We've been seeing strong signs of optimism about the economy in our customer base and in the prospective customers as well, so I was interested to see the results of PwC's survey of 60 multinational U.S. industrial manufacturing companies.  While this is a somewhat different segment of manufacturing than most of our customers, I think there's definitely enough overlap to be relevant to high tech. 

Based on the survey summary released today, these companies expect global economic growth this year and are planning accordingly.  Here's a quick overview of some of the findings: 

·         Most survey respondents plan to increase hiring in 2012.

·         The majority of those surveyed plan to increase investment spending this year. 

·         Companies report improved profitability in recent quarters.

·         There's less worry today about growth barriers than in the recent past.

One section of the survey that may be of particular interest to readers here is how the overwhelming majority of these companies have used technology to help achieve their strategic objectives to date.  In fact, a full 98% of these companies credit technology for improving operating performance in areas such as business intelligence and reporting and manufacturing and supply chain/distribution processes.   Most also cite increased business agility as a benefit of technology investments.

Going forward, 71% of these companies will be looking to digital change and transformation as a key enabler for their business growth over the next 1-2 years.  Why?   The two most common reasons are customer demands, especially for product information access, and supplier demands, especially for order management capabilities. 

Finally, 57% stated that their immediate plans for technology investment include cloud computing.

It's worth reading the entire summary, if you have a chance.

  Statement on Auditing Standards 70 (SAS 70) was the internationally recognized auditing standard used by service auditors to reporting on controls placed in operation at service organizations, including cloud services providers.  The American Institute of Certified Public Accountants (AICPA) issued Standards for Attestation Engagements 16 (SSAE 16) in 2010 to begin replacing SAS 70, starting on June 15, 2011.  

SSAE 16 was created both to update the SAS 70 standard and to align the US based standard to similar guidance released by the International Auditing and Assurance Standards Board (IAASB).  This guidance is known as the International Standard on Assurance Engagements 3402 (ISAE 3402), Assurance Reports on Controls at a Service Organization. 

The bottom line is this: what was once an auditing standard is now an attest standard.  SAS 70 required a description of controls, but not a written assertion by management.  Both SSAE 16 and ISAE 3402, however, require a description of the service organization’s system, along with a written assertion by management.

If your cloud services provider is not SSAE 16 and ISAE 3402 certified, you may want to ask some questions, and soon.  After all, the security and integrity of your data may depend on it.

 Seeing Dynamics GP 2013 for the cloud was definitely one of the highlights of this year’s Convergence for me.   It was great to see all of the focus on enabling Microsoft Dynamics for the cloud and all of the resources around that.  The one they’re doing this is by enabling screens using Silverlight technology to take existing dictionaries and configuration files from Dynamics GP, and presenting them as Silverlight windows.  So, for add-on modules that use a dictionary, then it should be enabled in the Dynamics GP 2013 web client.  Also, Microsoft has put a lot of thought into how to support multi-tenant deployments,   which promises to provide some cost savings, which we can then pass on to our customers.

For my perspective as a CTO, the session that I was most excited about was on high availability for SQL Server 2012, the new “AlwaysOn” version.  High availability is a key benefit for SQL 2012, allowing you to have multiple instances which will automatically fail-over, one instance to another.  For Cloud customers who want to have an on-premise instance of the Dynamics databases for archive purpose, internal reporting writing, or testing, this will allow us to do asynchronous synchronization to a customer site.   So, with SQL 2012, we can take the live production server and synchronize it to their server as part of that job process.   

Another benefit of SQL Server 2012 is that if you have two servers linked through AlwaysOn technology, you can actually have your transactional SQL Server database instance running and then have synchronous link to a secondary hot site, and have all your back-ups coming off of the secondary site.  Then you’re not impacting performance on the production server with overhead for backups or reporting, etc.   Now you can have a second SQL instance to use for anything that might impact performance. 

 Technology companies are often criticized for using jargon and acronyms, and I'm as guilty of this as most of us in my industry.  In my defense, I can only say that jargon serves an important purpose - it provides a shortcut for expressing complex concepts, eventually promoting the more popular jargon to a full fledged part of our dynamic language.  

"Scalability" is a word that I've seen on lists of jargonistic goobledygook that should be avoided at all costs.  Yet this is a term that really captues a very specific quality of some technology offerings - that is, the ability to easily scale your investment up or down.  Where do this apply?  There's no better example that the Cloud.

An article in CIO magazine provides a good illustration of how scalability in the cloud works, as well as the clear benefit that this providers to cloud customers.  In this case, Lehman Brothers needed to dismantle $600 billion of assets and needed high performance IT systems to wind down operations, while meeting the requirements of the bankruptcy court.  A key requirement for this was the ability to scale up quickly and efficiently with little (or no) capital investment, and then to be able to scale down gradually as the company dismantled.  

With Tensoft's focus on serving customers in the technology industry, we see this requirement frequently.  Companies want to conserve cash at the same time that they ramp systems and processes to support rapid growth.  They need systems to scale easily, so that they can quickly add new users or capabilities, or remove them if they're no longer needed.  Scalability is a important concept to understanding the cloud model, as well as a key benefit to cloud customers.

 When we first started to develop our own apps, we took a step back to see what we thought would be both scalable and attractive to customers.  Part of what we saw was the begining of a trend towards web-based apps instead of traditional client-server apps.  Clearly, the ability to deliver solutions as web apps would need to be an important part of our solution offering. 

As part of that planning, we began using a loosely coupled integration method, where we isolated the interfaces between our software and the ERP system, so that we would have a way to rapidly upgrade our apps when the ERP was upgraded.  In practice today, moving from one version of Tensoft FSM from the next typically takes only a day to validate that its still working, using the integration tools available to us from the ERP system that we’re integrating to.  Our applications didn’t become so tightly coupled with one ERP that it required a lot of work on our side to migrate to the next version.  We also benefited from this loosely coupled integration model later when we moved our apps to a cloud environment, because we have an interface that’s a web service exchange between ERP data and Tensoft app data.  This is a bi-directional data model that allows us to de-couple our software in a true cloud-based environment so that, for example, we can host our software for a customer and they can have their ERP system on-site on their servers, or we can host both our software and the ERP, or they can have both on-site.  Whether it’s a private cloud or a public cloud, the design should still apply. 

The challenge with a cloud-deployment model for traditional client/server software is that the underlying infrastructure needs are greater since you need to provide more of a remote desktop or terminal server-type platform in order to deploy the software.  It increases the complexity and resources required to deploy that type of solution.  The underlying infrastructure needed to deploy a client/server app in the cloud is greater than for an application that’s been developed for the cloud that can run in a web app and has more universal access for remote users.

In terms of licensing, our model provides some advantages as well.  Tensoft is able to provide vertical appication-specific functionality directly to users who may not need access to the ERP system itself.  Therefore, they don’t have to buy GP seats to access Tensoft apps.   For example, with Tensoft RCM, if a user wants to look at the revenue sub-ledger, they can just use Tensoft RCM independently of the ERP system.  It can be a more cost-effective licensing model for many companies.

 In a world where "the new new thing" is king and longevity is often slightly suspect, it's startling to think that we've now been building web applications since before the turn of the century.  Our current applications and business have evolved to the point where there's scant (if any) mention of those early efforts on our current website, but thank goodness for the Internet Archive: The Wayback Machine!  A quick glance back to this page from April 2000 shows some of the projects that we'd taken live for customers by then, including a web-based travel and expense system. 

When we began developing our current product offerings shortly after that, there was no question about it: they'd be web applications.  Even if most of our customers weren't ready to put their entire financial and/or manufacturing system(s) in a virtualized environment, it seemed to us that the writing was on the wall.  We wanted to develop for the new century.

The move to the cloud has changed our approach in many ways, but it's important to remember some of the very basic differences between today and yesterday.  For starters, the shift from client/server access to a web app model means that only what's required goes to the client.  In other words, the client's machine is no longer required for computing power.   Even more importantly, the shift to using the browser as a web interface has re-set users’ expectations of what they can expect from web applications and what the experience of using a web applications should  be like.  In some ways, the key question that we asked ourselves was: “How do we create more of a web/consumer product experience in our  business management applications?”   For example, we work at making everything no more than 3 clicks away, and we make sure that the basics are there, like a back button that takes you back. 

Building web applications today is all about building applications the way that they need to be built to optimize the world of on-demand cloud systems .   A little experience doing this definitely doesn't hurt!

 There seems to be a fairly common misconception floating around these days that the cloud ERP model automatically lowers training and consulting costs for cloud deployments.   I’ve seen questions about this come up often enough in forums and discussions that I no longer consider it to be just an anomaly.  It’s understandable too, considering all the marketing hype to the effect that “SaaS has changed everything” – consulting and training costs are part of “everything,” aren’t they?

While it’s certainly true that the cloud model has changed the dynamic around system management, it doesn’t negate the need for an implementation  consulting and training effort.  SaaS deployment may save you the expense of new servers and some of the resources to keep them – and your new solution – running securely and up-to-date.  By choosing the cloud, you simply won’t need the same kind of internal IT staff that an on-premise system requires

However, when you’re moving systems, it’s often a time of transition for your company.   Some of the reasons for the change may include business growth, going public, or just outgrowing old systems.   At a time of this sort of significant change, it makes sense to take a serious look at your business model, business processes, and generally how you do things.  

If you are at a transition point in your business, having input from implementation consultants who are skilled in your industry and its best practices will be extremely valuable to the long term success of your SaaS ERP implementation.    It’s a smart investment.

   While there’s been plenty of hype regarding the benefits of Cloud Computing and SaaS, a commentary by Proformative’s John Kogan in Forbes – “Defining IT Differently” – provides a very reasonable argument.   Kogan argues that moving to the Cloud and/or SaaS solutions reduces the number of IT staff needed at companies who do this, but that those who are left are more strategic.

I agree that this shift changes the composition of your IT team.  How it changes the composition depends on where you are in your company history.  Smaller companies who move to the Cloud will no longer need as many system administration staffers, such as desktop support and support for your engineering team.  Subsequently, the shift to the Cloud allows smaller companies to bring in a business analyst(s) at a much earlier point than they normally could afford to – definitely a strategic IT position for most companies.  While it still desirable to have someone on staff who understands what your Cloud provider is doing, and there may be some tasks you need/want to do on your own, the move generally means a reduction to system administrators and hardware specialists.

Kogan touches on another point that I see as one of the most significant benefits of the Cloud - the ability for companies to have access to far more – and better – hardware, technology and support in the Cloud than they could economically source for themselves.  This democratization allows smaller companies a more level playing field, and it also makes the Cloud a comparative money saver if you consider all of the costs that go into it (labor, hardware, replacements, training, etc).  This comparative cost savings is a point that is often over-sold and misunderstood – it’s a powerful benefit, but “the Cloud is cheaper” is not an accurate picture.

 Re-posted from ERP Software Blog:

I recently answered a question about the “disadvantages” of the cloud on an accounting and finance forum.  As a cloud solution provider, I’m actually very enthusiastic about cloud services – I see the benefits to our customers and the potential for even more benefits in the future.  However, I’m also in a good position to play Devil’s advocate on this topic, having heard some of what can go wrong in the cloud, and having learned a great deal from my company’s experience in this area.   Still, the benefits of the cloud delivery are strong enough that I think “trade-offs” more accurately describes what I’ve seen than “disadvantages.”    

 As there are with most things in life, there are certainly trade-offs to consider related to operating in the cloud.  If you’re interested in achieving the great benefits of the cloud, you should be fully aware of the trade-offs involved, so that you can establish an agreement that optimizes these trade-offs as best fits your company.   For example, let’s take a look at three of the major benefits of running in the cloud – simplification, availability, and ease of upgrades – and what the trade-offs may be for those benefits.

One of the primary drivers for cloud business applications is simplification.  Most system users have, at some point in their career, been told by their IT department that some seemingly simple thing can’t be done due to technology, resource availability, scheduling, or some other factor.   In these situations, who hasn’t thought, there must be an easier way to get things done?   The decision to move to the cloud may be seen as a way to focus on your company’s core competencies and to outsource non-strategic functions, or as a way to free up your internal IT staff for more high value-add tasks, or simply an acknowledgement that a good cloud provider generally has more expertise and infrastructure to leverage.  Whatever the driver is, I couldn’t agree more that the idea of turning on applications as a service and letting the cloud provider take care of the behind-the-scenes IT functions is very compelling.

The trade-off here is some loss of the control that you naturally have when everything is managed and run in-house.  For example, you may have less control related to direct data access, or the ability to extend applications through integration and optional extended analytics or reporting capabilities.  Most cloud providers simplify systems to make the solutions easier to use and support.  If you’re in a situation where strategic benefit can be gained through extending or modifying the application, you may find that – while most cloud providers do have optional services to support additional functionality – they often come at an unexpected and outrageous cost.  The solution?:  Make sure that:  1) the cloud solution that you choose is a very good fit for your industry; 2) negotiate for flexibility if needed; and, potentially, 3) budget for a private/public hybrid environment.

The second great benefit of the cloud is availability – the cloud makes remote access available and highly efficient for a cost that most internal IT organizations simply cannot beat.  If you open a remote office, your IT staff is now supporting multiple locations.  If you open an overseas office, your IT staff is now supporting multiple time zones.  If you have a single office that’s full of road warriors or remote access users, you are now supporting an extended enterprise.  The cloud is designed to be accessed from wherever you are, on multiple devices.

The trade-off is that your system performance will be more dependent on your network performance.  If you have survived on small network pipes to date, and your engineering team decides to download large design files every morning, then system performance will decrease.  If it isn’t already a priority, it soon will become a priority to actively manage networks and connectivity to the outside world.  The solution?:  If you’re moving from in-house applications to cloud-based applications, it’s important to consider the quality and quantity of your network pipes, and make the appropriate changes to update/upgrade.

Finally, the cloud offers the promise of easier upgrades.  The concept of easier, no-hassle upgrades appeals to almost everyone.  The trade-off here is the short shrift often given to user acceptance testing (UAT) – a process that is both required for Sarbanes-Oxley compliance, and a best-practice when your organization reaches a level where mission-critical systems should be reviewed as part of good change management.  Without a UAT option :  1) changes to functionality can occur before your team is trained; 2) errors could be found after you’re already live; 3) your provider may give you a UAT option that fits their schedule rather than your team’s availability; or 4) your provider may avoid significant feature enhancements in order to simplify their own upgrade cycles.  The solution?  If your cloud solution provider does not provide or offer a UAT process, negotiate one before you buy. 

If you carefully weigh the pluses and minuses of in-house applications versus cloud applications, you’ll be better equipped to avoid the possible pitfalls.  Not only will your decision to “cloud or not cloud” be easier, but it will be much more obvious which cloud providers can best support your needs.

 Gartner analyst Jim Sheperd recently published a commentary called "Multienterprise Commerce May Be What Comes After ERP," which discusses the need for a replacement for ERP.  Here's a partial explanation of why he's suggesting this:

"Many companies in the retail, distribution and manufacturing industries are struggling to manage complex and dynamic global supply chains with ERP systems that were intended to support the internal operations of a vertically integrated enterprise. The 'enterprise' in ERP was definitely singular!  The problems that I dealt with as a material planner in the 1970s, or that I designed ERP and supply chain applications for in the 1980s and 1990s, are largely irrelevant today. I needed systems that could help me plan materials with six- to nine-month vendor lead times, where everyone's warehouses and distribution channels were stuffed with inventory....  The real business problem that today's manufacturers and distributors are struggling to manage takes place between companies, not within them. Planning, sourcing, production, costing, tracking and fulfillment must take place in an environment that can be accessed and updated by all the players in the value chain. "

Tensoft's customers operate in exactly this environment, which has informed our product design from inception.  Cloud delivery has been a more recent development, but I couldn't agree more that it is the right way to go to meet today's collaboration challenges.  

What do you think?