Has large enterprise cloud ERP adoption finally turned a corner? No - I'm not talking about lift-and-shift into a private cloud. No, I'm not talking about a transitional "public cloud" move that keeps customizations in place.
I'm talking about what some call "true cloud ERP" - of the multi-tenant variety that has been so successful in the SME market.
Oracle certainly says yes. In his inimitable way, Larry Ellison made Oracle's views clear in recent earnings calls: Oracle delivers solid Q1 as Larry Ellison wants to know where the cloud ERP competition is. Whether or not you buy into Ellison's cloud ERP stump speech, Oracle does provide numbers to go with their talking points:
- Oracle Fusion ERP now has over 8,000 customers (NetSuite ERP has over 28,000).
Ah, but how many are live? Of the 8,200 customers that have adopted Oracle Fusion globally, Oracle told me that 6,400 of them are live, a solid number - though many are still expanding their Fusion ERP footprint, or moving into areas such as EPM or supply chain management, so the details matter.
Cloud ERP adoption - from a customer view
Earnings calls are long on bombast and short on such details. But at Oracle's recent Cloud ERP Virtual Summit (replays available), Oracle fleshed out their cloud ERP story, elaborating on the newest AI/ML Fusion ERP features, and sharing customer use cases. This issue of enterprise adoption warrants a deeper dive, so I followed up with a 1:1 video call with Rondy Ng, Senior Vice President, Applications Development at Oracle.
However, before we go there, a caveat: from a customer perspective, the question of cloud ERP adoption really doesn't matter. What matters is how customers solve business problems. Tech should enable these results - tech that fits the industry. Example: Workday, while shying away from the ERP monicker lately, obviously provides large enterprise multi-tenant ERP as well - though that depends on whether your definition of ERP includes MRP or SCM, and the particular industry you are talking about.
From a customer standpoint, large enterprises could go several directions with ERP:
- Ring-fence their ERP systems, and focus on emerging applications.
- "Lift and shift" ERP systems to their cloud of choice, perhaps eyeing a gradual transition to the standard ERP versions multi-tenant SaaS requires.
- Move to multi-tenant cloud ERP, as per the Oracle Fusion ERP pitch. Historically, these moves haven't happened in the large enterprise - not nearly as much as in the SME space.
The problem of lift-and-shift "cloud ERP" - Oracle pushes back
No use denying it - for cloud ERP advocates like myself, "lift and shift" has negative connotations. It seems like incrementalism - and perpetuating legacy processes. However: if that approach serves customer needs, and the customer has a clear understanding of the tradeoffs, I believe that choice should be respected. That said, let's contrast that with Oracle's cloud ERP case. I asked Ng: what's the problem with an ERP lift-and-shift? He responded:
It's pretty simple. 95% plus of all the customers I've seen, their legacy environments are not optimized. Many of them were actually cobbled together over years and years of work, or compromising positions. And trying to lift-and-shift a compromising position into a new generation isn't likely to give them any benefit, in particular data access, which is a key part.
Ng credits a different approach for Oracle's growth. The Oracle Cloud ERP Virtual Summit was timed with Oracle's quarterly SaaS ERP updates. Citing those, Ng told me:
You have probably heard from Oracle repeatedly, saying that we see a lot of adoption in back office SaaS. I saw your article, and that your definition of true SaaS [includes] ongoing quarterly updates. Everybody's on the latest version, within a quarter, and so on.
Our momentum is driven largely by customers who have been sitting on the sidelines for a little while. Especially during the pandemic, people are seeing more and more urgency to support remote workers, and other business opportunities and reasons.
Large enterprise cloud ERP adoption - customer examples please
How about customer examples? Ng was ready:
Bank of America has gone live with 33 different countries in one subset, which kind of replaces their Merrill Lynch ERP on the Oracle E-Business Suite. They are actually what we call [email protected]. It's still a standard cloud policy; they still have the update every quarter, and so on and so forth. But we have the physical infrastructure on the data center, and we manage it remotely. That's a big, big GL on one of the largest banks in the world.
Another banking example:
Second one: Macquarie Bank - the largest investment bank of Australia. In two and a half years, they went through multiple different phases with the subledgers, and then General Ledger went live just in the last few weeks. That was a project that I personally got involved with. I would say they are one of the most complex banking environment that I've personally experienced over the years, and I'm very proud to be able to support them, and go live with that.
Another large enterprise customer:
Federal Express has gone live a long time ago, four or five years ago, but lately, they have been going through a number of different phases, starting early on with some acquisitions... Now they're in the fifth phase, and they have 83 countries live already, and they continue to go on into some of the other countries in Latin America later on this year, and then North America next year, and so on.
Add to that list: the two biggest grocers in the US. Kroger went live in the beginning of the year; Albertson's went live a few days ago. And what about the product updates? Release highlights involve the further embedding of AI/ML into ERP processes - a topic I've covered a lot lately, as many ERP vendors are making this push. That would require a separate post - fortunately Ng has that covered already, with his own piece on Oracle's latest cloud ERP features. A quick rundown includes:
- Intelligent Document Recognition (IDR)
- Intelligent Performance Management (IPM) Insights
- Procurement Spend Classification
- Fusion ERP Analytics
- Enterprise Performance Management (EPM) Enterprise Journals
- Risk Management & Compliance APIs
Automating administrivia is a win in any economy. In our remote world of disrupted workflows; it's become a must-have. But at some point, features are just a blur. What is driving these updates? Ng says his team has four product priorities:
- Automation and process optimization
- Managing the data - providing a platform for predictive forecasting and more agile planning.
- Continuing to modernize the UX - including chatbots, digital assistants, and new collaborative partnerships like Zoom.
- Industry-specific investments - often, the hold up for adopting cloud ERP comes down to lack of industry functionality. Ng cited functionality investments in the energy sector, US federal, and other asset and manufaturing-intensive processes.
I guess for some, the headline might be the deluge of AI/ML functionality in Oracle Fusion ERP. But Oracle is not the only ERP vendor that has found the right AI strategy: practical, role-based, embedded - one that emphasizes automation, UX, and decision support. It's a promising trend.
Oracle's large enterprise cloud ERP adoption stats are piling up. To me, that's the big story here. Oracle is also as good as any ERP vendor at producing reference customers, something that was not always the case.
My own views on cloud ERP have changed, veering from the suite model. While the "suite" approach to ERP will hold up in the SME cloud, I believe the successful ERP vendors in the large enterprise will be the industry platforms, allowing open and easy access to data, cloud-based product/app extensions, and the ability to plug in best-of-breed components. Yes, even when those products are from close competitors. I get the sense Ng sees things differently: customers aligning with one cloud ERP vendor's applications, if not a suite. That's something I'd like to hash out further.
Update: I therefore view the future of large enterprise ERP as modular components, and perhaps process-based components. Plugging them in as needed, shorter term projects that can be built upon, either with more ERP or a customer-facing component. ERP has always had "modules," but they were always too interdependent for this "platform ERP" future. One unresolved question is: how far into microservices will these modular components go? That remains to be seen. Microsservices can be potent for limiting system dependencies, but they can also create development complexity.
I don't agree with Ng's assertion that there is no benefit to lift-and-shift; I've seen TCO and user experience benefits to such moves. But: I do share his lift-and-shift skepticism. It's not an effective end state, nor does it enable business model change. Customers should have a lift-and-shift option - if they go into it with their eyes open. But customers should also have a robust cloud ERP option for their industry - no matter their company size. In many industries, this still isn't the case. ERP was always more horizontal, despite the vertical assurances we saw in the marketing material.
Here, Oracle is making the push, and seeing the resulting adoption. Industry investments noted by Ng included Williams Energy, which owns 30% of the natural gas in the US:
This is a space that traditionally we didn't expect there was some momentum. But because of our investment in a capability called joint venture management, which is essential for these energy companies, they went live.
I'd like to see Oracle take this conversation further, into the advanced ERP benefits stages I've been stomping on about - well beyond go-live. Historically, the ROI of ERP has centered around IT cost reductions and TCO. That's not good enough anymore.
Remote access might be an adoption driver, but ERP must be much more than a remote work enabler. I invited Ng to return and discuss advanced ERP benefits and maturity models, and I believe he will (I've encouraged all ERP vendors to share their maturity models with us for open discussion, and reader benefit). For now, Ng pointed out:
People are using [Fusion ERP] for acquisitions and dispositions - M&A activities, because it gives them a very easy path for scale and split up, and whatnot. Number two is we've seen more and more customers moving to an online, service subscription type model. In subscription, everything is different, from the way that you sell and market, how you do revenue recognition, and how you manage your finances is completely different from your legacy, frankly, it's almost impossible for them to easily do with the legacy systems. But the platform here on SaaS allows them to do that.
The pursuit of cloud ERP for large enterprises is far from over. There is no winner's circle to declare as yet. But if you told me fifteen years ago that more than 60% of Oracle's ERP features would come from customer requests - an average of 250 new features delivered every quarter - I would have given you an extremely skeptical look. This type of change is good for ERP vendors; it's good for Oracle, and it's good for buyers, whatever flavor of ERP they choose. I welcome the change also. There is still plenty of overhyped tech out there to snark about, besides legacy ERP.
Updated, 9am US PT October 6, with a few small tweaks for reading clarity.