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SAP BPC & EPM
Thought Leadership

The Cloud: EPM Bust or Solution?

Posted by
David Den Boer
David Den Boer
on Tue, Nov 13, 2012 @ 12:11 PM
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WCO 028A cloud buster is a device invented by Austrian Wilhelm Reich, who claimed to be able to produce rain by draining energy from the cloud--effectively "busting a cloud." This far-fetched claim reminds me of some of the outlandish claims being made about how revolutionary cloud technology is these days. The fact is, the cloud has its place for some customers, but it is not quite the ultimate enterprise performance management (EPM)solution as it may be billed. The goal of this post is to discuss the realities, pros, and cons of the cloud deployment model that is becoming more popular in the market.

Every participant in the enterprise technology market has been inundated with messaging touting the benefits of "going to the cloud." SAP released on-demand EPM solutions on September 10, 2012. Software vendors are cropping up on a regular basis supporting the cloud-deployment strategy, and it's causing some confusion in the space with customers. We're being asked: "What is the cloud, is it valuable, and should it be considered for EPM solutions?"

The typical consultant might say, "It depends." But I can do better than that. As the largest service provider in the SAP EPM space, Column5 has some unique opinions to contribute to this discussion.

First, what is the cloud?

The cloud is a deployment strategy where software is loaded on a hosted environment, and the infrastructure, performance, and versioning is typically managed centrally by the vendor, not the client. Cloud-based software doesn't necessarily have to have different functionality from on premise versions of software, but it often does.

Next, is the cloud valuable?

It's a complicated calculation. Sources of value for the cloud come from all the expenses associated with managing an enterprise deployment of software that is not being done by the client. So, let's add them up: hardware, administrative costs, performance monitoring/assurance, upgrades (often included). It can save money when they're provided by the vendor across all their customers instead of the client having to procure or allocate resources. Where it gets complicated is when the scale of deployment is larger, or resources are already present in the enterprise. To allocate a small portion of a large database farm, or 25% of an existing administrator's time to provide the performance assurance, the same services could be achieved, and often at a lower cost than the cloud offering. However, for smaller companies that simply do not have those resources available, procuring new resources to properly support a solution would most likely result in a higher cost. Given this approach, perhaps the most universally appreciated advantage of cloud solutions is the predictable cost angle. You won't have the upfront cost of acquiring software, hardware, and the talent to manage it. Instead, you will have consistent subscription payments over time. This aspect can be partially achieved via financing tricks, but with the cloud model, there tends to be fewer surprises.

Finally, what is the cloud's relevance for EPM solutions?

I hate to answer a question with a question, but, "What is the perceived value of EPM to your organization?" It's important to determine if you believe EPM is a transformational technology or a tactical one. If you take a tactical approach, focused on minimizing the operational costs of the EPM process, then a cloud solution may indeed be a good fit. On the other hand, many organizations are beginning to embrace the notion that EPM is a potential game-changer for their competitive capabilities. If this strategic view is more aligned with your organization's priority, then limitations of the cloud deployment may soon become process limitations.

The Cloud's the Limit

Limitations and risks of deploying in the cloud can include process customizations, flexibility, increased data movement, and of course, security. It is our view that these constraints may limit the effectiveness of a cloud deployment in terms of applicability to EPM processes in specific. One feature of the cloud that is frequently cited is "multi-tenancy," meaning all clients are on the same platform. This yields advantages for support and performance, by removing the variable of which version you are on.

A less-often-cited consequence of this is that customizations must not be very deep, or they will risk becoming out of sync with the core software. For EPM, this may be a serious constraint. It has been our experience that no two customers have an identical performance management process, and custom configurations are a requirement. Upgrading all customers at the same time runs the risk of causing problems by invalidating customization. Flexibility is another limiting factor. Cloud solutions often permit narrow customizations for the customer, such as adding several custom dimensions, creating calls to an external process for leveraging common calculations, and more of the out-of-box solutions required in EPM solutions.

Increasingly, EPM means managing performance across a broader set of data functions, and that means managing more data in general. As a result, the data sets associated with EPM will only increase--and likely exponentially, as "Big Data" and "Real-Time Performance Management" become reality. The cloud inherently requires uploading data that is most likely on the premises to the hosted environment of the cloud via the internet. Not only is this a time-consuming process, but it may be a vulnerable transit from a security perspective.

At Column5, we push our clients to adopt a more integrated process that is more broadly distributed, in which EPM process cycles run more often. This is what we consider an ideal process. The cloud can enable this process to an extent, but we believe the constraints become more of a liability over the long run. The cloud options are certainly right for some companies. Perhaps, as one analyst told me, "The cloud can be a stop-gap" measure. Due to the speed with which you can go live, even with a limited process, cloud solutions may be able to produce value in shorter time frames. In those cases, getting some value is preferential to waiting a long time--potentially years--to get value from an onsite solution.

Choosing the right platform is a critical decision for your company. Column5 can help you make such decisions in alignment with a superior EPM strategy. Contact us today to get started on your EPM journey.

 

Topics: Thought Leadership, Enterprise Performance Management (EPM), Cloud, Performance, Value, BPC (Business Planning & Consolidation)

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