How to know when to pull the plug on legacy software and go SaaS

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Many B2B companies have gone down the road of enterprise software upgrades for ERP, CRM, database or other legacy on-premises applications. But how many CIO pet projects have gone astray this way? How many CFOs have thrown good money after bad in a futile attempt to recover sunk costs?

With consultant’s implementation bills piling up and no end in sight for installation, some companies decide to pull the plug on this process mid-stream and turn to a cloud solution. It’s not isolated to just a few B2B concerns, with a market inflection point occurring last year. These solutions, sometimes referred to as Infrastructure as a Service (IaaS) or Software as a Service (SaaS), have gone mainstream.

lynda
Lynda Stadtmueller, vice president, cloud services, Stratecast | Frost & Sullivan

“Cloud adoption hit a long-awaited tipping point in 2014,” says Lynda Stadtmueller, vice president, cloud services, Stratecast | Frost & Sullivan. “From 2011-2013, the percent of U.S. businesses using public cloud Infrastructure as a Service was stagnant, at around 15 percent of businesses.

She adds that in 2014, the number of businesses using IaaS soared to 50 percent. The percent of businesses using corporate SaaS applications more than doubled, from 19 percent in 2013 to 45 percent in 2014.

SaaS also goes Canadian

And it’s not just American companies that are embracing SaaS and leaving on premises software behind. Canadian companies like TJ’s Oilfield Contracting Ltd. of Alberta have spurned the advice of IT consultants and moved their supply chain solution to the cloud. TJ’s switched from building a Microsoft Dynamics NAV enterprise resource planning (ERP) solution from the ground up as their consultant recommended, to integrating a Procurify cloud-based, purchasing-management software solution.

“The owners (of TJ’s), at this point, had spent a great deal of time and money working with consultants to achieve this (Microsoft implementation),” says Shahbaz Saadat, assistant controller of finance and manager of purchasing process at TJ’s. “When I started, we had a consultant working on Microsoft NAV and developing processes and procedures that worked around the ERP in handling various functions. Unfortunately, the owners were not satisfied with the consultants. That is when I found Procurify and realized that it just might be exactly what we needed. Procurify was able to give us custom fields and integrate seamlessly with our ERP.”

On-premises software from a bygone time

It should not come as total surprise that on-premises software promises sometimes fall short. Based on models from the client-server and, in some cases, mainframe computer ages, legacy applications were designed for an era of low performance and lower expectations.

“The limitations of on-premise solutions have become increasingly apparent,” says Diego Pantoja-Navajas, CEO of LogFire, a cloud supply chain solutions company. “On-premise solutions are cumbersome, taking up a lot of real estate. They require extensive installation times and up-front costs and are hard to maintain, often meaning businesses are running older versions that are hard to support with the vendor’s IT. These solutions also can’t scale easily, making business growth limiting.”

Be cautious with cloud solutions

Even though on-premises software looks like an evolutionary dead end and the future seems clearly in favor of cloud-based solutions, B2B companies need to proceed cautiously. While SaaS has delivered much to date, like any new technology the hype can often be ahead of the reality.

Rob Reid, CEO of Intacct
Rob Reid, CEO of Intacct

“For software buyers to cope with a future full of uncertainty and technological change, keep one thing in mind: you are not merely buying software, you are entering a long-term relationship with a company,” says Rob Reid, CEO of Intacct, cloud-based provider of accounting and financial software. “When you buy software, you are buying a roadmap—a commitment from the developer that they will solve your business challenges today, tomorrow and throughout the duration of your relationship.”

Just the effort to move to a cloud-based solution from legacy software can be fraught with peril. A lot of thought and planning needs to be undertaken before making such a serious transition.

“Keep in mind that migration of legacy workloads can be extremely difficult, especially for far-reaching, complex ERP systems like Oracle,” Stadtmueller says. “Often such workloads are not able to be ‘cloudified’ without significant recoding. Most enterprises have decided that it’s not even worth the hassle to try to migrate such legacy apps.” Instead, to lighten administrative overhead, they may implement a cloud- management platform to automate some maintenance functions and leave the application code on premises, she adds.

Innovation with no up-front cost

B2B companies should seek out vendors who have a legacy of innovation, a proven focus on customer centricity and relationship building, and a culture of employee excellence, according to Reid. “Odds are, companies built in this manner will deliver the solution you need for the long term and build a relationship based on mutual trust,” he says. “You’ve all experienced or heard about working with software companies that lack focus due to too broad a product portfolio or too many disjointed fiefdoms, or been burned by smooth salesmen who promise the moon and stars to meet their quota.”

B2B companies need to build trust with B2B software vendors who have stood the test of time. “It is the best way to cope with an uncertain future that is heading toward the cloud,” Reid says.

Inherently, true B2B cloud solutions are built for the digital era. For example, LogFire’s solution requires no-up front cost and minimal installation times—sometimes inside 90 days, according to Pantoja-Navajas. “Because of no-up front cost, businesses sometimes can start experiencing (return on investment) right away,” he says. “Additionally, our solution is made for business fluctuations, as it allows companies to easily scale up and down. Because cloud solutions are Internet-based, businesses can send push updates that customers can download at their convenience.”

Therefore, the latest version of the applications is always operating. Because when you go to the cloud, B2B businesses expect to have the most updated products on demand, something not even IBM could deliver in pre-PC days.

Photo via product-management.com

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Derek Handova

Derek Handova

Derek Handova is a veteran journalist writing on various B2B vertical beats. He started out as associate editor of Micro Publishing News, a pioneer in coverage of the desktop publishing space and more recently as a freelance writer for Digital Journal, Economy Lead (finance and IR beats) and Intelligent Utility (electrical transmission and distribution beats).
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