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? 

  Tensoft’s High Tech Dashboard (HTD) is one of our newer products, but customers who’ve been using it already swear by it. One of the keys to its value is its ability to look at booking/billing/backlog information on a daily basis. With HTD, company executives simply check their mobile device every morning, and get an up-to-date reading of this key performance indicator.

Booking/billing/backlog reports are common for many tech companies, but may not be as familiar to those outside of that industry.  A booking is a new order.  It’s not revenue yet, because it hasn’t shipped, but this data is a leading indicator of where revenue is heading, and whether or not a company is going to make its numbers for the quarter. Backlog numbers indicate how much the company is going to ship, a number which can be time phased to see when it should turn into revenue. Together, these provide a quick indicator of health.

I’m always amazed at the effort companies will put into tracking bookings/billing/backlog manually. Often, we’ll go into a company and discover that one person’s entire job is to maintain a monster booking/billing/backlog spreadsheet. This huge spreadsheet gets passed around the company, but by the time the updates are done and it reaches all key personnel, it’s already out of date.  (Not to mention, highly suspect, due to the high incidence of error inherent to spreadsheets.)

Tensoft HTD both automates this process and provides options to do a lot more with that data.  ERP systems generate a huge amount of data, but this needs to be turned into actionable information to help execs make informed decisions. Tensoft HTD makes use of the data that’s already there in your ERP system, including historic sales data, tactical operations data for execution and forward-looking data used, for example, to see whether there’s enough material to meet supply.

Let’s look at a real world example. One of our long-time HTD customers uses the product to send an email to its CEO every day – before he even gets to the office. This email tells him whether the company is on track or not, by looking at performance indicators such as bookings/billings/backlog against forecast.   And, every salesperson in the company also gets a daily email that says: “Here are your bookings, quarter-to-date, and here’s where you are compared to your quota.” So every day, both the company executives and field salespeople get actionable, behavior-driving information that they can drill-down to a very detailed level.  Now that’s technology-driven motivation!

 I just read a blog post by Mike Gualtieri, a senior analyst at Forrester Research who specializes in application development, IT management and delivery issues. In his post, Mike was reflecting on the popularity of running cloud applications, and how “The Cloud” has now become a buzzword for savings and flexibility, when in fact this may not always be true.

He maintains that cloud computing is ideal only when “elasticity” is built into the mix -- when the cloud system is automatically brought into play during peak periods, and it’s “asleep” the remainder of the time. Mike used the analogy of the homeowner’s ability to only pay for electricity when the lights are turned on.

Reading this, I reflected gratefully on how Tensoft has implemented the cloud in just this way – building automatic flexibility into each installation. Unlike other solutions providers, our customers enjoy this benefit now, because they’re able to add or remove users on a monthly basis, paying only for the ones that they currently need.  We also scale the application infrastructure support without the user needing to ask or to even think about asking for it.  The result? No wasted user licenses or extraneous costs. Tensoft solutions are helping our customers to “shut off the lights” when they’re not in use.

Take a look at Mike Gualtieri’s blog and tell me what you think. I think this is an issue that bears more discussion.

 We hear this question often enough that I thought our readers might be interested in the answer that I recently posted on Proformative.  Here's the link to the original post, which includes some other answers with helpful information: www.proformative.com/ask/question/what-difference-between-cloud-computing-managed-services.  Here's my answer, from that same page:

"Managed services has been well explained here, and cloud computing with software as a service has been covered nicely as well. I would add that there are benefits possible with cloud computing – specifically, a public cloud environment, shared among multiple users - that leverage technology and the democratize high end computing in a way that managed services can’t. In a public cloud environment, these benefits provide high end capabilities to customers that would not otherwise be affordable to them.

While a public cloud environment requires careful attention to security, isolation, and process, it also offers significant management and cost advantages over the managed services model. For example, 100 managed service customers may require 200 or more servers to support. The same numbers of public cloud customers may only require something in the order of 20 servers with the appropriate management technology. The cost savings for a public cloud are evident, but these numbers actually translate into significantly improved security, since there are far fewer servers that need to be monitored.

Another benefit of a public cloud is 'high availability,' which basically boils down to this: there’s no single point of failure. In a managed services or an in-house, on-premise model, you would need to duplicate – at a minimum – every feature of your infrastructure to achieve high availability. In addition, a public cloud environment will include data management technology that is far beyond the average mid-market company’s budget, but can be provided cost effectively in a public cloud.

The choice of what’s right for your company depends on the type of technical service and software subscriptions you need, of course. But, there are compelling reasons for the popularity of the cloud model, chief among them being its ability to make high end computing available to companies who couldn’t afford the same level of technology in a comparable in-house system."

Tensoft provides solutions in a public cloud - rather than as managed services - because our customers want the benefits that I've outlined above.  In fact, we use the same public cloud that we provide to our customers, so feel free to ask me how we like it!  

  Now that the train has left the building for Microsoft’s 2011 worldwide Dynamics community conference, it’s time to reflect on how this year’s announcements affect Tensoft and its customers.

All last week, the blogosphere and twitterverse lit up with discussion about Microsoft’s cloud computing announcements.  But for all its notoriety, the cloud news from Convergence is simply an extension of Microsoft’s ongoing communication and strategy execution from Convergence 2010’s “all in” cloud rally call.

So, where does this leave Tensoft and its high tech customer base?  How are we positioned within the iterative ecosystem, and do we have the agility to acclimate to continued innovation?

 The short answer is we’re  pleased by the validation that Microsoft’s massive cloud strategy gives to  Tensoft’s strategic goals, R&D investments, HR staffing objectives, product development roadmap and technology partnerships.  For example:

•  Tensoft applications have always been designed for the web.  Cloud deployment through advanced data center and virtualization technology was an easy and logical next step for Tensoft.  With the Microsoft ERP stack we have leveraged the world class database and portal technology. 
• Since 2005, Tensoft has provided ERP solutions through cloud technology.  Our Tier One, SAS 70 certified Cloud infrastructure environment brings the cost effective benefits of a public cloud to our emerging and established customers.
• Cloud deployment offers the promise of easy to use and maintain ERP solutions with a lite internal IT footprint.  Tensoft’s focus of vertical industry solutions fully integrated to the ERP stack offer more value than ever.  We are offering out of the box industry specific ERP solutions for the Technology Industry.  Software, Internet, Semiconductor, and Tech Hardware companies receive the benefit of deep industry experience from a Cloud solution delivery.

According to IDC, $17 billion was spent on cloud-related technologies, hardware and software in 2009, and this spending will grow to $45 billion by 2013. With Microsoft spending nearly $10 billion dollars alone on R&D in 2011, this means that our mutual customers will have the option to embrace technological change at a business reasonable pace.  It also represents continued commitment to enhancing the architectural platform and features of Dynamics ERP with a transparent long term roadmap, and an opportunity for even greater collaboration with other applications such as Excel or customer- facing systems.

We look forward to “the road ahead,” in the cloud.

For those who are willing and able to invest the time and effort, there are an astounding number of ERP selection guides.  Additionally, there are online and consulting services that specialize in helping you make an informed decision.  These options are intended to provide users with a "bullet- proof" Request For Proposal (RFP) - one that will "guarantee" an objective outcome.  However, many companies ultimately find these methods to be either expensive or unsatisfactory - or both - and to be designed more to validate a decision or to support company political necessity.

 Despite the use of ERP selection guides and services, anecdotal evidence often plays a significant part in ERP software selections.  It's human nature.  Colleagues in your professional associations, Board members, golf partners: anyone who's been at a company that's implemented an ERP system, or knows of a company that's implemented an ERP system is happy to pass along what they know, or what they have heard.  Most of us take anecdotal evidence with a grain of salt, of course, but how do companies make a good decision about which ERP solution to chose?

 First, look for solutions - and solution providers - with deep experience in your industry.  With a really close fit, you won't need to invest a day or more educating each candidate about your needs - they'll already know, and will have more than a few customers who look pretty much like you.   

Second, I'd recommend taking a look at the vendor rankings in The Accounting Library (www.accountinglibrary.com).  This provides an objective measure of the depth, breadth and maturity of core financials, based on a third party review.  And, if a well-known vendor is not included in the rankings, you should probably explore why they've chosen not to participate.   

Third, follow the time-tested advice in "Keep It Simple When Buying Enterprise Apps," attached below.  The basic idea is to pick 2-3 specific issues that your company needs to address, and ask your short-listed vendors to show you how they address those issues.  You'd be surprised at how often the key reasons that started your search for a better way can get lost in the most seemingly thorough RFP.   

Finally, look for a team that you're comfortable working with.  You'll be spending some time together - might as well enjoy it as much as possible!

We’ve recently posted a great new customer case study to the Tensoft website that beautifully illustrates the benefits of cloud deployment. Focusing on our customer, Syndiant, the four-page case study describes how this technology industry start-up has been able to leverage Tensoft’s industry-specific solutions in the cloud to quickly gain better visibility, control, and efficiency.  .

 Syndiant’s V.P. of Operations, Tupper Patnode, provided much of the commentary in the document, discussing in detail how Tensoft FSM and Microsoft Dynamics GP, running on a cloud platform provided by Tensoft partner SaaSplaza, enabled the company to comfortably plan and scale their growth from a $1 million company to $20 and up to a $60 million enterprise. Take a look at the Syndiant case study and tell us what you think by responding to this blog.

And, if you’re planning to attend Microsoft Dynamics Convergence in Atlanta on April 10-13, discuss the particulars of the Syndiant project or your own future project with our own Michael Chadwick and Sonam Thandi in the SaaSplaza booth #1316. They will only be at the booth part of the time, so contact me ASAP if you’d like to arrange a time to meet.

See you in the Cloud!

I recently ran across  a Microsoft press release  that summarized the results of its global SMB IT and Hosted IT Index, a research study that investigates how small and midsize businesses are faring during the recession and how they use technology. The research was extensive, interviewing 3,000+ small and mid-sized companies in 15 countries.

The key conclusions are well summarized in the first paragraph of the press release:  “businesses that value IT as an enabler for better business productivity and effectiveness and those that use hosted services performed better fiscally than those that do not.”   

Interestingly, more than 40% of the respondents were using hosted or cloud technology, and these companies reported revenue rises of 30% or more, despite the global recession.  On the other hand, 90% of the respondents who did not use hosted or cloud technology saw revenue decreases.  That’s a pretty strong endorsement for allocating IT budget in the direction of cloud technology!

Here at Tensoft, we’ve definitely noticed a trend towards the adoption of cloud or hosted ERP among our customers (see 10/1/09 press release).  While we could name quite a few examples of well-run companies from our customer list who choose to host their ERP systems on-premise, most of these are utilizing some form of hosted or cloud technology. 

This all makes good sense.   Most of our customers are multinational operations by the time they have 50 employees.   Building an internal IT infrastructure that can support a global operation 24/7 is a costly undertaking.  And, for many companies today, it’s a distraction from their core competencies. 

Of course, there are exceptions.   But the results of this study suggest that companies that haven’t yet tried some form of cloud technology may be making a mistake.  

It's been almost a month since Momentum 2010, the 5th Annual User Conference for Tensoft Fabless Semiconductor Management (FSM) customers.  Internally, we've had time now to process and begin work on all the great enhancement suggestions and feedback that came out of this year's fabless ERP brainstorming, and we've also had time to go through the conference surveys. 

The consensus seems to be that this was the best conference ever, despite the fact that we deliberately took a very low-key approach to keep the conference affordable.  Who knew?  Well, one conclusion that you could draw from this is that our very wise and grounded customers tend to choose substance over flash - a smart choice and one that we support!

For a little something different this year, I wandered around during the breaks and solicited feedback on the conference from customers, as a supplement to the usual feedback surveys.  I used a Flip HD camcorder, one of the mini videorecorders that are only about the size of a cell phone.  The result was a little "Blair Witch Project" as far as video quality goes, but our customers were good sports, so I was able to record some great feedback.  This was fun and helpful for our team internally, so I asked some  of the conference attendees if they'd be willing to let me share a few clips here.   A couple of them graciously agreed. 

The first clips are of Ted Tresch, a seasoned semiconductor ERP and supply chain planning software user, who became a Tensoft FSM expert at Open-Silicon.  Here, he's commenting on Tensoft's new product introductions.  Ted was also a strong proponent for this year's more casual conference venue, as you can see in this clip.  Thanks Ted!

Deshen Yu, VP of Information Technology at Amlogic, was attending the conference for the second year in a row.  Deshen has many years of experience managing ERP solutions from a variety of ERP vendors, so his positive feedback was especially appreciated. This is a clip of Deshen commenting on his experience at Momentum 2010.

I hope these clips give you a feel for what the Tensoft FSM User Conference is all about, and hope you can join us next year.