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Oracle ERP Cloud vs On-Prem: Part 1 - Introduction

1.  Introduction

This multi-series blog compares the cost, agility, and talents for implementing Oracle ERP's (Cloud and On-Premise) for small, medium, and large-size businesses. 

Issue Statement

Infosys is an Indian multinational corporation that provides business consulting, information technology and outsourcing services to clients across various industries all over the globe.  The Oracle practice at Infosys produces value for their clients through consulting, implementations, roll-outs, and upgrades to application support and maintenance (Infosys).  A strategic decision many Infosys' client IT and financial executives are starting to face more frequently is whether to implement Oracle ERP application on-premise or on the cloud.  This decision is no longer technical or functional, it is rather more financial (Aberdeen).  The greatest challenge faced by client executives making these decisions is that there is not sufficient data available to support one type of Oracle Financial ERP implementation over another.  The purpose of this research is to evaluate the total cost of ownership (TCO) and return on investment (ROI) of using a cloud-based Oracle enterprise resource planning (ERP) system as opposed to an on-premise Oracle ERP platform for Infosys' clients seeking to implement Oracle financial ERP for the first time and those which are on older versions of the application.  It is intended for Infosys sales and client IT and Finance managers to help decide offering which provides the most value to the client. 

Analysis overview

When analyzing financial business processes, there are three drivers finance and IT executives must study: economics, agility, and talent.  Oracle vaunts the economic benefit of their cloud services to their customers through better cash flows by means of lower up-front infrastructure costs and by charging the client a licensing cost for only the desired features.  Due to the nature of the cloud offerings, clients will always have access to the latest software and hardware technology and functionality, high speed to market, and more standardization and simplification.  (Oracle) Working on the latest technology with the latest features and functionality also helps firms retain and attract better talent which can result in greater effectiveness and efficiency and better overall adoption. 

Recommendation Overview

For most clients, the challenges of cloud ERP's outweigh the benefits resulting in only 20% penetration in Oracle Cloud ERP adoption.  Cloud implementations are not recommended for all clients; it is more suitable for those with limited investment in IT infrastructure and who have a user base which varies throughout the year.  (Joshi) Clients which already have invested in infrastructure and resources to protect and maintain these investments may not be interested in jumping on the cloud, however, as the infrastructure begins to depreciate and become outdated, some clients would find cost savings in retiring the infrastructure assets and implementing a cloud iteration of their Oracle ERP financial application (McPherson). 

Planning and Implementation Overview

Regardless of which platform clients decide to implement, it is important to note that both platforms present unique challenges.  Through a thorough evaluation of the clients' business processes, value configurations of on-premise and cloud implementations will be used to determine the how the discrete activities, drivers, and linkages impact clients' margins.  This data will be used to plan a course of action and help clients plan and implement an iteration of Oracle ERP financial applications, on-premise, cloud, or hybrid, based on the output of internal analysis. 

Continue to Part 2: Oracle ERP Cloud vs On-Prem: Part 2 - Analysis


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