Yesterday I talked about some of the broad contractual problems emerging out of SAP's cloud transformation. The feedback so far has been interesting. Check the comment discussion. Later in the day, my old boss, Larry Dignan pinged me about a piece he'd written that draws extensively on the practical experience of one CIO who is represents an Oracle customer. The implicit message in both can be summarized by Dignan's observation that:
Existing enterprise software vendors such as Adobe have already made the license to cloud turn, but you'll also see a bevy of cloud partnerships modeled after Oracle's moves. Add it up and it's highly likely that your new cloud boss will be the same as your old software license and maintenance one. The cloud may not be the lock-in cure originally foreseen.
I can't say I am surprised and in back channels, some have argued that despite my preferences for an 'on-demand' model, the industry will simply try replace its old model but on different terms.
In that vein, it is timely that I now publish a short insight into SYSPRO's cloud journey.
In the video above, which I recorded on a recent trip to South Africa, Simon Griffiths, head of global product marketing walks me through part of the process his company went through.
Griffiths is remarkably frank in discussing the topic but then he can afford to be. SYSPRO is not a public company and so is not accountable to public financial markets. Even so, the company is taking calculated risks. So what are the highlights?
- The company spent nine months figuring out the technology and pricing angles.
- Marketing worked with finance to understand how best to package the cloud solution.
- The company does not expect the kind of return it would get in years one and two of a traditional on premise licence deal.
- Pre-existing contracts for maintenance revenue provide the 'wiggle room' to get to the new model.
- Contrary to popular belief, in the Tier 2 manufacturing markets in which SYSPRO plays, there isn't the 'big push' demand that analysts were suggesting, even in North America where SYSPRO saw the biggest demand.
- The technical challenges are considerable when moving a 'thick client' to a web page and especially to mobile devices.
- There is an inevitable carry through of functionality from on-premise to cloud but it provides opportunities to rethink the user experience.
SYSPRO will not fit the purist model. Does that matter? As we are seeing at other vendors, you don't have to completely re-invent in order to provide a cloud model the market accepts.
I was particularly interested to learn that SYSPRO is prepared to sacrifice recognized revenue in order to offer a compelling value proposition. That is something I believe all legacy vendors which are in transition will have to accept or be outsold by pure plays willing to take that on the chin from the get go.