Paul Esherwood looks at the options for Oracle customers. Tune in next issue for a similar review for SAP installed applications.
As a journalist, I find myself at the same crossroads as many CIOs; I know cloud technologies – whether applications or infrastructure – are complete game changers. I understand that AI-infused ERP systems will continue to deliver efficiencies, advantages and insights beyond their on-premise equivalents. And I realise that installed applications are legacy technologies that one day will be as forgotten about as an 8-track player and VHS recorder. But I can’t ignore the fact that the vast majority of enterprises are not on the cloud with many of them harbouring legitimate concerns about costs and business-wide disruption. Whilst the focus of ERP Today is to champion emerging technologies, we are equally committed to providing balanced and realistic commentary that is accessible and relevant – we can’t ignore the fact that most businesses aren’t running cloud apps.
Ask any senior exec at one of the big ERP vendors if they are focussed on cloud or on-premise applications and you will only get one answer. However, 90 percent of their customers have not joined the cloud revolution with many standing station and looking at ways to maximise their investment in existing technology before jumping ship and joining the cloud elite.
We all know that feeling when you’ve spent your hard-earned cash on a new TV or smart phone, only for the manufacturer to bring out an even better version a few months later. You feel like a second-class citizen almost unable to watch TV in 4K UHD when you know your neighbours are basking in 8K viewing nirvana.
Many IT directors would be forgiven for feeling the same. Having invested heavily in on-premise ERP technology only to be told that the platforms are redundant, and cloud is the only game in town. However, despite the very strong message from all of the vendors, more than 90 percent of ERP customers remain stubbornly on-premise, with a variety of reasons being offered up to account for the slow adoption rates.
Oracle has the largest customer base of all the ERP vendors with some 430,000 customers running various elements of their technology. E-Business has its roots back in the late 1980’s, when Oracle first released their Financial Applications. These enterprise systems form a critical part of the IT backbone of many large enterprises globally, supporting finance, procurement, HR and supply chain processes.
Until recently, many E-Business customers were nervously looking over their shoulder due to significant doubt concerning the on-going commitment from Oracle to support on-premise customers. A recent announcement which pledges support for E-Business Suite up to 2030 (provided you upgrade to the latest 12.2 version) has put many concerns to rest and now E-Business users can look forward with confidence and consider what their future roadmap will look like.
E-Business Suite crossroads
Despite the positive news around support, E-Business users still remain at a crossroad; continue with E-Business Suite by upgrading to 12.2 and start to deploy some of the cloud options to innovate from a core installed platform. Or, take a leap into the cloud and migrate all applications off-premise. Both options have their challenges and in many cases the decision is dictated by a number of factors.
Mark Smith, CEO of Support Revolution believes that the ‘cloud now’ argument isn’t as strong as the vendors would like us to believe: “In theory the customer will benefit from lower cost, less hassle and no need to upgrade hardware. However, whether this is worthwhile or not depends on how these benefits compare to the cost, complexity and time it takes to complete cloud migration. The journey to cloud is likely to be complex and even when complete the resulting system will likely not meet every requirement. Oracle is very focussed on cloud and moving their customers to a SaaS subscription model – but businesses need to weigh the pros and cons carefully. Is the destination worth the journey?”
Gartner’s most recent report into E-Business Suite also sets out a number of considerations for any E-Business customer contemplating their options. The report advised CIOs to “avoid confusing the sourcing of new technology with the fulfilment of business requirements – a full ‘rip and replace’ of your current applications may not be your best option.”
There are a number of reasons why this advice stands true;
Some verticals are less suited to cloud innovation and many of the advantages that cloud offers do not resonate across all domains. And some simply cannot adopt cloud-native principles due to regulatory and governance issues.
Many customers are reluctant to write-off their investment in on-premise applications and infrastructure until the original lifecycle of the platform has matured.
Full adoption of cloud principles and technologies is far more than another IT project. To leverage the full value of cloud applications, customers need to embrace a business-wide transformation which many are reluctant or ill-equipped to do.
The vast majority of customers are not on the latest release of the product and even those that are, have usually arrived there via a series of technical upgrades, and therefore aren’t leveraging the latest functionality that the product has to offer.
From a functionality point of view, Oracle E-Business is still generally more functionally-rich than its cloud applications counterpart, particularly in terms of module coverage, where some areas have not been implemented in the cloud product yet.
Moving to SaaS means that you are ceding the support of your critical business system to a large software vendor. Whilst there may be some advantages to this, there are also issues to consider as well.
Value Deficit at the crossroad
Unlike pay and play options in the cloud, investment in on-premise applications and infrastructure is costly and has a lifecycle over which the value is realised. Many installed ERP customers are in the middle phases of that return on investment so throwing the baby out with the bath water and abandoning a ten year plan half way through is not an option.
Mark Vivian, CEO at Claremont, an Oracle gold partner specialising in the implementation and management of E-Business Suite said: “Due to the longevity of the product lifecycle, organisations who implemented Oracle E-Business some years ago can experience a gap between what the system is actually delivering for the business, and what it is currently capable of. E-Business users who linger in the void between running old versions of applications and upgrading E-Business Suite often find themselves operating a system that is seen as the problem rather than the solution as ‘off-system’ manual processes breed like wildfire and a proliferation of Excel spreadsheets appear.”
In other words, a value deficit builds up between the capability of the software – which the organisation pays for in licence fees, ongoing support and maintenance costs – and the business value actually delivered to the organisation. By upgrading to the latest version of 12.2 and harmonising that process with the introduction of IaaS or PaaS innovations, customers have the opportunity to maintain their investment in the core technology but also breathe a new lease of life into creaking systems.
Options for E-Business users
Infrastructure cloud: This means retiring the physical hardware on which your Oracle E-Business system sits and deploying it on a cloud infrastructure instead.
Co-existence: This means implementing one or more SaaS modules alongside your existing Oracle E-Business system.
SaaS: This means replacing Oracle E-Business with Oracle ERP Cloud, in other words a full migration to the cloud.
For the purposes of this editorial, we are looking at the future of on-premise applications so we will discount the full SaaS option at this point. That leaves two options (or three if you consider that doing nothing and running old applications which will soon be unsupported as an option).
Understanding the cloud options
The word ‘cloud’ is ubiquitous in the marketplace, but it is also ambiguous and often misunderstood. Many of the themes covered in ERP Today’s editorials on artificial intelligence can also be applied to cloud technologies in general.
And, in this instance it couldn’t be truer. Cloud is the hottest topic in technology but it is often seen as an ‘all or nothing’ option and many businesses, large and small, simply do not understand enough, or have confidence in, cloud technologies to consider them. Whereas your historical upgrade project was always an IT-lead initiative, cloud demands a much deeper assessment of business processes and company culture that many are unwilling or unable to embrace.
Similarly to how AI is solving some of the small problems both at home and work, cloud technologies can also present on-premise customers with opportunities to innovate and gain competitive advantage without a root and branch transformation of their entire business. Customers who can’t or won’t migrate their application estate to the cloud can still embrace some of the cloud advantages in one of two ways.
Co-existence between your installed platform and cloud innovations
Some customers choose to go down the co-existence path by implementing discrete SaaS modules such as talent management or expenses alongside their existing Oracle E-Business footprint. It allows customers to leverage some of the best functionality available in the cloud product suite, dip their metaphorical toe in the SaaS water, and retain their existing investment in Oracle E-Business at the same time.
IaaS and PaaS as a stepping stone to ERP cloud
There are many benefits to moving your existing Oracle E-Business system to a cloud infrastructure. You no longer have to worry about purchasing and maintaining the hardware yourself, up-front Capex costs are replaced with Opex costs, and you will typically have more flexibility to scale resources such as CPU, memory and storage as well. Features such as disaster recovery and security are embedded in these solutions. It’s usually cheaper to take this option, and typically you will get a service level agreement that goes along with this.
Customers who choose to move their infrastructure to the cloud have a number of options; Oracle’s Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) offerings, Azure and AWS et al. Whilst hosting on the Azure or AWS public clouds is generally very popular, the cost of licencing Oracle software on these platforms is at least twice as expensive, and this can offset any savings on the actual hosting.
Vivian from Claremont summed up the options facing E-Business Suite users nicely: “The majority of Oracle E-Business users we’re talking to are opting to look at infrastructure cloud at this point, in conjunction with an upgrade to the latest release of the product. They want to ‘sweat the assets’ and maximise the value that they get out of their existing investment in Oracle E-Business technology before considering migrating their mission critical applications to the cloud.”
What are the highlights you need to know about the E-Business suite roadmap?
The current latest major release of the product, Oracle E-Business Suite 12.2, will be the last major release of the product.
Previously, it was implied that a 12.3 release would come in 2019. Instead, this will be replaced with a ‘continuous innovation’ release model for Oracle E-Business 12.2, which will have ongoing applications and underlying technology stack updates without the need for a major upgrade.
Premier support for Oracle E-Business 12.1 will cease in December 2021 as previously communicated.
Oracle E-Business 12.2 remains in premier support until at least 2030 with the support horizon being reviewed annually.
What does this mean for Oracle E-Business users?
Guaranteed Support for Twelve Years: Whichever version of Oracle E-Business you are currently on, if you upgrade to 12.2, you will receive premier support until at least 2030. This twelve-year support horizon provides certainty for organisations planning their IT roadmaps.
Access to Ongoing Applications Innovation: The ‘continuous innovation’ for applications is akin to the 12.2.x updates that have been made available annually in recent years. This will benefit E-Business users with Oracle’s ongoing product development, making new functionality available as it is developed until at least 2030 with cumulative patches.
Independent Technology Stack Updates and Protected Customisations: Crucially, as the underlying technology stack is independent under the ‘continuous innovation’ model, new versions of this can be deployed without having to upgrade Oracle E-Business applications code, meaning that customisations don’t have to be modified as a result of these new versions.
One Last Major Upgrade in the Next Three Years: What all of this means is that if you’re currently on 12.1, like most of our customers, then you have until the end of 2021 to upgrade to 12.2.
Oracle E-Business R12.1 On Premise
Upgrade to R12.2 – Remain On Premise
An existing software platform that supports organisation until at least 2030.
Upgrade to R12.2 – Move to Infrastructure Cloud
Make further improvements
As above, but management of own hardware/data centre goes away, plus opportunity to deliver further benefits.
Co-Exist EBS & Orcle SaaS
(e.g. Talent Management)
Hybrid approach which combines benefits of existing system with new functionality from Oracle SaaS
Implement Oracle SaaS or other Cloud Application Re-implement a new product to replace Oracle EBS, with associated cost and business change