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ERP in the Ethers

Cloud computing is gaining acceptance, but is it core ready?
University Business, March 2012

Acceptance of cloud computing—the practice of storing data in off-site servers rather than on campus—has been growing by leaps and bounds, at least in some areas. “It’s growing in the areas easier to rip and replace, such as CRM,” says Stan Swete, chief technology officer at Workday, which offers HR and Payroll systems through software as a service (SaaS).

Now interest in moving core systems, such as an ERP system, is beginning to grow. In a Datatel survey of higher ed professionals, about one-third said they would be interested in exploring the option in the next 24 months, says Sudarshan Ranganath, product manager for managed services at the company.

Chances are your campus already has some functions in the cloud, and IT is considering moving more. The low-hanging fruit of email and word processing have already shifted off campus, but how feasible is it to shift more critical systems?

Time to Move

“I would say that all SaaS is in the cloud, but not all cloud is SaaS,” says Sam Burgio, vice president & general manager of Jenzabar EX, the company’s ERP system for the Microsoft SQL Server platform.

Most higher ed institutions are slow to adopt emerging technologies, he reminds. In addition to email, colleges and universities are interested in moving their Learning Management Systems to the cloud because of the immediate benefit of providing faculty and staff anytime, anywhere access. And if the LMS is SaaS, there is the added benefit of 24/7 support.

“Upwards of 30 percent of schools are taking LMS into the cloud. But only around 2 percent are putting ERP in the cloud,” Burgio says.
When campus leaders do look to make the move, the main motivation is, not surprisingly, financial.

“We’re looking to save costs and improve the student experience,” says George Claffey, CIO of Charter Oak State College (Conn.). If the choice is between hiring a new staff member or using the funds to improve the admissions process, the student-facing service will probably win.

IT leaders are also feeling the pinch of ongoing maintenance and might not have funds available for the large upfront cost of a server refresh, explains Jami Morshed, vice president of global sales and marketing at ERP vendor Three Rivers Systems.

'IT departments tend to be staffed by ‘firefighters’ who rush in and fix things when they break. Socially, we applaud these people. I think, “How many times can you depend on that?'—George Claffey, Charter Oak State College

Providing better service to students also informed the decision of Cleveland Chiropractic College (Ohio) leaders, who use hosting services from Campus Management, says Kirk Barnett, student information services manager. “When we looked at where we were applying our budget dollars in IT, it was in hardware maintenance, servers, licensing costs, and thin net computing. We decided we would like to utilize those budget dollars in areas that would more directly benefit students.”

At Brown University, a desire to decommission the mainframe housing the HR system, combined with the fact that the old system was no long supported, prompted the move to Workday, shares Roberta Gordon, Workday project director.

But, since the ROI can be long-term, people are wisely waiting until the end of a refresh cycle to make the move. Switching to hosted services instead of upgrading a server is becoming more acceptable, says Burgio. “I had a president tell me once that he evaluates all the functions in his college, and if it doesn’t deliver the core functions, it should be outsourced.”

“It’s easier to buy 40 cents for a compute hour rather than buying 1,000 CPUs and excess capacity,” says Darren Wesemann, CTO of SunGard Higher Education. By switching to cloud-based services, IT leaders can “reduce the excess capacity column down to zero.” Most institutions size their capacity for the heavy load of registration, but the rest of the semester that computing power is wasted but still requires budget dollars to maintain.

However, the budget, while a big driver, is not the only factor in the decision to move ERP to the cloud. Campus culture also plays a critical role. “Some institutions have the culture of ‘not invented here,’ ” Wesemann points out. “[They] have to control it and do everything themselves. It is something every institution has to go through; they have to grow into it.”
IT departments tend to be staffed by “firefighters” who rush in and fix things when they break, says Claffey. “Socially, we applaud these people. I think, ‘How many times can you depend on that?’ ” He sees the cloud as a way to move away from firefighting to staff playing a more proactive role.

“Managing infrastructure and technology is a hassle,” says Ranganath. Some schools, depending on where they are located, can also have trouble attracting and retaining employees qualified to maintain the infrastructure. A cloud solution puts that burden on the vendor and frees campus staff for other projects. In addition to the logical time of a hardware refresh, he has seen schools move to managed services either when they lost key staff members or when change agents are hired. Additionally, seeing peer institutions successfully embrace these technologies raises their own comfort level.

“Those new to the topic are focusing a lot of requirements on security and uptime,” says Tim Gilbert, senior vice president and chief marketing officer at Campus Management. While those are both important, there will be changes on campus that have to be communicated. “It will be an organizational change. People call you and get it fixed. Now you have to call the vendor,” he cautions. The IT leader’s job, he believes, is to educate people about what’s going to happen and how the change will affect them. Things to watch for are a reallocation of IT staff, a change in trouble ticket response time, and the possibility that some requests can’t be fulfilled because IT staff “can’t mess with the code.”

A cloud-based solution can be a weight off the IT department’s shoulders. “Not having to worry about the new system and the set up was the best part,” says Joe Street, director of information systems for the Institute for Shipboard Education’s Semester At Sea global education program, about a recent switch to Datatel. Having a data center on a ship thousands of miles away makes it more than a little inaccessible, and the Semester At Sea hardware was at or beyond end of life, making it difficult to maintain. After contracting with Datatel, the team there “handed it back with our passwords. We didn’t have to dedicate time to selecting and sourcing equipment, or installing an operating system. That was all handled.”

Determining ROI

Campus officials have dipped their toes in the cloud through email and other low-impact systems and gained confidence to try more. “They see the value in other segments through cost, etc., and are trying to map it out for ERP,” says Ranganath.

Claffey sees advantages to a SaaS version of an ERP because it allows faculty and staff to work from home and on mobile devices and the service provider is the one who has to worry about VPN and tunneling.

“Traditionally, the CIO in any organization will tell you the biggest issue is aligning IT with business strategy,” says Yousuf Khan, CIO of Hult International Business School (UK). “The fact that you can make the conversation much more succinct helps the CIO become a future-state CIO.”

With campuses in Boston, San Francisco, Dubai, London, and Shanghai, it made sense for them to use the cloud-based CAMS ERP from Three Rivers System to ensure the same level of robustness to all locations. Not having to worry about legacy technology allows Khan to focus on other things. “The overall benefits of cost and making the organization more agile helps the CIO think more strategically,” he says.

When trying to determine benefits, especially to the budget, Wesemann says it’s important to look at utilization. “I tell them 70 percent is the break-even point if you look at raw computing,” he says. “It gets better if you layer software licenses on it.” He points out that 70 percent utilization is an “incredibly high” number and most campuses are in the eight to 10 percent range, but many are carrying excess capacity because they built to the peak usage of registration.

The savings are nearly immediate in a hardware refresh year, Wesemann says, “but if you don’t have to refresh, the payback isn’t as immediate.”

The ability to access more capacity on demand is a big plus, according to Barnett, since installed servers can’t easily be removed. Passing maintenance off has improved quality of life for his department, as well. “Our IT staff can keep normal hours. That’s pretty amazing.”

Projects can move rapidly in the cloud because it is scalable, says Jeff Barratt, executive director of Emily Griffith Technical College, located in Denver. His staff— and budget—is freed up for other projects by using a SaaS SIS from TopSchool, because he doesn’t have to invest in hardware resources. “We don’t have to worry about backups and server farms,” he says.

Flexibility, shorter time to delivery, and not having to source hardware or higher staff to run it allows you to go from being a “C-I-‘nO’ to a business partner,” quips Claffey.  “Ten years ago, we were judged on keeping the plumbing flowing. Now we’re being judged about how we’re helping the institution grow and improve.”

“If you are the CIO of an organization, your ‘bandwidth’ for dealing with issues is limited,” agrees Khan. “You don’t want to be talking to the president about applications being down.”
SaaS solutions also bring budget stability versus on-premise solutions, since there is a predictable monthly fee compared to costs involved with software and hardware upgrades, says Swete.

“It’s a cost avoidance,” adds Street. Although there was an initial outlay in switching to a hosted solution, he points out that the cycle of buying hardware and hiring someone to manage a server farm has been broken. “Over 10 years, depending on what you determine our necessary structure to be, we basically projected that by hosting this elsewhere we’d be saving between a quarter to a half million dollars.”

Security Risks?

Despite these benefits, not all campus leaders are rushing to place critical systems in the cloud. “I think the core reason is data,” says Wesemann. “The ERP is the home of the student record. It’s the core.” Campus leaders aren’t ready to cede control of that data.

“It’s still the Wild West out there,” agrees Barratt. “We’re always concerned about the integrity of our data.” Ensuring there are strong encryptions and passwords in place has eased his mind somewhat.

Street contacted his security auditors for advice before switching to the cloud.

While security concerns are valid, most experts will tell you the risk is the same as an on-premise solution, if not less. “The dangers of the cloud are the same as a disgruntled employee taking your data off site,” says Gilbert. “If you read the literature on security, you’ll find it’s the internal abuse that is greater than a hacker coming in.”

Adds Burgio, “Some of those hosted environments are more secure than your campus. It’s their business and a core concern for them.”

Beyond the worry about breaches is the concern about where the servers are located. Regulations vary from not allowing the data to leave the country to not leaving the state. Some cloud providers might not be able to guarantee that won’t happen. Working with a vendor who can ensure where they’re located, or establishing a private cloud, might be the solution.

Latency and Disaster Recovery

Just as solution providers will probably have better security in place, their latency and disaster recovery plans should also be stronger. The beauty of the cloud, says Morshed, is the ability to pay for a service and then not worry about maintenance. “It’s like your phone—you just expect it to work,” he notes, adding that there’s no need to worry about the hardware architecture.

When it comes to reliability, find out “how many 9s out of 100 percent”—that is, ninety-x percent—the vendor provides and ask yourself, “Is your vendor equipped to get more 9s than you can [elsewhere] at the same cost,” says Gilbert. He says there should at least be parity with your on-campus solution.

Reliability increases exponentially the more data centers a provider has, Wesemann explains. “One hundred percent reliability is impossible, but you can get incredibly close to it with more centers.”

Those service level agreements are something Claffey likes about having a hosted solution, since they are more rigorous than what he can provide on campus. A second thing is the disaster recovery process. He shares that “Snowtober,” the 12.3-inch snow event in Hartford over Halloween weekend last fall, revealed flaws in his own plan, such as what to do if the technology fails and staff can’t leave their homes. “My people were working 12 hours at the college and then going home to chainsaw in the dark. That is an incredible commitment, but it would have been nice to offload that to a cloud provider.”

In the end, things worked out OK. “I think we were down for 20 minutes. Both internet lines came down and we put up a Wi-Fi antenna. But I realized that one more thing would have taken us down for a week.”

“The vendor will take responsibility for security. The vendor does failover in the event of a disaster,” says Gilbert, adding that “there is a cost for having those services on demand.” From his perspective, “the rule of thumb is generally customers end up paying more around years three to five. You will pay more for SaaS than if you did it yourself.”

Closing Lines

When all is said and done, campus users aren’t going to be thinking much about the cloud. “Most campuses are in the cloud but people don’t realize it,” Burgio says. “The end users don’t care about a lot of this as long as they can access their data.”

The cloud has evolved beyond email and can handle complex systems such as ERP, says Ranganath. The due diligence higher ed officials do before making a change should put their minds at ease on that fact. And for people concerned about being unable to customize a SaaS solution, Ranganath suggests, “maybe using best practices that other institutions have found useful isn’t a bad idea. There is no reason to reinvent the wheel.”