A hidden cost of cloud ERP: Changing project risk

The latest application of technology to enterprise resource planning software (ERP) is the magic of the cloud. Sales and marketing literature touts a long list of benefits derived from moving ERP and related software from on-premises hardware to the cloud.

The point of this article is not to discuss the technical benefits of a move to the cloud. Instead, it is to examine a serious unintended consequence having a dramatic impact on ERP implementation projects.

Traditionally there is a high rate of failure for enterprise ERP software projects that are glossed over by software publishers and implementation partners.

A quick internet search will confirm that billion-dollar ERP implementation project failures do occur. That is billion with a B. As Lewis Black famously noted in another context, “what were they doing, building their own space program”?

It has long been my contention that ERP project success is based on three simple criteria: on-time, on-budget, and delivering promised functionality. There has never been a successful ERP implementation project, and cloud ERP licensing will add to the problem.

How can license policies possibly affect implementation quality? In short, subscription licensing, and the resulting loss of attractive perpetual license margins, means less money for partners to defray the high cost of selling and marketing ERP projects. This shift puts significant downward pressure on implementation quality and success.

My first exposure to cloud ERP licensing models immediately raised the specter of higher rates of challenged and failed projects. Anecdotal evidence and empirical data starting to leak out from the partner community supports this premise, but at a much higher rate than initially thought.

Let’s look at ...