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Manufacturers are Looking to the Cloud: Part 2

What the Analysts Say

According to a recent study by Gartner, SaaS-based manufacturing and distribution software will increase from 22 percent in 2013 to 45 percent by 2023. Gartner predicts that the catalyst for much of this growth will be two-tier Cloud ERP system adoption.

Gartner also predicted that, by 2016, “heavily customized ERP implementations will be routinely referred to as ‘legacy ERP.’ In its place will be a “more federated, loosely coupled ERP environment with much of the functionality sourced as cloud services or via business process outsourcers.” By 2018, at least 30 percent of service-centric companies will move the majority of their ERP applications to the cloud.

The same study found that a total of 47 percent of organizations surveyed plan to move their core ERP systems to the cloud within five years, and 30 percent said that the majority of their ERP systems would be on-premises for the foreseeable future.

Two-tier or hybrid cloud ERP solutions are attractive to companies who have invested great resources in their on-premise ERP systems. These firms see hybrid systems as a way to modernize their systems without abandoning their on-premise ERP system entirely – they can add compatible functionality or equip other locations with SaaS cloud apps.

However, Gartner’s study also predicted that by 2017, 70 percent of organizations adopting hybrid ERP will fail to improve cost-benefit outcomes unless their cloud applications provide differentiating functionality. There is the potential of actually increasing the total cost of ownership. According to Carol Hardcastle, research vice president at Gartner, “Most organizations still fail to recognize and plan for the total lifetime costs of their ERP solutions, whether on-premises, cloud or hybrid. Such an approach actually leads to increased total costs once the additional costs for connecting the solutions together are taken into account.”

Stay tuned for Part 3!

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