While some pundits predicted that cloud ERP software would dominate the ERP market, that has not yet happened. On-premise ERP still commands the majority of ERP market share, but there is more willingness for certain departments and functions to run in the cloud while others remain in-house. Cloud ERP is especially popular for two-tier ERP deployments, in which companies run a primary ERP system on-premise with one or more additional ERP systems in the cloud.
(Enterprise Apps Today recently published expert advice for those evaluating software for two-tier ERP deployments.)
Market-leading ERP vendors SAP, Oracle, Microsoft Dynamics and Infor are seeing relatively few customers implement their software in the cloud, according to Panorama Consulting Solutions. Security concerns about placing valuable corporate data in the cloud may be inhibiting the cloud ERP software adoption rate for these companies, believes Eric Kimberling, Panorama's founder and managing partner.
Cloud ERP Market Share Growing
Still, cloud ERP rates are rising for these vendors. Only 18 percent of SAP's ERP deployments were in the cloud in 2013, though the number rose to 29 percent by the end of 2015. This places SAP in line with Oracle and Microsoft, who also have cloud ERP usage rates of 29 percent. Twenty-four percent of Infor's ERP deployments are in the cloud.
"Most core (e.g. financial) ERP systems are on premise, while the second tier (such as sales and inventory management) may be either on premise or cloud," said Kimberling. "Generally, companies will use the smaller second tier solution to address functions that are required to be more flexible to meet diverse customer needs, while the first tier financial ERP system would be used for more standardized back office business processes."
How are SAP, Oracle, Microsoft Dynamics and Infor addressing the cloud ERP software market?
SAP Business ByDesign
SAP is the ERP market share leader, with a 26 percent share of the market, according to Panorama. SAP Business ByDesign, which is targeted at upper-midmarket companies, subsidiaries of large enterprises and service organizations, is its primary cloud ERP software offering. To serve the needs of these diverse markets, SAP has put together a menu of cloud ERP services at various price points, ranging from 15 to 179 euros (U.S $17 to $202) a month.
There are too many options available to cover here. The SAP website details the many ways SAP Business ByDesign can be sliced and diced to fit a wide range of cloud ERP environments, budgets and needs.
Oracle Enterprise Resource Planning Cloud
Oracle holds a 16 percent ERP market share. Since Oracle boss Larry Ellison reversed his famously anti-cloud stance about five years ago, the company has been steadily increasing its focus on the cloud via on-demand versions of its traditional products as well as the Oracle ERP Cloud. This provides core features around financial management, procurement and project portfolio management (PPM).
This strategy appears to be working, as the company has been successful in expanding its user base in the cloud. It is even getting orders for cloud ERP software from those who have never used Oracle's many on-premise ERP products.
"Oracle ERP Cloud customer numbers have climbed to 334 last quarter, of which 175 did not have Oracle before, putting the installed base well over 1,800," said Terrance Wampler, vice president, Financials Product Strategy at Oracle.
In terms of two-tier ERP deployments, Oracle is seeing some uptake in Oracle on-premise ERP users adding a cloud tier. But not all fit that profile.
"Typically, we see enterprises move their smaller subsidiaries and acquisitions to a single Oracle ERP cloud," Wampler said. "However, for enterprises with a long-term cloud strategy we also see them moving key business flows at the corporate level to the cloud such as source-to-settle, financial reporting, and project execution."
Infor also holds a 16 percent ERP market share. It focuses on tailoring its cloud ERP software to industries such as health care, manufacturing, fashion, wholesale distribution, hospitality, retail and the public sector, using an open source approach. As such, it seeks to add process automation to these fields via cloud offerings by partnering with Amazon Web Services (AWS).
A variety of on-premise ERP versions are also available. Infor LN manages financial, manufacturing, supply chain and service operations, while Infor M3 and Infor SX.e serve different areas of the distribution business, for example.
But the company has been smart enough to take its manufacturing/distribution on-premise heritage, and move similar functionality and industry tailoring to the cloud. Infor CloudSuite Industrial (SyteLine)is said to provide manufacturing and supply chain planning capabilities for small and mid-sized organizations. The distribution side provides a balance of service and inventory management.
Microsoft Dynamics AX
Despite enormous effort to conquer this space, Microsoft holds just 9 percent of the ERP market.
Its primary cloud ERP software, built on and for Microsoft Azure, is Dynamics AX. This platform brings together a set of ERP, business intelligence (BI), infrastructure, compute and database services in a single offering. It also comes with industry-specific processes. A variety of additional features are extendable via a range of integrated partner applications.
"Organizations can match their business growth by adding users and business processes with a pay-as-you-go model," said Pepijn Richter, director of Marketing, Microsoft Dynamics AX. "With the pace of change in business accelerating, we see that cloud solutions offer large enterprises a way to accelerate the rollout of this scenario without the hassle of managing the infrastructure."
Richter has observed the two-tier ERP scenario - especially in plant operations, sales and service, and subsidiaries - and believes it is going to continue.
"Where Dynamics AX is being used in a two-tier scenario, the legacy system is being relegated to the back-end, with the capabilities of Dynamics AX being the way for people to interact with their ERP solution," said Richter. "Dynamics AX is running the business in retail stores, in customer-facing applications, in manufacturing plants."
Drew Robb is a freelance writer specializing in technology and engineering. Currently living in Florida, he is originally from Scotland, where he received a degree in geology and geography from the University of Strathclyde. He is the author of Server Disk Management in a Windows Environment (CRC Press).