Cloud, On-premises, and More: The Business Value of Software Deployment Choice

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1 Cloud, On-premises, and More: A research report prepared by: Publication sponsored by:

2 TABLE OF CONTENTS Introduction: Choices, Limits, and Adaptability Isn t Everything Cloud? The Importance of Architecture Mindset Change: Choice Needs Not Be a One-time Thing Conclusion: Choice Enables Change Without Fear Sponsor Perspective Epicor ERP: Delivering Deployment Choice TABLE OF FIGURES Figure 1: Business Software Buyers Preferences Slide To Cloud Figure 2: A Choice Methodology Figure 3: Charting Choices About This Report Saugatuck Technology Inc. is solely responsible for the content of this report. Unless otherwise cited, all content, including illustrations, research, conclusions, assertions and positions contained in this report were developed by, and are the sole property of, Saugatuck Technology Inc. The research and analysis presented in this report includes research from ongoing Saugatuck Technology research programs, including our global survey and interview work with user enterprise business and IT leaders, briefings with providers, and analysis of publicly-available market information from multiple sources. The publication of this report was funded by Epicor Software Corporation. About Saugatuck Technology Inc. Saugatuck Technology, Inc., provides subscription research and management consulting services focused on key market trends and disruptive technologies driving change in enterprise IT, including Cloud, Mobility, Social and Collaborative IT, and Advanced Analytics. Founded in 1999, Saugatuck is headquartered in Westport, CT, with offices in Falmouth, MA, Santa Clara, CA and Frankfurt, Germany. For more information, please visit or call Saugatuck Technology Inc. i

3 INTRODUCTION: CHOICES, LIMITS, AND ADAPTABILITY For decades, business management software buyers had multiple, valid choices of providers and solutions, but little choice as regards how and where that software could be deployed. In the vast majority of instances, deployments were on servers within the company premises. Some, mostly larger enterprises, outsourced the software and servers as part of large-scale IT outsourcing programs; and a few firms, often in specific markets with unique requirements, utilized hosted software that resided on the provider s servers and was accessed via dedicated client software and networks. The advent of Cloud-based ERP and other business management applications has greatly expanded choice in software deployment. Buyers today can acquire secure and reliable, completely Cloud-based solutions, or utilize Cloud to extend the capabilities and useful life of their existing software. And of course, buyers can still acquire and deploy applications in traditional formats as well and there are many valid reasons why they pursue this approach. The bottom line is that buyers today have more choices in business software deployment but too often, they limit their present and future ability to compete by the choice they make. This report by business IT research and consulting firm Saugatuck Technology Inc. provides guidance regarding choice in business management software deployment. Specifically, we look at how deployment choice and flexibility affect firms ability to adapt and compete, and why providers approaches to enabling that choice matter as much as the solutions themselves. ISN T EVERYTHING CLOUD? First of all, it often surprises business leaders today that Cloud is not the de facto format for business software. Even Saugatuck s own research among business software buyers suggests that Cloud already accounts for at least half of all new business software as of Figure 1 summarizes the data and illustrates the convergence and shift. We can see that Cloud is certainly a growing and powerful alternative to traditional business software. But it is also one part of a business software spectrum that stretches from traditional, on-premises software to pure-play Cloud-based software and computing services. Most businesses will find themselves inhabiting several different spots within this spectrum over the course of their lifetimes. This is because of the unique operating properties and environments of each firm. Business structures, operating models, market requirements, capital resources, and the resulting value of software deployment and use not only vary by firm, but also by the stages of each firm s lifecycle, and are increasingly subject to accelerating paces of business and technology change. What we are as a business today is often quite different from what we were a few years ago, and what we are likely to be several years from now therefore, the ways that we acquire, deploy, and use business management software today are almost certain to differ over time Saugatuck Technology Inc. 1

4 Figure 1: Business Software Buyers Preferences Slide To Cloud Source: Saugatuck Technology Inc., global surveys, This certain uncertainty is one important value factor in business software choice. Solutions (and providers) should not only enable operational efficiency and adaptability to business needs today. They should also enable flexibility through deployment choices that can be altered as the business is altered over time, without forcing the firm to lose assets or abilities. When business operations and conditions change, even in relatively minor ways, being locked into a specific deployment and usage format can severely limit the ability to manage the business, and therefore limit the firm s competitive abilities. THE IMPORTANCE OF ARCHITECTURE Traditionally, the selection of ERP and associated business management software has helped to define, guide, and even limit, how and where firms do business. The software became the foundation of business processes, enabling significant efficiency via automation and standardization, which typically set limits on how, how well, and how quickly firms adapted to market changes. Over decades of development and refinement, most such applications have become more adaptable and valuable in more aspects of firm organization and management, and have helped to improve competitive advantages when deployed and utilized efficiently. As a result, the software has often become the de facto architecture of our business structures. Think in terms of an office building or a home: What we can do with it is determined not just by the foundation, but by the entire building design and construction. When business changes not if the architecture choices of our software providers can force us to keep doing business in inefficient ways, or limit our 2014 Saugatuck Technology Inc. 2

5 ability to change, to expand, to compete, or to satisfy changing customer, partner, regulatory, and market demands, or to create new opportunities. Even Cloud-based business management software imprints itself in this architectural fashion. While Cloud-based software tends to be but is not always less expensive to acquire, implement, and use, its very nature is still to guide, enable, and manage how business is done. This is why choice of deployment format Cloud, hosted, on-premises, or hybridized is only part of the value proposition. Many traditional business software providers have developed excellent Cloudbased offerings, either as an alternative to traditional software or to layer onto that software. But too often, these offerings are architected differently, because they were developed with different deployment and use models in mind. They use different development approaches, different software code, different interfaces between applications (i.e., APIs), and different user interfaces. These differences affect the utility of the software and the cost of using it. Different code requires more investment in adaptation and integration; different software interfaces add to the cost of adaptation and integration. Differing user interfaces require additional training, and can lead to an increase in user errors based on differences in operational characteristics. And should the buying firm decide to alter its deployment format due to business changes (planned, or beyond its control), these differences can result in significant differences in the ability of the software to use valuable business data. Even within Cloud-based software, there are important architectural differences that influence choice. For example: Most Cloud software providers today offer what is called a multi-tenant architecture, which means that a single instance of the software runs on a server in the Cloud, serving multiple customer firms (i.e., tenants). This sharing of resources enables significant cost savings for customers and for providers, as it greatly simplifies version control, maintenance, upgrades, and security. However, many firms prefer what s called single-tenant Cloud solutions. These consist of a single instance of the software, used only by one customer firm. Single -tenant solutions are still Cloud-based, so the firm can take advantage of widespread availability, rapid scalability, and all the other benefits of Cloud-based software, albeit at somewhat greater cost than would be charged for multi-tenant solutions, which share costs among multiple customer firms. Unfortunately, many software providers have built single-tenant solutions differently than their multitenant solutions, creating some substantial differences between the two. A provider s use of the same architecture, and the same software code, across all of its deployment formats, reduces or eliminates these differences, making the choice of deployment format less of a gamble for the buying firm. So if, or when, we need to rethink and redeploy business software in the future, we can do so without losing the investment and value that we have built on our existing software foundation Saugatuck Technology Inc. 3

6 MINDSET CHANGE: CHOICE NEEDS NOT BE A ONE-TIME THING The third value factor in software deployment choice is buyer mindset. For decades, we acquired and used software as a thing, a product usually located on a computer or computers that we could touch. With Cloud, we ve quickly become accustomed to the concept of software-as-a-service, and how it alters what we buy, how we buy it, and where and when we use it. For most software buyers, the belief is that we ve gone from having one deployment choice to having two (Cloud or on-premises). The reality, as noted earlier in this report, is that we have many more choices. Through at least 2020, very few firms large enough to benefit from ERP or other business management software will have entirely on-premises or entirely in-cloud software. The vast majority will have percentages of software in and between both environments, and those percentages will vary over time based on changes in technology, cashflow, business models, and market influences. Figure 2: A Choice Methodology Sample Assessment Statements Sample Enterprise Business disruptions from software maintenance and upgrades must be avoided at all 4 I expect a high degree of variability in my organization's business model or in the markets 3 We have significant restrictions on capital spending. 4 Fast deployment of solutions is of measurably high value to our organization. 3 Our important business operations and workloads are easily migratable to Cloud. 3 We expect to have reliable and affordable broadband networking available where we do 4 We see great value in the availability of on-demand business software functionality. 3 We expect to have a limited or lean in-house IT organization and resource availability. 3 The number and disparities of our business systems and data will grow and/or vary 3 We expect to explore a large number or wide range of pilot programs and/or proofs-ofconcept in new and different business systems and operations. The speed and ease of adding or extending solution capabilities is important. 4 We expect that our processes and operations will change unpredictably. 3 We can only invest in new business IT with demonstrably low upfront/startup costs. 5 We have, or expect to have, a dispersed, disparate, and/or unpredictable number and type 3 We have no need to maintain complete and direct control over ALL data and IT resources. 4 TOTAL SCORE 53 Source: Saugatuck Technology Inc Saugatuck Technology Inc. 4

7 Because of this variability the certain uncertainty buyers need to think and act in terms beyond an A vs. B or black-white approach. To enable the most business flexibility and benefits over time, we need to begin thinking in terms of Cloud-first or on-premises-first rather than just Cloud or on-premises, and we need to be able to adapt that thinking as the business adapts to change. Saugatuck has translated this flexible choice thinking into a checklist approach that helps determine which direction is most beneficial for the company today, and which will be the most beneficial as things change. Figure 2 lays out a simplified sample of such an approach. The Assessment Statement column contains typical statements regarding buyer or business leader needs and concerns about business software and related IT. The Sample Enterprise Score column contains numbers from 1 to 5, with 1 representing the lowest level of agreement, and 5 representing the highest possible level of agreement. With this number of statements and an agreement scale of 1 to 5, this sample will provide a total score of between 15 and 75. The lower the score in this sample, the more likely the firm is to benefit from an on-premises-first approach; a higher total score suggests that the firm would be better off pursuing a Cloud-first deployment approach; and a score in the middle range (e.g., between 30 and 60) suggests that a hybridized approach would be most beneficial. Such a method also enables charting to visualize this approach on a spectrum from on-premises-first to Cloud-first. The data from above is charted in Figure 3, and clearly indicates a Cloud-first approach would be most suitable. But we can also see how a few subtle business changes could shift that toward a more hybridized, or even on-premises-first, approach. This is only a sample, and only meant to illustrate one means of understanding and indicating how a specific firm s situation influences its choice of software deployment. In any case, the Agree/Disagree statements and valuation must be adapted to each specific firm s situation. The key to the model s value, however, is to repeat its use over time and to reexamine the factors and data whenever significant business changes occur or are expected. Typical business changes that require rethinking of business software include the following: Changes in ownership Merger/Acquisition Market expansion Product/portfolio changes Changes in partner type or location Market entry, expansion, or exit 2014 Saugatuck Technology Inc. 5

8 Figure 3: Charting Choices CONCLUSION: CHOICE ENABLES CHANGE WITHOUT FEAR Source: Saugatuck Technology Inc. The concept of change tends to trigger fear and hesitancy among almost any population. In a business, change is often seen (at least initially) as a potential threat to livelihood and security. And almost any type of business change requires time and money two things which few businesses are able to waste. Given that our business management software helps to align and guide how we do business, changes in that software tend to trigger greater fear within and between companies than many other business changes. Fear leads to anxiety; anxiety leads to hesitancy; hesitancy leads to competitive loss. Change becomes potentially more threatening, and more costly, when we consider that our choices of business management software tend to be for the long term but we need to make our software decisions today, when we often are not certain of what the future holds for the business. This is why it is so important to select business management software that not only enables choice of deployment, but which also enables changing that choice without fear of significant business change. It s also why the choice of provider is at least as important as the choice of solution and deployment method. Providers that design, build, and deliver business software using the same interfaces, the same abilities and features, and, most importantly, the same code, throughout their deployment portfolios will enable the greatest amount of software change with the least amount of business change, while optimizing business agility and future-proofing the company s ability to compete and succeed Saugatuck Technology Inc. 6

9 SPONSOR PERSPECTIVE Epicor ERP: Delivering Deployment Choice Epicor Software Corporation is a global leader delivering inspired business solutions to the manufacturing, distribution, retail, and service industries. With over 40 years of experience, Epicor has more than 20,000 customers in over 150 countries. We deliver unmatched customer experiences and deployment flexibility, allowing companies to choose the deployment model best suited for their specific business needs (and to easily change their deployment to adapt to changing business requirements.) In recognizing the importance of choice, Epicor believes that only the customer can determine the right deployment model for their enterprise applications. Epicor ERP - Delivering Across All Deployment Models Epicor delivers a consistent experience in a single solution by leveraging the powerful Epicor ICE Business Architecture, the foundation of Epicor ERP. Epicor ICE enables organizations to map Epicor ERP to specific business rules and processes without changing source code, thereby allowing migration from one deployment model to another and allowing companies to futureproof any deployment decision. Companies should consider the critical aspects of the most common deployment models: Multi-Tenant Cloud provides the greatest efficiency, lowest costs and least amount of administrative overhead of all the deployment models. Multi-Tenant cloud deployment is regarded by many as the most agile approach to cloud deployment. Single-Tenant Cloud is ideal for companies who demand greater administrative control over their cloud-deployed ERP solution. Single-Tenant deployments are common with companies whose IT staff is turning to the cloud for strategic reasons. Hybrid Deployment is a common deployment model for large enterprises standardizing on Epicor ERP across a global footprint who desire to deploy in the cloud and on-premises in parallel. This model is common in an environment where headquarters is deployed on-premises and remote locations are running in the cloud. Application Hosting is an option that is most appealing to companies that prefer outright acquisition of their software license, but have no desire to own or maintain the supporting infrastructure. On-Premises is the traditional deployment option for companies that have a desire to keep all aspects of their ERP solution in-house and have the right IT resources. By proudly providing our clients choice, Epicor helps empower organizations to use technology as a competitive advantage and a path to increased business agility. For more information, visit or call to speak to an Epicor expert Saugatuck Technology Inc. 7

10 SAUGATUCK OFFERINGS AND SERVICES Saugatuck Technology provides subscription research / advisory and consulting services to senior business and IT executives, technology and software vendors, business / IT services providers, and investors. Our Mission is to help our clients make better business decisions and create new business value through trusted and objective insights into the key market trends and emerging technologies driving real change. Over the last few years, this has included a major focus on Software-as-a-Service (SaaS), Cloud Infrastructure, and Social Computing, among other key trends. CONTINUOUS RESEARCH SERVICES (CRS) Subscription research / advisory services that provide independent / unbiased analysis, insights and guidance into the most important emerging technologies driving change in business computing. We are experts in Cloud Business and Cloud IT, among other key market trends / technologies - with a balanced view that is valued by both providers and consumers of technology-enabled products / services. USER STRATEGIC CONSULTING SERVICES Leadership and Planning Workshops Strategy and Program Assessments Vendor Selection / Evaluations Cloud Transition / Migration and Best Practices VENDOR STRATEGIC CONSULTING SERVICES Market Assessment Strategy Validation Opportunity Analysis Positioning / Messaging / Go-to-Market Strategies Competitive Analysis THOUGHT-LEADERSHIP PROGRAMS Custom research programs targeting key technology and business/it investment decisions of CIOs, CFOs and senior business executives, delivered as research reports, position papers or executive presentations. VALUE-ADDED SERVICES Competitive and market intelligence Investment advisory services (M&A support, due diligence) Primary and Secondary market research. To learn more about Saugatuck consulting and research offerings, go to or Chris MacGregor. While there, register for our complimentary Research Alerts, which are published on a weekly basis, or visit our Lens360 blog Saugatuck Technology Inc. SAUGATUCK LOCATIONS: US Headquarters: Westport, CT Silicon Valley: Santa Clara, CA Germany: Wiesbaden, DE

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