Case Study:

Enterprise Applications move to the cloud

.You’ve already read about Salesforce.com in thisbook. It’s the most successful enterprise-scalesoftware as a service (SaaS). Until recently, therewere few other SaaS enterprise software applicationsavailable on the Internet. Today, that’s changed, as agrowing number of cloud-based enterprise resourceplanning (ERP) and customer relationship management(CRM) application providers enter this marketspace.

While traditional enterprise software vendors

like Oracle are using their well-established positionto grab a share of the cloud-based application market,newcomers like RightNow, Compiere, and SugarCRMhave found success using some different tactics.

Most companies interested in cloud computing aresmall to midsize and lack the know-how or financialresources to successfully build and maintain ERPand CRM applications in-house. Others are simplylooking to cut costs by moving their applications tothe cloud. According to the International DataCorporation (IDC), about 3.2 percent of U.S. smallbusinesses, or about 230,000 businesses, use cloudservices. Small-business spending on cloud servicesincreased by 36.2 percent in 2010 to $2.4 billion.

Even larger companies have made the switch tothe cloud. For example, camera manufacturer Nikondecided to go with a cloud-based solution as itattempted to merge customer data from 25 disparatesources and applications into a single system.

Company officials were hoping to eliminate

maintenance and administrative costs, but not at theexpense of a storage system that met their requirements,was never out of service, and workedperfectly.

Nikon found its solution with RightNow, a cloud-basedCRM provider located in Bozeman, Montana.

The company was founded in 1997 and has attractedfirms intrigued by its customizable applications,impeccable customer service, and robust infrastructure.

Prices start at $110 per user per month and the

average deployment time is 45 days.

Nikon had been using several different systems toperform business functions, and was struggling tomerge customer data located in a variety of legacysystems. While looking for vendors to help implementa Web-based FAQ system to answer customerquestions and provide support on the basis of thesedata, the company came across RightNow. Nikonfound that not only did RightNow have the capability to implement that system, but it also had anarray of other useful services. When Nikon discovered

that it could combine outbound e-mail, contactmanagement, and customer records into a singlesystem in RightNow’s cloud, it made the move,expecting to receive a solid return on the investment.

What Nikon got was far more than expected: anastonishing 3,200 percent return on investment

(ROI), equivalent to a savings of $14 million afterthree years! The FAQ system reduced the number ofincoming calls to Nikon’s customer service staff.

More customers found the information they neededon the Web, call response times dropped by 50 percent,and incoming e-mail dropped by 70 percent.While Nikon still hosts its SAP ERP system internallydue to its complexity, Nikon switched its entire CRMsystem to RightNow.Not all companies experience gains of that magnitude,and cloud computing does have drawbacks.

Many companies are concerned about maintainingcontrol of their data and security. Although cloudcomputing companies are prepared to handle theseissues, availability assurances and service-levelagreements are uncommon. Companies that managetheir CRM apps with a cloud infrastructure have noguarantees that their data will be available at alltimes, or even that the provider will still exist in thefuture.

Many smaller companies have taken advantage ofa new type of cloud computing known as opensource cloud computing. Under this model, cloudvendors make the source code of their applicationsavailable to their customers and allow them to makeany changes they want on their own. This differsfrom the traditional model, where cloud vendorsoffer applications which are customizable, but not atthe source code level.

For example, Jerry Skaare, president of O-So-Pure(OSP), a manufacturer of ultraviolet water purificationsystems, selected the Compiere Cloud Editionversions of ERP software hosted on the AmazonEC2 Cloud virtual environment. OSP had longoutgrown its existing ERP system and was held backby inefficient, outdated processes in accounting,inventory, manufacturing, and e-commerce.

Compiere ERP provides a complete end-to-end ERPsolution that automates processes from accountingto purchasing, order fulfillment, manufacturing,and warehousing.

Compiere uses a model-driven platform that storesbusiness logic in an applications dictionary ratherthan being hard-coded into software programs. Firmsusing Compiere are able to customize their applicationsby creating, modifying, or deleting businesslogic in the applications dictionary without extensiveprogramming. In contrast to traditional ERP systemsthat encourage subscribers to modify their businessprocesses to conform to the software, Compiereencourages its subscribers to customize its system tomatch their unique business needs.The fact that the Compiere software is opensource also makes it easier for users to modify. OSPwas attracted to this feature, along with the robustfunctionality, scalability, and low cost, of theCompiere ERP Cloud Edition. Skaare said that hewas comfortable that “the little idiosyncrasies of mycompany” could be handled by the software. ThoughSkaare is unlikely to make any changes himself, it’simportant for him to know that his staff has theoption to tweak OSP’s ERP applications. Opensource cloud computing provides companies thatflexibility.

Not to be outdone, established CRM companieslike Oracle have moved into SaaS. Pricing starts at$70 per month per user. Oracle may have an edgebecause its CRM system has so many capabilities andincludes embedded tools for forecasting and analytics,including interactive dashboards. Subscribers areable to use these tools to answer questions such as“How efficient is your sales effort?” or “How muchare your customers spending?”

Bryant & Stratton College, a pioneer in careereducation, used Oracle CRM On Demand to createmore successful marketing campaigns. Bryant &Stratton analyzed past campaigns for tech-savvy recenthigh school graduates, as well as older, non-traditionalstudents returning to school later in life. Oracle CRMOn Demand tracked advertising to prospective studentsand determined accurate costs for each lead,admissions application, and registered attending student.

This information helped the school determinethe true value of each type of marketing program.

Sources:

Marta Bright, “Know Who. Know How.” Oracle Magazine,January/February 2010; Brad Stone, “Companies Slowly JoinCloud-Computing,” The New York Times, April 28, 2010; and Esther

Shein, “Open-source CRM and ERP: New Kids on the Cloud,”Computerworld, October 30, 2009.

CASE STUDY QUESTIONS:

1. What types of companies are most likely to adoptcloud-based ERP and CRM software services?Why? What companies might not be well-suitedfor this type of software?

2. What are the advantages and disadvantages ofusing cloud-based enterprise applications?

3. What management, organization, and technologyissues should be addressed in deciding whether touse a conventional ERP or CRM system versus acloud-based version?

MIS IN ACTION:

Visit the Web site of RightNow, Compiere, or anothercompeting company offering a cloud-based version ofERP or CRM. Then answer the following questions:

1. What kinds of open source offerings does thecompany have, if any? Describe some of thefeatures.

2. Toward what types of companies is the companymarketing its services?

3. What other services does the company offer?

MIS IN ACTION