The appeal of cloud applications is irrepressible. Low capital costs, flexibility and “free” upgrades – anyone who has experienced behemoth on-premise application upgrades can be easily swayed by the appeal.
Last year, IDC forecast that from 2013 to 2017 spending on public IT cloud services would enjoy a compound annual growth rate of 24% – five times that of the IT industry as a whole.
But in-house applications will not go away. Investment in reliable enterprise applications can be too great to disregard, so the two models will have to live side by side for the foreseeable future.
For example, in 2009 the Islamic Bank of Britain began moving its customer relationship management (CRM) systems to the cloud, but kept its core banking system on an AS/400 IBM mainframe running a Misys financial application.
In doing so, it was able to create more efficient onboarding of customers to launch products, but not before investing in a sophisticated middleware layer (see case study below).
Running cloud and on-premise applications in tandem
In fact, the majority of companies using cloud business applications do not closely integrate them with on-premise systems. A study from Ventana research found 56% of organisations do the integration through spreadsheets or by exporting data, with custom coding being second most popular at 39%.
“This is the reality of business today,” said Ventana CEO Mark Smith. “Many departments and individuals, using different applications, are needed to support orders, fulfilment and service. If these applications are not connected, organisations have to perform manual intervention, re-enter data, or copy and paste, which not only wastes time and resources, but can introduce errors.”
To get around this, users are better off with a “light touch” approach to integration, allowing the cloud application to operate on a standalone basis as much as possible, only connecting with in-house systems when necessary, said Alastair Bennett, a solution architect at Coupa.
Coupa offers procurement, invoice management and spend management applications, built from the ground up, to be hosted in the cloud. Bennett said the approach is very different to in-house enterprise resource planning (ERP) systems, and customers need to understand those differences.
“We train them and get them to understand that they are looking at cloud applications and not looking at ERP any more. Most customers, if they have SAP running through their veins, cannot see beyond that,” said Bennett.
The process will require data modelling and mapping of business processes. “We look at business process and how users' and suppliers' data models interact with ERP data. We build up a model of how everything inter-relates,” he said.
Keeping software integration simple
Coupa, like a lot of cloud applications, is built to be very configurable by users with a flat data structure, and therefore does not need the bespoke customisation that some in-house systems require, said Bennett.
Our successful customers have light-touch integration with back-end ERP
Alastair Bennett, Coupa
“Configuring the solution takes a matter of hours, but sorting out the structure of the data and getting that into the solution can take time. Quite often customers need to build something in their ERP to create the correct data structures that we consume,” he said.
“We find our successful customers have light-touch integration with back-end ERP, whereas in the past everything had to be tightly integrated.”
Bennett said an ERP system will commonly handle purchase orders, goods receipts and invoices. Instead of integrating all data across both systems, he recommends Coupa matches the three internally and simply sends an instruction to pay suppliers, with information about the associated cost centre, to the ERP.
“Because we’ve defined an interface agreement on these very few fields, we can make it slick and efficient. We’re not pushing information into and out of ERP all the time,” he says.
Using cloud to modernise legacy IT
In fact, rather than presenting another problem to businesses wanting to integrate legacy applications, cloud technology could help bear the burden, said Nigel Barnes, lead technology architect globally at Accenture.
We are right at the beginning of a journey to software as service
Nigel Barnes, Accenture
“We are seeing a lot of legacy out there that people want to keep and renew or re-platform, recasting them in modern technology,” he said.
In the case of older generation languages such as Cobol, the application may be moved to run on emulation software in-house, as part of that renewal, said Barnes. Alternatively, there is a growing trend to emulate the application environment in the cloud, where service providers can gather a pool of hard-to-find legacy skills.
“We’re seeing a lot interest in that space. It is about making sure you have the skills at reasonable price. We are right at the beginning of a journey to software as service. People will be asking how they can modernise applications and you will see niche players interested in the market,” he said.
Users are struggling with integrating cloud applications to their enterprise application portfolio, often falling back on ad hoc, inefficient techniques. They can use integration layers or adopt a light-touch integration with their on-premise systems.
Either way, they will still have to understand their data structures and business processes to benefit from the latest generation of cloud technology.
Case study: Islamic Bank of Britain reaches across the cloud
An ageing customer relationship management (CRM) system from Siebel was proving costly to maintain and upgrade for the Islamic Bank of Britain, the UK’s first wholly Sharia-compliant retail bank.
Chief operating officer Mohamed Gamil said the bank contacted Salesforce.com in 2009, and the decision was made to move its CRM to the cloud. But the question remained about how to connect it to an AS/400 mainframe which runs the core banking system from Misys and had once also hosted the Siebel system.
Salesforce.com sends only the relevant information to the core banking system and holds the rest in the cloud
Mohamed Gamil, Islamic Bank of Britain
The answer was to build an integration layer based on Microsoft Biztalk server, which is set for an upgrade. Initially, this supported one-way replication when account information was changed, and that was replicated to the CRM system. “But that meant data redundancy, as we held customer information in two places,” said Gamil.
In the second phase of the project, completed in 2011, the bank began to eliminate this redundancy and manage customer acquisition in Salesforce.com, sending only the relevant information to the core banking system and holding the rest in the cloud.
This made the account-opening process faster, helping the bank to launch products more rapidly. As a result of using the system, the bank quickly reached a £20m deposit target for a 120-day notice account, said Gamil.
Salesforce.com has since been extended to manage products equivalent to mortgages, allowing solicitors to input conveyancing data on the cloud system and greatly reducing the management burden of the process, he said.
The bank has also benefited from a range of plug and play add-ons in the Salesforce.com platform, such as SMS services, without having to link directly to its core banking system, said Gamil.
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