November 14, 2018 |Kurt Moydell | Senior Vice President, Global Sales and Marketing
Leverage third-party software support and maintenance to fund your cloud vision, reclaim control of your application roadmap, and avoid software vendor “lock-in.”
The adoption of all forms of cloud services is accelerating as enterprises strive to reap the promised benefits of the digital model. Cloud is fundamental to any digital transformation strategy, but a digital enterprise is not just business applications transitioned to the cloud, then connected to a plethora of disparate devices. In its basic concept, digital transformation implies achieving a technology state where shared computing resources (such as processor time, storage, applications, databases, and infrastructure) get deployed as a service. In the ideal state, these shared resources scale dynamically based on increasing or decreasing demand.
A digitally-transformed environment has immense potential for enterprises that seek affordability, simplicity, and scalability. Natively developed, best-of-breed cloud products and services from companies such as Saleforce.com, Workday, Amazon, and Google, helped jump-start the cloud revolution. However, experts agree that what was once a fragmented provider space is moving beyond standalone applications to become a more holistic solutions landscape. Digital transformation reduces costs and simplifies IT infrastructure management, so enterprises can concentrate more on their core business competence.
As It Relates to ERP
SAP and Oracle have long dominated the tier 1 on-premise ERP and Database market and are now aggressively pushing on-premise customers down their vendor-specific cloud-based technology roadmaps. Transitioning existing legacy software and technologies to products and services designed for the cloud will take years. To stave off competition, increase cloud adoption, and shorten time to market, strategies adopted by Oracle and SAP include:
- Funding cloud research and development (R&D) with huge profits made from on-premise maintenance fees. For example, in fiscal 2017, Oracle pulled in $19.3 billion in revenue from support operations, while spending just over $1 billion to provide that support.
- Augmenting their organic R&D efforts by acquiring edge cloud solutions like NetSuite and Callidus Software.
- Trading unused on-premise licenses and unsupported shelfware for cloud licenses and cloud futures.
Such tactics are part of a strategy to “lock-in” current customers for the long-term, yet lock-in restricts freedom of choice. By remaining on the software vendors’ high-cost on-premise support, customers risk being locked in with a vendor that might never produce tier 1 cloud solutions. For example, a recent article published in Forbes by Dan Woods predicts that Oracle’s cloud solutions are not and will never be first tier. Only 2% of CIOs surveyed for the article see Oracle as their most integral vendor for cloud computing. A rising number of IT leaders are choosing to keep their options open rather than be forced down the software vendor’s cloud roadmap.
It’s understandable that the long-term visions of Oracle and SAP involve protecting their current customer revenues by locking them in during the journey from on-premise to the cloud. They realize that reaching cloud integrated platforms is transformational, but they don’t want to lose customers in the process. Claims that the totality of their respective cloud platforms has reached a state of maturity and already delivering the full benefits of this transformational technology are highly debatable. Again, according to Dan Woods, Oracle cloud apps represent only a fraction of the usage of their installed base, but they are on par with the percentage adoption from SAP and other large enterprise software vendors who have on-premise installed bases. With SAP and Oracle extending support availability on current ERP technologies to 2025 and beyond, it is reasonable to assume that each company’s transition from an on-premise license model to the SaaS license model will not occur until that time. Both vendors understand that widespread adoption cannot occur until the fulfillment of their SaaS promises.
Spinnaker Support believes that the promise of cloud applications and platforms presents immense potential for businesses requiring enterprise-level solutions that are affordable, simple, and scalable. As this promise is realized by vendors (not just Oracle and SAP), we believe the near total adoption of cloud solutions for the enterprise is inevitable. However, on-premise business applications are not going to vanish anytime soon. “Even if on-premise computing eventually becomes a smaller piece of the pie than digital transformation, there’s going to be a long period of transition,” said Larry Ellison at Oracle OpenWorld.
We also believe the cloud promise is only realized when solution maturity is congruent with today’s technologies and that the point of congruency is unique to each enterprise. We suggest you map your functional and technical requirements against the current vendor’s product availability roadmap. In parallel, assess other best-of-breed alternatives in the process. Avoid vendor lock-in and never agree to cloud “futures” (products you cannot fully utilize in the short term).
Increasingly More Enterprises Are Leveraging Third-Party Support
Industry experts note that innovations in traditional on-premise software have diminished as SAP and Oracle invest in their cloud visions. But since these visions have not reached sufficient maturity, and won’t for quite some time, more than 1,000 enterprises – from mid-size to Fortune 100 – have replaced Oracle and SAP-provided support with Spinnaker Support. The higher quality service and substantial cost savings are immediate. They have found a safe haven until the right cloud applications are ready.
Exercise your freedom of choice by switching to third-party software support to fund your cloud vision, reclaim control of your application roadmap, and avoid software vendor “lock-in.”