Manufacturers hesitant to switch to virtual ERP

Manufacturers are reluctant to virtualize their mission-critical ERP applications. There are good reasons for hesitance about virtual ERP, especially for medium-sized global manufacturers.

Software virtualization may indeed be the top area of IT technology investment for business users, according to a recent survey conducted by AMR Research. But few firms are moving to virtual ERP.

When Bruce Richardson, chief research officer at AMR, studied the results of the survey, they showed that companies "are not necessarily thinking about virtualizing ERP yet," he said. 

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There are several reasons why companies are reluctant to virtualize their ERP systems.

Complexity of ERP poses virtualization challenges

Compared with other applications that companies are virtualizing, ERP applications are larger, more complex and more mission-critical. Simply put, ERP affects just about every process in a manufacturing organization; because of this, companies, particularly larger manufacturers, are understandably hesitant to virtualize their ERP applications.

"There are no downtime windows if you are a global company," Richardson said. "You're not like a business that can take it down and do an upgrade over the weekend" because divisions elsewhere are still operating. That makes virtualizing an ERP system a highly complicated transition, he said.

IT departments need to be on board with virtual ERP

Another factor: There are still some corporate IT departments that will not throw their weight behind virtualization. "You have to have an IT organization internally that is comfortable with that technology," said Eric Kimberling, president and founder of Panorama Consulting Group LLC, a Denver-based research firm that focuses on ERP issues. "My gut says that most companies at that level with ERP are dealing with so many internal [software and economic pressure] changes … that those tend to be the higher priority for those companies."

The most likely companies to attempt ERP virtualization are smaller users and manufacturers, according to Kimberling. A medium-sized or large company may have a hard time justifying the virtualization of its ERP software. "For our clients, there's no magic number," he said. "But for manufacturers that have over $100 million in revenue, it just doesn't make sense."

There are no downtime windows if you are a global company. That makes virtualizing an ERP system a highly complicated transition.
Bruce Richardson
chief research officerAMR

At any rate, not many users are asking Kimberling about virtualizing ERP today. "We heard from one chemical company that is thinking about it," he said. "They are looking at it in the longer term as part of their initiative to virtualize all their operations."

Richardson also said that, so far, he's seeing only sporadic attempts by users to virtualize their ERP applications. "One CIO at [the recent Oracle] OpenWorld conference said they are already past virtualization and are looking at moving it all to the cloud – to a private cloud that would run all his operations with an outside vendor [including ERP]." But, Richardson said, that customer is "definitely at the bleeding edge."

24/7 ERP users reluctant to virtualize

John Asi, data services manager for ERP vendor IQMS in Paso Robles, Calif., said that some users are just starting to look at adding ERP to their virtualization strategy, but because of the difficulty of managing [such complex applications] that operate 24/7, "[users] were hesitant of taking something so critical to their companies and running it [in new ways]."

Still, Asi cited one IQMS manufacturing customer in the U.K. that has been successful with virtualizing its ERP system – a system that has 45 ERP users -- but said he could not identify the customer because of privacy issues.

Some ERP vendors are looking at ERP virtualization as an alternative to software as a service (SaaS) application delivery models, Kimberling said. But they need to be further along with their ERP virtualization roadmap to interest users, he said.

Even manufacturers interested in virtualizing ERP have concerns – some might call them fears – related to maintaining data security and moving their applications offsite, such as in the case of a hosted virtualization infrastructure, Kimberling said. The Panorama customer who doesn't have that concern is rare. "Ninety percent of the time," he said, "there's that fear of security issues."

About the author: Todd R. Weiss is a technology journalist and freelance writer who worked as a staff reporter for Computerworld.com from 2000 to 2008. He spends his spare time working on a book about an unheralded member of the 1957 Milwaukee Braves and watching classic Humphrey Bogart movies. Follow him on Twitter @TechManTalking.

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