Against a background of now open-ended austerity, where investment not only needs particularly careful planning but a rigorous and quite possibly unsuccessful search for funds, there is one prediction that can be made for 2013 that may cast a shadow over the future plans for many enterprises, both large and small. That prediction is for the coming of the Tech-Upgrade Cliff.
Like the judiciously, if temporarily, escaped Fiscal Cliff, which could have tipped the whole US economy into a quagmire, the Tech-Update Cliff could tip many enterprises into a pit where further development of the business becomes hog-tied by an inability to upgrade their existing business-critical applications.
The impact will certainly extend to the vendors of those business-critical applications. Indeed, the impact could be much greater, because at least enterprise users have a potential way out.
The issues underpinning the growth of the Tech-Upgrade Cliff emerged during a discussion towards the end of last year with Host Analytics, a business specialising in delivering SaaS-based Corporate Performance Management (CPM) services.
The essence of the problem is based in the underlying austere economic climate, with investment funds hard to get even with good justification. This has led many user businesses to skip upgrades over the last four or five years. They have, until now, been able to 'make do’ with their existing applications, even if they are approaching end of life. Sweating investments has become the mantra for enterprise IT departments.
But now three important changes are coming into play as a complementary set. One is that the latest versions of these applications are now appearing, and are incorporating capabilities that businesses would like to exploit, particularly in identifying and exploiting new business and revenue opportunities. The second is that, because the users have failed to follow the linear update path they will probably find themselves obliged to pay penalty charges to the vendors to upgrade to the latest versions.
Finally, next year will certainly see many of those older versions of applications being 'sunsetted’ by the vendors; support will reduced to critical maintenance only, and even that will tend to be available only at premium prices, as the applications come to what the vendors see as their official ends of life.
The result of this trend will, therefore, see enterprises large and small faced with a choice—pay the going rate imposed on them by the applications providers, struggle on as they are, or find some alternative.
It is the alternative that Host Analytics’ CEO, David Kellogg, aims to present to those enterprises looking for a way to move on in the development and use of Corporate Performance Management. This is an application type targeted almost exclusively at the largest enterprises, where the need for what he calls 'strategic financial management’ is at its greatest. It covers financial planning, financial consolidations, complex budgeting and strategic financial analytics. CPM systems are largely responsible for producing the numbers that financial regulators and stock market traders and analysts work with.
It is also a sector where on-premise applications, such as Hyperion, dominate and where concern about moving such capabilities to the cloud can be expected to be at its keenest.
"Business Intelligence users have been slow adopters of the cloud and CPM users have been even slower," he observed. "Financial people are naturally conservative. But the upgrade issue is one important reason why it is now starting to happen, especially in the USA. We are getting a lot of interest from Hyperion users facing the update issue. Many of them are on Version 9 and the latest update is Version 11. What we offer is effectively Hyperion in the cloud."
Undertaking this level of financial management in the cloud is interesting as data security, and in particular financial data security, is the common concern for most users when the subject of cloud utilisation comes up.
However, according to Ron Baden, the company’s VP of Services, Host Analytics undergoes annual SSAE 16 SOC1 Type 2 and SOC 2 audits, other security audits, and internal compliance self-assessments as the foundation of its compliance program for critical regulatory requirements.
"Doing what we do, we get audited by everyone," Baden said. "Running financial applications in the cloud is a very serious business. Everything that happens on our service is logged and tracked so that it can be fully audited. Nothing happens without those who should know, knowing about it."
This includes dealing with the one operational instance where on-premise is said to be better than the cloud—proving compliance that processes have run on the stated application version number. Auditors often insist on this for periods of time during certain business processes, such as annual audits. This is often thought to be all but impossible in a multi-tenanted, SaaS environment.
Host Analytics overcomes this by initiating temporary application pods—virtual instances of the specific version number of the required applications. If different customers require to be locked down on the same version of a required application, that does give the company the chance to multi-tenant them in that single application pod.
This level of operational security is, according to Kellogg, proving to be one of the capabilities selling the Host Analytics service, despite the high-value nature of the business being handled. "They now seem to be going for the benefits of cloud," he said, "including the fact that it is green compared to on-premise operations and there is no new hardware or software investment required, which means that deployment is faster. In addition, they can keep up with the pace of innovation while eliminating the upgrade problem. And of course there is good security."
Ron Baden added the observation that upgrading an on-premise application is now a time consuming and complex task. "It will normally require a great deal of change management operations, and can take at least six months to complete to the point where the business can function at the same level. So it will have effectively stood still for that time. We estimate that on-premise Hyperion takes a typical 2,000 man/days to implement from scratch, where scratch also includes undertaking a major upgrade.
"We estimate that users can move to Host Analytics for around one tenth the cost of trying to move to the next upgrade, and have it deployed and contributing to revenue much faster. We estimate the speed to value 6 months, rather that the four years or more needed for an on-premise installation. With SaaS they get the advantage that, as a SaaS vendor, we need our customers to stay with us for two or three years to make money, so we have a strong vested interest in making it work, and work well."
Kellogg compared this to the sales pitches put forward by on-premise vendors, noting that their sales staff earn commissions geared to the up-front licence fees users are obliged to pay.
The approach is starting to spread the market for the company. While large enterprise Hyperion users remain the primary target, Kellogg indicated the company is now generating interest amongst what he would call the SME’ community—businesses generating revenues of under $100m a year.
"They are not a core focus for us as yet," he said, "but we are finding interest amongst users where their financial planning and budgeting tasks can no longer be carried out effectively by torturing Excel."
This story was first published in Business Cloud 9 here