Large applications like ERP systems in enterprise-class organizations are not easily turned into SaaS-type cloud services, despite the huge pressure to move systems off-premise, says Dell Managing Director for Services Sukumar Narayanan. Although his present brief is running a large IT services organization, Mr. Narayanan has a depth of experience and knowledge in software and, in particular, ERP systems. Wikibon CEO and co-founder David Vellante quizzed him on ERP’s future in an increasingly virtualized world in which companies of all sizes are moving from on-premise to SaaS to meet new business needs and save money during an interview on SiliconAngle.TV from OracleWorld 2010 (http://www.siliconangle.tv/video/senior-exec-dell-services-sukumar-narayanan).

While the market is full of talk about moving everything to the cloud, that isn’t happening with ERP systems. “The primary issues are first that there is significant complexity in trying to deliver a complete, end-to-end ERP solution in a SaaS package because of all the integration into other large legacy systems that you have to deal with,” he said. “And frankly it cannibalizes the business models of the big vendors.” That makes the transition a major challenge. Instead, he says, he thinks large enterprises will turn to SaaS for new add-on services such as advanced warehouse management and advanced planning. Eventually they may also replace some modules of their ERP systems such as the HR module with SaaS, but the core ERP systems are likely to stay in place for some time.

This means that SAP and Oracle will continue to compete in what has become a mature market. In reply to a question from Mr. Vellante, Mr. Narayanan said that even at the present mature nature of the software, the choice can matter, depending on the industry. “For example, Oracle has had a lot of success in the high tech space, while SAP has had tremendous success in process manufacturing, chemicals in particular. That is because they have a tighter functional fit to those markets out of the box.”

Beyond that, however, “the successful deployment of these solutions has less to do with the turning of the knobs in the software and much more to do with bringing the process, organization, policies, and procedures into sync and addressing those in conjunction with deployment of the software.”

In other words, as the software has matured the services associated with them have become the dominant consideration in choosing between them and achieving a successful installation. Which may explain why Mr. Narayanan has moved into the service end of the industry.