Industry clouds have been getting a lot of media attention in the last year as vendors vie to demonstrate their ERP solution offers the most seamless transition to the cloud and delivers the most relevant functionality for a specific industry.
The dilemma for long-standing ERP customers is that they have become very attached to their highly customised on-premise applications so any claims an industry cloud can replicate the same level of functionality will quite rightly face scrutiny. As customers evaluate their best approach to modernize their existing ERP systems it is therefore no surprise they ask: are industry clouds delivering on their promises?
First, let’s define our terms. What are industry clouds? These SaaS platforms swerve away from generic approaches to act as a fast-forward button for companies seeking a model that fits their specific industry.
Hence, there are industry clouds for manufacturing, professional services organizations, for retail, healthcare, non-profits and pretty well every other sector of a reasonable size. They build in relevant functionality, data models, cross-cloud connectors, workflows, APIs, core processes, regulatory standards support and whatever else is needed. For example, as a non-profit, it is very important to keep track of and report to donors how their donations are spent.
To answer the question posed earlier, I would say industry clouds are beginning to deliver on their promises, as they are already solving two of the age-old and fundamental challenges in enterprise IT. Namely, implementation times and effective data integration.
As we researched the launch of our Industry Mesh technology, we spoke to some of our customers who said that for a typical organization with 1,000 employees, the productivity impact of optimized integration between ERP and ancillary systems equates to up to $1.2m/ €1.0m per year.
If, as IDC suggests, 40 percent of Global 2000 companies will be using their ERP systems as the data and transactional hub for their industry-based ecosystem by 2023, the ability to implement quickly and ensure data is flowing correctly around the organization will be crucial.
Consequently, industry clouds let organizations get a head-start on value creation and they tend not to be prescriptive or force users down a very specific and rigid direction. Instead, they are composable and flexible within their parameters, with, for example, development tools, snap-on integration, optimized data fabrics, app stores and marketplaces allowing buyers to make them bend to their needs.
Why are they popular? Industry clouds have won support especially among companies that want to concentrate on what makes them different as a business and move at pace. Gartner research suggests that 40 percent of North American and European enterprises surveyed, are deploying industry clouds while a further 15 percent are in pilots and a further 15 percent are considering deployment by 2026. So, we can say with confidence that industry clouds are delivering on their promises.
Fit enabled by technology
People are coming around to industry clouds because there is a greater maturity in enterprises. While they provide a solid foundation, there is plenty of room to innovate quickly building software that is unique to a company’s business operations. How does a company become digital fast? In our view it is a careful resource allocation decision — deploy industry clouds and create custom software to create business differentiation.
The problem industry clouds solve is to provide the foundations that can be easily adapted to the needs of different enterprises without excessive cost. For example, Unit4 Industry Mesh automatically integrates data flows from the likes of Salesforce and Microsoft Dynamics CRM so that finance users can capture cost of sales and support billing while providing invoice and reminder data for account executives. It also includes data flows from Oanda for updates on exchange rates and Dun & Bradstreet for quick evaluation of customer credit ratings. Other integrations around tax filing, e-invoicing, banking, document management and credit card transactions also mean your core ERP system is helping to create value sooner.
Perhaps even more important, though, is that these integrations are not just for generic business processes. We work with services industries and within different sectors which have specific processes. For example, in professional services how users integrate Salesforce with the core ERP system is different to non-profits – understandably because they are focused on different business and organizational metrics. In the former, it is crucial to understand as quickly as possible which deals are likely to close, so that you can reserve capacity in your teams within your core ERP system.
Non-profits must be able to track fundraising in Salesforce and show funders how those resources have been allocated to different causes. This requires an industry specific integration. In the past it might have been delivered by a Systems Integrator which could be very expensive, but now thanks to low-code development models and open APIs companies like Unit4 can turn these integrations into a product feature.
Next steps
So, where next for industry clouds?
I think Gartner is correct when it says that to succeed fully, industry clouds will need to evolve into ecosystem clouds where inter-business processes are easily managed to facilitate fast, multi-party back-office functions such as procurement, distribution, payment processing and so on.
In a world of co-creation, co-curation and attempts to avoid a race to the bottom on pricing, industry clouds will need to support and foster joint innovation and ideation through sleek value chains. Nobody wants to become isolated or become locked into a cloud where others don’t want to join the party.
Similarly, nobody wants to go back to the days of spending as much, or more, on customization and hiring armies of ABAP programmers. The emerging model of IT that industry clouds exemplify is pragmatic and depends on a layering of innovation on common building blocks. Think of Veeva Systems as a sign of the times here: a CRM system purely for life sciences and built on the Salesforce platform.
In the bad old days, too many company leaders insisted they were so different to everybody else that they needed unique software. The result was high costs, ample scope for delays and major challenges in hiring people with scarce skills. Today, we can accept that relatively few metrics and processes are unique to an industry and yet fewer are unique to an individual organisation. That acceptance means we can profitably re-route our ICT approaches to go faster and tweak less.
Those who may criticize industry clouds, suggesting they have not delivered on their promise may not have fully understood how organizations use IT systems to create competitive advantage in this world of low-code, agile development models and tools. Rather than trying to customize functionality such as payroll, leave that to the industry cloud, because spending time tailoring such a process is not likely to shift the needle.
If you leverage industry clouds properly you can focus resources where software has not been developed for your industry. This is where you can build unique functionality, which will deliver competitive advantage.
If organizations are to fully embrace the potential of industry clouds, they must embrace this new realism about where IT delivers value and where it does not. If you are prepared to shed your reliance on traditional customized enterprise applications and be prepared to focus where IT differentiates your organization then industry clouds will meet and exceed your expectations.
This is a sponsored article from Unit4.
