Cloud Affinities And Its Advantages
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1 Directions EMEA 2015 Connected InNAVation! Mannheim, Germany, October 5-7, 2015.
2 ERP IN THE CLOUD DOES MICROSOFT HAVE A HIDDEN AGENDA? I want to present my analysis and thoughts on: What is the cloud from an ERP/NAV perspective and what is it for Microsoft? What are Microsoft s arguments for ERP/NAV in the cloud and what do they not tell us? How could these observations influence your actions and decisions when adding the cloud delivery model to your business?
3 Why me and now? CEO of Singhammer IT Consulting AG in Munich Vertical solution for IT and High Tech companies based on NAV and AX (260 installations on NAV in 22 countries) around 50 employees We have our first few NAV subscriptions and quite some hosted installations Part of our vertical is the contract billing for cloud services which are volatile I doubt the CRM and ERP cloud success stories of Microsoft because I cannot see them in our market I wonder if the undifferentiated marketing of Microsoft for the cloud is irritating and prevents some customers from deciding for our products I feel manipulated by Microsoft to invest in cloud processes when Microsoft still has some fundamental homework to facilitate doing cloud business with them Our target as partners must be that our investments are repaid by real revenues We do not want to be misled by arguments that are not ours
4 My attitude to start with I say no to the sentence: Cloud Computing (CC) is still marketing In some areas (Iaas, PaaS, CRM) Cloud Computing has gained momentum and many customers use it to their advantage or have at least bought into it No to: CC is a hype that will go away and not affect ERP Cloud Computing is beyond Gartner s trough of disillusionment now and on the slope of enlightenment Yes to: There are and will be industries and scenarios that profit from this additional delivery model already No to: CC is a new concept for business software We do know that centralized concept since HOST-times see DATEV in Germany and many others in other countries Yes to: Cloud Computing is the return of a centralized computing concept which has a lot of good aspects for mastering business processes Yes to: ERP in the cloud is an evolutionary step and an additional delivery model Yes to: CC does change the opportunities for all of us There will be new business models There will be an opportunity to centralize applications to a hitherto unknown extent ( industrialization of IT, communication, process management, personal productivity, mobile) Yes to: Microsoft wants to help us to adopt the new delivery model and points out the consequences for our businesses
5 My experience with the cloud is Singhammer uses an external private cloud provider to run SITE AX (IaaS, PaaS) enterprise storage like OneDrive meeting/presentation software like Lync/Skype for Business and others Singhammer is ready for Exchange in the cloud NAV on Azure I personally use Office 365 / online on Windows and OS9 devices OneDrive Our NAV is On premise Accessible by Terminal Server / Winframe Citrix for demos/online tests
6 What is cloud computing in connection with CRM/ERP? General definition the technical side The access to an application through a browser any time over a network via open internet standards/protocols + The management of application, data and computation capacity in one central spot usually through the resources of a cloud service provider + the creation of a flexible, dynamic and generally automized resource allocation Connected to cloud computing is often A special billing type: Subscription fees (instead of permanent licensing) building on named users or resources used An application architecture that allows resource sharing or even the usage of multicompany structures or multi-tenant solutions The decision to run the central applications in a public or private cloud The Microsoft metrics: ERP in the cloud is foremost a billing and user type! Anything that is run under the billing type subscription + in ERP: which is invoiced per named user To be counted as cloud does not require a public or private cloud; it could be run on premise; the Azure product suite is the target, but not a prerequisite
7 The technology hype cyle of Gartner 2014/15
8 The stakeholders of the ERP cloud evolution
9 The cloud is a reality The marketing and sales people of Microsoft tell us Our customers are using our cloud services as an integral part of their IT; new business in area xy is 90 % cloud business Partners are far beyond lighthouse projects partners offering cloud services are growing faster than traditional partners and are highly profitable What they will not easily tell us is Microsoft has learned that selling a cloud service/user is not the same as customers really using it on a permanent level it is a completely different target than selling licenses and seems to be much harder than expected As long as Microsoft needs external consultants to teach partners how to profit from the cloud, the concept has not been convincing for the majority of partners (it is like Social Media: at the moment, the social media consultants earn more money with their consulting than the enterprises who invest in their Social Media) As long as there have to be roadshows by Microsoft on the legal side of the cloud business the offering still seems to have a number of serious traps The different stakeholders including Microsoft - are redefining their roles and portfolios it will take a while until every one of us knows where to go and who to team up with that does not make life easy for our customers
10 Young people now go for the cloud first Microsoft makes us believe New entrepreneurs run their information systems in the cloud The lower risk and lower investment for startups makes the cloud delivery model the only solid choice What do I hear from students at different university courses in Germany? Yes, subscription is a big advantage for our liquidity and flxibiltiy Yes, subscription lowers our risk to invest in something that may prove the wrong solution No, we do not run the backbone of our enterprise in some other place No, we do not want to negotiate with a cloud solution provider on SLAs No, we do not want to outsource our technical know-how and be dependent on others
11 Customers demand it Open agenda / Microsoft statement Customers are demanding cloud solutions When we go and see customers, cloud is the topic We recommend partners that have a real cloud-competence What Microsoft does not express clearly Cloud computing has a regional dimension the attitude of countries worldwide is very different the speed of adoption is very different Cloud computing has an industry dimension some industries are adopting it faster than others Cloud computing has a process dimension companies who offer unique products and services may profit from it; companies which are unique through their processes will not be ideal cloud adopters Cloud computing has a flexibility dimension companies with few peaks in their business will profit from the flexiblity of users or resource allocation Cloud computing is for enterprises with technology aversity cloud computing simplifies dealing with applications if you stick to standards and proven solutions What could that mean for you? Beware that the cloud delivery model is an additional option for customers that may postpone decisions Differentiate the market approach with respect to the affinity of your offering to your potential customer group
12 Justification for cloud Justification for cloud workload Let s have a look at a typical problem that cloud computing wants to solve time
13 Let s look at the cloud affinities (1) CC provides flexibility in resources What would be a typical example for that? Seasonal business like Christmas Card manufacturers Event agencies with a few events a year What is their requirement? Heavy changes in user numbers or business transactions What does the Microsoft subscription model not have an answer for? Small number of users all year, but enormous amounts of invoices in a very short period of time and then back to normal that would require a usage based billing model, the user is not it CC provides a good solution for certain industries What would be a typical example for that? Hair dressers all over a country What are their requirements? Standard functionality to plan, do their job, invoice All hairdressers have similar requirements No technological affinity with most of them No process consulting required
14 Let s look at the cloud affinities (2) CC provides an advantage for product based businesses What would be a typical example for that? Household goods with low complexity + very little service requirements What is their requirement? Highly standardized and few processes Purchase and sales, invoicing of simple services Simple processes for mobile service people in the field CC and it s disadvantage for companies in which process quality makes the difference What would be a typical example for that? Managed service companies with customer-individual processes and maybe billing rules What are their requirements? Exact adaptation to their Unique Selling Propositions Highly individualized and flexible processes Cloud computing with it s focus on standardized processes would prevent bespoke processes and functionalities
15 Let s look at the cloud affinities (3) CC provides an attractive solution to technology averse industries What would be a typical attitude for that? Companies that regard running an ERP or other information systems not as a reasonable way of spending their time and money What is their requirement? Let s just use the applications and not know anything about the technology Partner with someone who manages their ERP
16 Customers profit from it Open agenda Flexibility in usage Safety of implementation and technology No technology needed on site What Microsoft does not say: their grip on customers will change fundamentally CC is the ultimate killer of software piracy Microsoft would know the real usage of the applications in their own cloud the users would be absolutely transparent the development of new features would be much easier Microsoft could decide on the update cycles and not the customer or partner the danger that customers leave Microsoft after many years on an old system would be minimized For customers with a very steady or constantly growing businss cloud and subscription bring price increases in comparison to permanent licensing (26 months for NAV) Partners with their own interests in guiding a customer would be pushed back in their influence on customers Microsoft can apply and sell their complete solution stack other manufacturers will have a difficult time getting into a cloud application scenario set up my Microsoft Microsoft does not depend so much on ups and downs of the economy any more in bad times people do not invest in licenses, but they will have to go on paying their subscription fees
17 Partners can profit from it Microsoft points out the changes for the VAR business Cloud partners continue to outperform Cloud partners grow more quickly and more profitably Cloud partners get more new customers and more recurring revenue Stop what you are doing and consider your cloud plan Don t wait to adopt cloud What I am missing in the communication: No real data on the number of projects are published it reminds me of the success stories around older versions of Windows which were actually a desaster Success stories published are often not real if you analyse them Conviction seems to be that the power of Microsofts communication will create the market What irritates me most: No differentiated picture on the cloud success not by product lines, not by cloud locations, not by country The integration of add-ons has become really difficult since they are no longer licensed by Microsoft (almost every ISV has different rules for contracting and billing their addon: binding periods, minimum volume, alignment of billing period with main license)
18 Microsoft invests heavily in ERP in the cloud The open agenda The ERP products see big investments the products are cloud ready CRM and ERP are drivers for In and On What do we see in reality CRM gets most of the attention here seem to be the real ambitions to push Dynamics cloud business CRM has about 20 % of the complexity of an ERP system it is much more suitable for the cloud delivery model than an ERP system with tons of integration needs The competitor Salesforce is the benchmark and binds a lot of resources The technology for NAV to speed up roll-outs and set up the systems, to run it in a multi-tenant environment, to migrate installations easier and faster we see progress but not the momentum that Cloud first might imply The powerful argument that Microsoft offers it s products for OnPremise, Hybrid and Public/Private Cloud delivery models is at the same time a disadvantage it is a compromise in technology and splits resources
19 The more integration, the more difficult for the cloud delivery model I n t Manufacturers of process oriented software Providers of containers, communication media, social media platforms ( as is service) Hardware-Manufacturers Große Portalbetreiber Managed Service Anbieter e g r a t i o n d e p t h ERP CRM DCM Office-Applications Social Media, Portals in der Cloud PaaS = Platform as a Service SaaS IaaS = Infrastructure as a Service
20 My last point on the agenda: Our environment profits from cloud computing The open agenda Sharing resources saves energy Going to the cloud will be an argument for people who care for our environment The hidden agenda Many data centers are desperately fighting for the usage of their capacities Many big data centers produce so much heat that they change the climate around their locations Many data centers do not use green energy the ecological footprint is still a desaster See Greenpeace How Clean is Your Cloud? Clicking Green: A Guide to Building the Green Internet, May 2015 Update Microsoft has a long way to go here
21 So back to the initial question of this presentation Does Microsoft have a hidden agenda for ERP in the cloud? No - most of the published agenda is valid; often, we have to look for details between the lines - MS sees how much is still left to be done; the warnings to the partners are loud and clear - The profitability guide for partners is helpful, it makes clear what we are heading for But on the other hand - The advantages of a cloud delivery model are really dramatic for Microsoft much more prominent and important than for partners or customers - The parallel existence of delivery models of the Microsoft product stack makes the allocation of resources really challenging it is an incremental development and not a revolution - With ERP, we are a far cry off from the success of other cloud services and there is a good reason for it - Cloud business models for CRM and ERP are not in place yet we need another two to five years until we see what is worth surviving
22 So my findings are We all have to analyse our markets and opportunities; we should not be mislead by interests that are not our own We all have to question most of the statistics that we read about cloud business, the business is to young, to divers and the definitions to divers to be an easy help We all have to team up with colleagues who provide other services to aour future cloud customers than you do or we have to fulfill the future needs on our own We might want to develop into a trusted advisor for our customers who have the cloud as an additional delivery model in our portfolio then we do not miss any important development
23 Thank you for your attention You reach Singhammer IT Consulting You reach me at Singhammer LinkedIn Josef Boeck Xing Josef Boeck
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