Forming a Cloud Strategy That’s Right for You
In my last article, The Real Reason Why Oracle is all about the Cloud, I talked about the motivating factors behind Oracle’s push to the cloud. I ended by acknowledging that cloud technology represents a land of uncharted opportunity, but stressed that it’s important to form a cloud strategy rooted in what’s best for your organization (while taking Oracle’s pitch with a grain of salt).
When I was fresh out of college and just getting started here at Surety Systems, my manager told me “Aaron, don’t come to me with problems… come to me with solutions.” That means I don’t think it’s fair to tell you all about Oracle’s cloud motivations without also providing a thoughtful opinion on the factors that should play into your decisions on the cloud.
So, how do you determine if a move to the cloud is right for you? The list below is by no means all-inclusive, but it should provide a good starting point when trying to devise the right strategy for your organization.
Is Your Company’s DNA Suitable for Cloud?
Cloud solutions are typically less flexible than on-prem solutions; they generally offer fewer customization options. So, how flexible does your software to be?
Based on the nature and volume of your system’s customization, you’ll want to consider whether it’s more painful to change your current business processes to fit a pre-configured cloud offering, or to opt for an on-prem software strategy that can be tailored to fit your processes as they exist today. In other words: something’s gotta give. And based on your company’s DNA, should that change come from the business processes or the software?
If you are more comfortable changing business processes to match your software, then cloud may be the right fit for you. This leads to the question of change management. Different organizations have varying appetites for change. ow does your user base react when the winds of change start to blow? Based on other change efforts your company has previously initiated — what can you learn from the success and challenges that you experienced, and how would that translate in a move to a cloud-based solution? My grandma always told me “the proof is in the pudding.”
Will users actually adopt a new cloud-based system? Even if your CFO is cheering loudly over significant cost savings, and your IT Department is running around doing congratulatory fist bumps following a successful cloud migration, return on investment is only truly realized if users actually adopt the new system. After all, you didn’t go through all that trouble just for folks to keep using Excel spreadsheets!
What is the Complexity of Your Current System?
As mentioned above, cloud systems tend to offer less flexibility. As companies become more customized, they become less likely to succeed with cloud-based systems. How much of the functionality available in your current system are you using?
Complexity isn’t limited to customizations either. You’ll want to think about any third-party integrations you may need. Knowing which third-party software you plan to integrate is important because you’ll need to verify that their APIs are accessible through the cloud provider you select.
The size of your overall ERP footprint can also impact the complexity of implementation of a cloud-based system. Larger systems will require more attention and effort when it comes to deployment.
How Will Cloud Impact Your Annual Budget and Cost Structure?
It’s true that over a 5-10 year period the total cost of ownership for a cloud-based system can be as much as 50-60% lower than on-premise systems. However, that’s TOTAL cost of ownership which includes implementation labor and hardware purchasing costs that are normally much higher up front. Be sure to evaluate costs both from a long-term perspective and a monthly/yearly perspective. I’ve seen graphs that show monthly costs of cloud-based systems at as much as $800K per year higher than on-prem maintenance.
So, even though there’s a large up-front expense to implement an on-prem system, cloud isn’t necessarily cheaper from an operational perspective. This difference in annualized maintenance cost could be a significant factor since most companies reading this article have already paid the upfront implementation costs of a new installation.
Finally, cloud offers an option where companies can “pick their poison.” Since cloud is a service-based product it is generally billed on a subscription basis, and largely thought of as an operational expense. On-prem implementations, upgrades, and hardware purchases, on the other hand, are normally viewed as one-time capital expenses.
In some cases, it may be easier (based on company culture) to get approval for one-time large costs (capital expense) than getting approved for a higher annual operational budget.
Is This a Reputable Cloud?
Okay, this may seem pretty basic, but how long has this company been in the cloud arena? How many customers are they supporting? Once you’ve determined they’ve been around for a while and you won’t be one of their first customers, you’ll want to ask about downtime and disaster recovery. How much downtime has the company experienced over the past 6 months? What is the cloud provider’s DR (disaster recovery) strategy, and how fault-tolerant is their design?
Finally, are they willing to provide you with referenceable customers that you can speak with directly? Don’t settle for a pre-written testimonial. It’s important to speak with an actual person to really get the low-down on how well that relationship is going and how satisfied they are with their own move to the cloud. And while you’ve got that reference on the phone, ask about downtime again and make sure the reference’s experience lines up with what all the salespeople are telling you.
Deciding on Next Steps
Moving to the cloud is a big step — it shapes your IT strategy for the foreseeable future, so it makes sense to take your time and do your research before making a decision.
Talk to Your Peers
In addition to asking your vendor the questions above and talking to references, be sure to leverage as many of your counterparts as possible. Be active in the Quest Community, including conferences like Collaborate and InFocus. These events offer an excellent opportunity for networking. You can also participate in special interest groups (SIGs) and regional user groups (RUGs).
When talking to your peers, make sure you’re prepared to hear both the good AND the bad about cloud. Cloud technology can’t be all roses; there are some thorns with every process — but it’s best to walk into any cloud situation with your eyes wide open to any potential drawbacks, and be able to make an informed decision.
Start with Baby Steps
If you’re at the point where you’re pretty sure that cloud could be a viable option for you, consider dipping your toe in the water before making the dive. Try smaller “cloud investments” by starting with products like Oracle Mobile Cloud Services or Oracle’s Internet of Things Cloud Service. This option allows you to verify that your answers above about user acceptance, cultural readiness, and budgeting were accurate. If they weren’t, it gives you some time to help the organization adapt. Then, as you see more value and organizationally become more comfortable with the cloud, you can gradually increase your IT investment.
This is the third piece in a 6-part series on JD Edwards in the cloud. Read the rest: