five percent said the private cloud approach is better for their operations than SaaS.

Perhaps, as with service oriented architecture, businesspeople want solutions that can deliver greater revenues and increase market share -- they're never going to ask for SOA or private clouds.  And they're not going to care.



In this blog (formerly known as "SOA in Action"), Joe McKendrick examines how BPM and related business and IT approaches can promote business transformation.

Joe McKendrick

Joe McKendrick is an author and independent analyst who tracks the impact of information technology on management and markets. View more

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