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In a keynote address presented at Interop last month, SAP CTO Vishal Sikka talked about components of the company’s cloud computing strategy. Sikka’s presentation included a discussion of SAP’s Business ByDesign on-demand suite which is targeted at midsized companies.
The software is targeted at companies with 100 to 500 employees and is being used by charter clients such as Skullcandy, a designer, manufacturer and distributor of audio products and ADC Rig Services Inc., a provider of project management services to offshore oil and gas exploration companies.
While SAP continues to move forward with its Business ByDesign services, Sikka effectively told Interop attendees that they shouldn’t expect to see SAP Business Suite extended into the cloud anytime soon.
Some observers have scorned SAP and Oracle for being slow to introduce cloud computing services. While executives at the two companies figure out the most profitable way to deliver scalable software services while addressing technical challenges including security and reliability issues, the current testing ground for ERP software in the cloud clearly appears to be with midmarket customers.
For instance, Redwood Shores, Calif.-based Compiere, Inc. recently made its Compiere Manufacturing ERP system available in the cloud. The system, which helps companies to integrate and automate planning and scheduling, production control, cost management and other manufacturing activities, has been available as an on-premise system for the past ten years and is now being offered via the cloud to midsized companies and subsidiaries of larger multinational organizations, according to Chief Marketing Officer John Cingari.
The system, which currently runs on Amazon’s cloud, is priced at $795 per user per year for the cloud system, with another $150 per user to use the manufacturing system. The cloud package includes a JBoss manufacturing server plus a free version of Oracle XE, says Cingari.
The annual cost for about 40 users to utilize Amazon’s cloud runs as low as $2,000 a year, says Cingari. That would place Compiere’s cloud package for a set of 50 users at less than $50,000 annually, he adds.
“Our expectation is that the cloud will be attractive for a piece of the market” (i.e. midsized companies), says Cingari. He believes adoption among Fortune 1000 companies “will be much slower” since most of those organizations have already invested heavily in premise-based ERP systems and IT infrastructures used to support them.
Generally speaking, many Software-as-a-Service providers got their respective feet in the door by catering first to small-to-midsize businesses before eventually attracting the interests of enterprise customers. Time will tell whether ERP software follows a similar path.
Many enterprise IT organizations are shackled by the high fixed costs associated with operating and maintaining IT infrastructures to support their organizations’ day-to-day operations. That makes it increasingly difficult to free up discretionary spending to invest in revenue-generating opportunities.
Putting aside security and other technical cloud concerns for a moment, any opportunity to drive down escalating infrastructure costs would be gladly welcomed by CIOs and senior management. But it’s hard to imagine many big companies walking away from the tens of millions of dollars they’ve socked into premise-based ERP systems, at least in the near term.
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