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The Cloud IS the Way... Really?

cloud-erpWe've been tracking and writing about cloud based systems since the first issue of Of course back then in 2003 we referred to is as SaaS or even just 'online applications.' Since that time the world has mostly overcome its apprehensions about putting corporate data and processes outside the firewall. Even so, Cloud speculation and operations continue to be big news. To this I say - Whoop-de-doo! 

The fact that the all-things-cloud marketplace is growing should not, in 2014, come as shocking news to anyone who even marginally follows the software and services marketplace. Still, Louis Columbus' story in Forbes calls out the growth of the enterprise ERP market, though not necessarily cloud-based ERP. What's interesting in his post is the relatively slow growth at the top end of the ERP market. The report he sites shows just a 3.8% growth in 2013. That's an increase over the very moderate growth rate of 2.2% in 2012. What's going on here that's different? It's that the ERP vendors that make up these numbers are not primarily offering cloud-based systems.

The report contrasts the growth rates of the cloud based systems with more traditional installed software like SAP, Oracle, and Microsoft. While these types of systems continue to occupy the largest of the large companies, the horror stories of cost and time overruns for implementations and customization continue to make using them seem like a losing proposition. Of course the argument is that only these locally installed systems are able to support the peculiarities of the organizations that chose them. That may indeed be the case, but the cry that 'our business is different from any other' is a very old argument, and one that seems to hold less and less credibility as systems like NetSuite and it's ilk continue to gain market share.

While the growth of the overall ERP market seems slow, it's the larger organizations that are making new acquisitions that amount to big dollars. Smaller companies are moving toward more flexible cloud based offerings that seem to meet their "individual and unique" needs even though these systems support much less customization than do the installed software options.

At the bottom of the Gartner report is a section tagged "Other Notable Vendors" where I see the real story of enterprise ERP systems. Notice the names and the rather spectacular results they are reporting. The difference is that these software companies are small compared to the leaders in the category. But that may not be the case for long if their growth continues apace. Here's an excerpt from the Gartner recap:

Other Notable Vendors
  • Workday More Than Doubles Revenue and Becomes a Public Company
  • Cornerstone OnDemand Continues to Execute Well and Extends Reach Into the Small-Business Segment
  • WorkForce Software's Focused Efforts Help Move It Up Four Places
  • Ventyx Growing Through Acquisition
  • NetSuite Deepens Operational ERP Capability and Benefits From Larger Deals to Enter the Top 20

Companies involved with the supply chain are likely to have a jump-start on cloud based systems by virtue of the nature of the supply chain and passing orders and other documents electronically. As advanced EDI providers provide deeper integration with ERP systems, the more flexible options are likely to include the use of cloud-based systems for both ERP and order processing, and require less expense to accomplish their connections.
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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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