Software Selection: Involving the User Community

Cloud vs Hosted ERP for Manufacturing and Manufacturers

by Estes Team | Jul 18, 2017 | Cloud, NetSuite

I’m Jeff Klaubert, with the EstesGroup. You know, I think by now we all accept that we are living in a digital and cloud-based world moving forward. As a matter of fact, according to research conducted by the Enterprise Management Associates, in 2017 alone, companies will move 19 percent of their applications to the public cloud. They’ll move an additional 10 percent to a private cloud. So think about that. Just one year, companies are moving 30 percent of all their applications to some form of a cloud environment.

And, of course, the cloud has been with us for a number of years, so it’s not just that 30 percent from this year. It’s a big shift. And the research goes even further. They concluded that today, 45 percent of all companies are using the public cloud services of at least three providers. So make no mistake. We are in the midst of a major digital transformation that is impacting all industries. And the fact that you’re watching this video suggests that you’re probably in the middle of your own transformation or certainly evaluating the strategies that make the most sense for your business.

In this video blog, we’re actually going to cut through all the jargon and hype, and we are going to define and compare and contrast the different types of digital deployment scenarios you should be thinking about for your business. And, you know, to start off with here, let me just kinda set-set the-the baseline, all right? This video is not about telling you that you need to go to the cloud. It — we don’t know that, right? In every business is going to be different. But what’s crucial is that you understand the differences between the-the-the deployment scenarios and you use the terminology correctly.

We hear these terms “cloud” and “hosted environment” and “hosted applications.” Throw in “virtualization” in there. People use these terms interchangeably as if they mean the same thing as if there’s just like one common general digital deployment scenario, and that couldn’t be further from the truth. Cloud and hosted applications are very different solutions, and it’s crucial for you to understand the implications for your business so that you can evaluate your options with clarity.

So, over the next two videos, we’re going to, one, define — simply, let’s define, using industry-standard definitions, what cloud is and what a hosted application or a hosted environment is. That’s what we’re going to do in this video. In the second video, we’re going to compare and contrast the two deployment scenarios using National Institute of Standards and Technology — NIST — using their five essential characteristics of a cloud solution. So at the end of these two videos, you are going to understand how those, how these different deployment scenarios relate to your business and what makes the most sense, because no one size fits all.

Now, before we get started into that, I actually want to start off with a little, setting a little context, that cloud, and hosted applications, these models are not new by any stretch of the imagination. They’ve been around literally for decades. As a matter of fact, IBM introduced the underlying technology of cloud, which is virtualization, all the way back in 1972. They called it VM virtualization. And they did it — here, check this out — to create an agile mainframe that had the ability to share resources dynamically in response to a changing environment. Now, doesn’t that sound pretty similar to the cloud pitches of today?

And, interestingly enough, in that same year, SAP introduced a revolutionary new application that they called Enterprise Resource Planning in 1972, which enabled customers to take orders and track inventory in real-time to provide better visibility and control to the business and provide enhanced customer relationships. Now come on, folks. That was 50 years. So that’s proving out the adage that the more things change, the more they stay the same. I want to, I want to set one more context here. Some would argue that the current version of the cloud is nothing more than management’s response to needing to get more things done quicker.

You see, the pace of change has accelerated so much that oftentimes the traditional on-premise IT strategy just can’t keep up with the pace of business. So in order to remain competitive and innovative in today’s hyper-competitive and-and increasingly global environment, it really does take the cloud and digital business models. Okay. Let’s get right down to it. Let’s define cloud and hosted applications. Let’s start off with Gartner’s definition of cloud. They define cloud as a style of computing where massively scalable, IT-enabled capabilities are delivered as a service to external customers using internet technologies. Did you notice there was no technobabble in there?

They’re talking about business capabilities. Now go back to my argument that some-some would say cloud is nothing more than management’s response to needing to get more things done quickly. Well, what is a capability? You know, at its core it is the ability to get something done. So that’s what cloud is doing for us. It’s enabling us to accelerate how much we need to get done, where we can get it done, how we can get it done. It’s really exciting, actually. Now. Let’s get a little more, you know, infrastructure-y about this. Let’s look at the National Institute of Standards in Technology. NIST. Let’s look at their definition of cloud.

They define cloud computing as a model for enabling convenient, on-demand network access to a shared pool of resources, meaning servers, storage, network, applications and underlying services — here’s the key thing — that can be rapidly provisioned and de-provisioned with minimal management effort or service provider interaction. Now think about this here. What in your current on-prem IT environment that is significant enough to run an aspect of the business can be rapidly provisioned or unprovisioned today? Probably nothing. [laughs] And, in fact, if you can do that, you’re on the cutting edge, and you’re probably on the cloud, and you probably know that.

Okay. So those are two definitions of cloud. Let’s compare that to what a hosted environment is. And a hosted environment is pretty much taking your current environment — you have an entire technology stack, so you have your own manufacturing ERP software, your own services, your own network, all that stuff — and simply transporting it to someone else’s data center and letting them manage that. Major differences between cloud and what I just described there. So in a hosted environment, you still have to — you or someone else has to maintain your own software, and you still have to deal with version issues or how many versions back are you. Or, you know, you have customizations that are required to meet your business requirements. Will they be carried forward to the latest manufacturing ERP software?

You still have all those concerns, and you still have to implement that on a server, both whether it’s physical or virtual. You are going to own that, buy that, or pay for that somehow, and someone’s going to implement that. And that server’s sitting on a network in a data center, so you got ping, power, and pipe. And you have your own silo, your own stack of technology compared to and contrasted to the cloud, where you have a shared pool where you can dynamically have access to all of the underlying resources. As a matter of fact, one of the key differences between cloud and even a virtualized environment is that cloud adds orchestration and automation so that you get to extract your applications in your workload from the underlying infrastructure.

You don’t have to worry about that. Think about it like a-an-an automobile, right? Pretty much any car, anywhere in the world, you get into it, and your interface with it the same way. It has a standard set of capabilities and functionality that pretty quickly you can, you can, um, understand and adapt with and get using it, versus a hosted environment. Think of that like, you know, a water tank. You have to own the tank itself. You’ve got to make sure there’s enough water in it. and then there’s must be a hose to get it to you. So those are the differences between cloud and a hosted application.

As you can see, they’re completely different. So, in the next video, we are going to go just a little deeper, and we’re will use NIST’s, definition of cloud. Well, actually we’re going to use their five essential characteristics of the cloud as a framework to compare cloud and hosted environments from a functional perspective. We will be pretty granular about this. And at the end of these two videos, you will understand the difference, and you’ll be able to better evaluate your options. Now I want to leave you with this thought that, you know, no one solution fits all businesses.

So our approach at the EstesGroup is we want to get to know your business. We want to talk with your people. We’d actually like to visit your facility and walk your production floor and understand your processes. You see, we’ve been implementing manufacturing ERP software systems in the mid-market manufacturing space since 2004. Our people understand manufacturing and distribution processes. We’ve run the same systems you’re running today or are considering implementing in your business. Invest an hour of your time, and let’s do a digital process review and see how ready we both are to help you do your own digital transformation. I’m Jeff Klaubert, and we’d love to talk with you.

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