Before I get struck by lightning, I thought I had better share with all who are making decisions on whether to continue to host their software applications internally or have them hosted externally by a service provider.
With so many , and all the potential benefits of lower costs, better security, and better up-time; there are some serious drawbacks with improving business processes if the right environment for serving your software applications is not chosen. So what six areas do you need to be aware of to make the right decision to move your organization forward with business process improvement in this cloudy world?
First, let me define the scope of my conversation here. The focus of this post is on ERP software applications (this can also be applied to CRM applications as well as a wide range of other software applications).
Second, below is a list to help you understand the multiple hosting options for your ERP and/or CRM software.
- Hosted internally and you own the license.
- Hosted externally by a service provider and you own the license.
- Hosted externally by a service provider and you rent the license in a shared software application environment with other organizations (known as SaaS or Cloud environment).
- Hosted externally by a service provider and you rent the license in a dedicated software application environment (also known as SaaS or Cloud environment).
- Combinations of the above.
Third, compare the cost of the above choices. This may require you to , or you may need to work with multiple vendors. The analysis needs to include all costs associated with each alternative over a period of 5 to 10 years.
If you are evaluating new applications and the capabilities, support, and vendor viability is not materially different, I would suggest adding each of these different applications into the analysis. You may be surprised on how much the 5 to 10 year total cost analysis might vary between the selected software applications on the different hosting options and licensing options.
Regarding what should go into your cost analysis; I will save for another day of sharing. The big is within the improvement of business processes.
Fourth, prevent current automated business processes from being broken. When changing the hosting of all or part of your software applications externally, beware of breaking business processes in the following areas:
- Integration with your office applications (i.e. Microsoft Office Excel, Word, Outlook, Office Communication Server, etc.).
- Integration with your Intranet application (i.e. SharePoint).
- Integration with other internal business applications.
- Integrations with other external business applications hosted by customers, vendors, partners or compliance organizations.
- Support of mobile devices.
- Support for customizations.
- Support for custom reporting.
- Support for add on applications to your ERP or CRM software.
Many of the issues with integration may not be apparent, because when all these applications are hosted internally you would not experience the . To help with many of these issues SaaS providers provide dedicated application environments that you can subscribe to. However, even these environments are not without limitations.
Fifth, prevent the inability of automating future business processes. Get your crystal ball out and plan ahead for your business process improvement initiatives. Make sure the environment you are about to enter into does not prevent these processes from being fully automated.
The last and sixth point is to perform a cost-benefit analysis on the software application hosting options above. Quantify to the best of your ability the benefits lost if a hosting option breaks an existing automated business process, or prevents a future one from happening. Focus on costs and benefits that are material and that are different between the alternatives. Don’t waste your time on costs and benefits that are the same for the alternatives you are considering.
In summary, to keep your head above the clouds, evaluate carefully your options and you will not get lost in this new frontier; you could even shine!
By Tad Remington, President, InterDyn – Remington Consulting,
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