ERP Software: Get Thee to the Cloud—or Get Left Behind
ERP software vendors still provide on-premise and mixed ERP options for manufacturers, but the future is in the Cloud.
While enterprise resource planning (ERP) software has existed as a manufacturing tool for nearly five decades, digital manufacturing has taken a giant leap forward over the past several years with companies increasingly adopting Software as a Service (SaaS) or Cloud ERP models.
With traditional, on-premise ERP software, solutions are locally installed on a company’s hardware and servers and then managed by the company’s IT staff. But with Cloud ERP, the software is centrally located, i.e. in the internet “Cloud,” and accessed by customers using a web browser. Additionally, SaaS solutions are typically licensed on a subscription basis and based on multitenant architecture to support scalability.
SaaS has been incorporated into the strategies of almost all ERP software vendors, including two companies that have each been in business for more than 40 years: Epicor, based in Austin, TX, and Global Shop Solutions, based in The Woodlands, TX.
To learn more about ERP software trends, including SaaS and predictive maintenance, Quality spoke to Mike Melzer, director of service at global shop solutions, and Terri Hiskey, vice president of product marketing, manufacturing at Epicor.
Quality: What options do you offer as a bridge between on-premise ERP and SaaS, especially for older customers who may be wary of transitioning to the Cloud?
Mike Melzer, Global Shop Solutions: To be honest, our older customers don’t really understand it. Their mentality is, “If it ain’t broke, don’t fix it.” We have converted some to the Cloud, but typically it’s because they have an issue and they’re finally like, “Oh, we can do this? How does it work? What exactly is it?” It’s been hard, because usually we’re not dealing with an IT staff of four; it might be a part-time IT guy who does engineering and CAD work as well. So we don’t do a ton of conversions, but it is becoming more and more common.
Whether our customers host the software or go in the Cloud, they still get the same stuff that’s available to them. From a Global Shop standpoint, they’re not gaining more functionality by going to the Cloud. But they don’t have to worry about their hardware, backups, or loading updates—all of that stuff is handled for them. They can just run their business and focus on manufacturing, without having to worry about all the IT stuff that has to go on in the background.
Terri Hiskey, Epicor: We adopted this strategy of “go at your own pace.” While we, like all other ERP software vendors, are pivoting to Cloud and SaaS, on-premise is not going away. And we know that’s a reality for a lot of the slower-adopting companies—those that are more conservative and concerned about their IP, that don’t trust the Cloud. They’re saying, “You know, I’m not ready to move my whole ERP into the Cloud, but I want to test it.” So they might adopt a Cloud add-on, like Epicor’s Enterprise Commerce Connect, which would give them some e-commerce functionality that’s Cloud-based.
We definitely are seeing these patches of mixed models, where some of the functionality is on-premise and some of it is on-Cloud, as companies are becoming more comfortable with putting their information in the Cloud. I think it’s more of a risk mitigation thing, where companies decide they’re going to pilot the Cloud, or pilot a Cloud-based application, to see how it goes, and then use it as a jumping-off point for considering a greater enterprise Cloud strategy.
How do you address security concerns?
Hiskey: We hear that a lot from some of our older customers, and the questions we ask them about security is, “How secure is your on-premises option?” Unless it’s completely disconnected from the internet, you’re still prone to viruses and security hacks. One of the benefits of moving to the Cloud is that, if you’re on a subscription model, you’re on the latest security patch—those come on as quickly as your vendor can produce them—and that probably provides better, faster security than you having to apply a security patch to your own on-premises system, which also might be three or four versions behind.
That’s how we deal with it within sales cycles: You might think that you’re safe, but unless you’re completely disconnected from the internet, you’re not—and there are actually security benefits to being in the Cloud that you might not have considered.
The right Cloud ERP solution can help a business streamline administration, reduce costs, and optimize operations. Source: Epicor
Melzer: We’re constantly pushing [SaaS], but I don’t know that many of our customers fully understand what the Cloud is or how it works. They’re afraid somebody’s going to grab their data and look at it, when in reality the Cloud is probably more secure than what they have at their facility. It’s interesting: If a company has multiple facilities, it’s a no-brainer to be in the Cloud. So our multi-site companies are more knowledgeable on the subject just because of that.
How do you emphasize other benefits of Cloud ERP to current and potential customers?
Melzer: Of our new installations, more than half are in the Cloud. So the folks that are choosing to do it now, we’re having deeper conversations with them, and they’re saying, “That makes sense. Let’s go to the Cloud.”
Global Shop Solutions’ TrueView Data Display. Source: Global Shop Solutions.
It’s trending up, for sure. We still give our customers both options, for a new prospect that’s coming on—but more than half are going the Cloud route, because it’s just easier; you don’t have to buy the hardware. With customers who don’t use the Cloud, you’re often dealing with people who’re buying 50 servers a week instead of one every five years. The cost, in the long run, also ends up being better for our customers.
Hiskey: It’s definitely a cost benefit. But when you think about all the new technologies that you’re seeing in the news, most manufacturing companies are still trying to make sense of them. A lot of manufacturers I’ve talked to are getting a little panicked about the volume and pace at which all the new technologies are coming out. But while it’s easy to say, “My ERP software can last for 10 years; I’m not going to worry about it,” the fact is there could be disruptors in your industry that could change things in a few months, and it’s harder to link these new Cloud technologies to your old, on-premises system. You need to already have the foundation to which you plug in these new technologies as they emerge.
In terms of how we’re trying to get these companies over the hump with Cloud adoption, we try to get them to think about what they’re missing out on. What is your competition starting to leverage? You don’t want to be the cab driver who pooh-poohed Uber, and one year later you’re out of business.
How do you deal with industry disruptors, like young startups building their solutions on popular apps like Salesforce?
Hiskey: One of the ways that we compete with that is we’ve been around for 40 years. We have a deep understanding of manufacturing, and I think that’s a level of expertise that a lot of these newer software developers don’t have.
They have this bright, shiny application, but it’s not necessarily built for manufacturing or for specific industries; it’s more of a horizontal application that still doesn’t answer all the questions or serve all the purposes that we know manufacturers have. In terms of breadth of problems, that could be everything from product design and development to sourcing materials and parts to managing your shop floor and getting your parts out through the logistics of your supply chain. We’re finding there’re a lot of point solutions that address certain pieces of the holistic view of what manufacturers do, but we’re not seeing this end-to-end expertise or competition come in with the Cloud solution to manage it all. You also don’t want to spend a lot of time adopting these point solutions for every area and then have to worry about them talking to each other and being integrated—and you don’t want to have to do that yourself. You choose a Cloud provider, so you don’t have to be the IT department and worry about that. And we have a solution by which all of these functional areas talk to each other: It's in the Cloud, and all in one place. That’s the big differentiator for us.
A lot of our smaller customers, our heritage customers; they look to us as a technology partner to tell us what they need to know. “I’ve been hearing a lot about the IoT,” they’ll say. “Tell me how it affects me with my ERP system, with my finances, with my manufacturing.” And so part of what I’m doing is connecting the dots for salespeople in that if customers are looking to better manage their global quality and compliance, and have better visibility and risk management, they should leverage these modern technologies around IoT, security, and authentication. Again, you need to have that solid platform that allows you to hook into these new technologies, so you can gain these efficiencies and continue to be competitive.
Melzer: Honestly, we’re more concerned with our existing customer base than our prospects. We realize that our customers help us sell Global Shop every day, and it’s because they know we’re here and provide a service to them that they rank us second to none.
How we can compete with those other guys is that we do everything direct. We don’t have resellers, so there’s not a middle person. We do all of our consulting: Write it all, do it all. We’ve got 41 years in the business, we pride ourselves on our service, and we look at every relationship as a marriage we’re going to be in forever. We don’t get into a deal where it’s not going to be good for us, either. We’re looking for the right fit.
Have you noticed differences in Cloud ERP adoption and implantation when it comes to larger enterprises versus small to mid-size companies?
Melzer: Every company is a little different, but the smaller companies are usually easier to get up, because it’s not as much work—not as much movement or as many hands in the mix. With the larger companies, if they’re in a push to go—let’s say they’ve got a cut date on their old system, January 1, and they have to write a big check after January 1 to keep their old system going—they’re going to hurry. But since they’ve got more people, those guys generally have more time to spend, as opposed to a smaller company where one guy might wear five hats.
In our implementation, we go through a couple of phases. Phase one is to get the basics down, and phase two is to start getting more into the advanced areas, where we’re using our advanced scheduling system and tying it in to UPS. So phase two is putting on the bells and whistles, and phase one is about the nuts and bolts. Can we ship products, invoice and track them? Can we get labor on the floor? We want to get the inventory accurate and the cost correct, and then we’ll go to phase two and start managing opportunities in our CRM. That’s how we look at it. But some people go all in, and say, “By January 1, we want it all going.” Those folks are typically more gung-ho in the training upfront. The others will train a little bit, but it depends on time: “How busy am I? Do I have a couple of hours each day to work on a new ERP system and get my functions down?”
Some implementations take two months, some take a year. It really depends on how much time you spend on it beforehand. If the owner or plant manager is pushing it, it gets done a lot quicker.
Hiskey: I’ve found that it really depends on the industry. The willingness to adopt new technology seems to match pretty consistently with the industries that you’d expect: early adopters like high-tech and medical device companies—the faster-moving areas.
In terms of trying to move everybody over to the Cloud, it’s interesting. Epicor’s customer base is small to mid-size manufacturers, and we have some enterprise-level customers as well. The mid-size to smaller manufacturers tend to be more conservative about technology, even though I think the Cloud and all the technologies that the Cloud enables for a small or mid-size company actually level the playing field with other, larger enterprise vendors.
Global Shop Solutions’ Customer Relationship Management (CRM) software. Source: Global Shop Solutions.
What do you see as the next frontier?
Hiskey: Predictive maintenance is what I’m seeing as the most popular use case that people are going to in terms of employing IoT technology. This is because you can see the immediate benefits and gains that you get by doing something as simple as putting a sensor on a piece of equipment in your plant that’s 50 miles away; and instead of having to have someone there to tell you what the performance metrics are, you can track all of that with the sensor. And once you apply algorithms on top of that, you can make the data actionable.
Of course, the next step is machine-to-machine (M2M) learning, so that the sensors know every time the temperature gets above a certain degree, for example, there needs to be an adjustment. We’re seeing a lot of movement around field maintenance; and when you extend that scenario to what else the machine can start doing on its own, that’s where machine learning comes into play. I see those as more adoptable concepts, because they’re easier for people to understand.
Melzer: All these machines that are bought and installed now, once they’re set up, they’re basically being run unmanned. We just went to a group in Ohio that spent $8 million on machines, and their business is booming. They can set up their machines at 4:30 in the afternoon and then leave, but the machines are still running for the next six hours.
With FactoryWiz and ShopFloorConnect, we can grab the machine time, and it’s 100% accurate. As soon as the cycle time or spindle time stops, meaning your machine has stopped making parts, then we stop collecting data; so your costs are accurate as all get out. And if your machine goes down prematurely, you’ll get an email or text notification in real time. With all machines becoming automated, and so quiet—that stuff’s coming, in a big way. To compete, you gotta do it. That’s the bottom line.