100% ERP Will Be On Cloud In Next 5 Years: SAT Infotech CEO
ERP in the cloud offers faster time to value, increased innovation, and scalability with the business. While there are challenges that need to be addressed, Cloud is going to be instrumental in shaping businesses and offers ample opportunities to the solution providers. In an exclusive discussion with Channel Times, Veera Swamy Arava, CEO and Director at SAT Infotech, an ERP consulting firm in Hyderabad, discusses the importance of cloud ERP for businesses. Arava also explains the company’s plans in the cloud ERP space.
CT: It has been reported that half of all new ERP implementations are already on cloud. From an India perspective, how are these numbers faring? And what really are the drivers for this shift?
Veera Swamy Arava: India is no way different from the global market. There is a clear shift towards cloud when it comes to ERP and other critical applications. You would notice that most of the leading ERP vendors have reported a steep rise in their cloud revenues. When it comes to SAP ERP implementation, where we are specialized, more than 45 percent of new implementations in India are already moving to cloud. These are estimated figures.
One of the major factors that drives this shift is the infrastructure cost associated with on-premise
ERP implementations. The hardware cost is as much as the licensing fee or implementation cost, in a typical ERP project. Even though the actual hardware costs are falling, OEM partners tend to oversize the hardware, to avoid further hardware upgrades in the near future. Since the hardware is a significant cost factor, companies started exploring alternatives. Cloud thus emerged as a viable option for organizations to avoid huge upfront cost.
Maintenance of the on-premise system is another concern for organizations. IT departments now
have more strategic things to focus on, rather than ensuring, for instance, the UPS is up and running!
The huge effort spent on maintenance aside, organizations need highly skilled resources to keep an
on-premise system up and running. This adds to the cost and complexity. Skill was in fact the first
thing to get outsourced. Once the skill activity is outsourced, organizations find no reason to keep
the hardware on premises.
CT: SAT still has a big chunk of business coming from the traditional ERP business. Would you be able to give us a comparison on how the traditional users of ERP do as compared to the cloud users?
Veera Swamy Arava: The move to cloud is a question of when, not if. Today’s technology disruptions mandate a clear shift towards the cloud model, irrespective of the criticality of the application. In next 5-8 years, I think 100 percent of ERP will be on cloud. We see this change happening within our installed base, which is predominantly SMEs. Many of these existing customers are on the verge of upgrading their SAP ERP systems to the latest version, which is SAP HANA. Migration to the newer version of ERP is thus a critical juncture at which many of these companies decide to move away from the on-premise model and adopt cloud. The only factor which probably works in favour of the on-premise model is the mindset of customers towards data. They feel that their proprietary data is safer when it is on the premise and they have better control over it. It’s a changing perception though.
CT: So, you think security still remains a concern in the whole cloud discussion?
Veera Swamy Arava: Yes, security still remains a concern, especially when moving critical applications to cloud. But
security standards are going to change completely. Today, we have peripheral security standards.
But that is not the way forward. Cyberattacks are becoming more nuanced and targeted. Security is moving to the application level, from the network level. Cloud is going to be instrumental in bringing that change. Also, cloud providers are more than just infrastructure providers. We are now talking about managed infrastructure as a service, where aspects like security, application expertise, consulting etc are built into the infrastructure offering.
From a security point of view, what exactly is the differentiator that a player like SAT brings to the
table, especially because you now have to compete with large cloud providers in the market?
I think our biggest strength lies in our understanding about operating system. SUSE is the de facto
operating system for SAP and we are one of the highly skilled organizations when it comes to SUSE.
We have also been meticulously developing our internal security skills. One of our directors is a
certified security specialist with expertise in multiple areas. We believe that our deep understanding of open source is another major advantage. Moreover, we position ourselves as ‘specialists’ in the market in providing end-to-end SAP ERP solutions, rather than being like many other cloud providers out there.
You mentioned SME sector as your primary focus market. SMEs in India are often seen as
technology laggards, to some extent. What is changing?
Veera Swamy Arava: Information Technology has always been a non-productive system for the SMEs mainly because of
their shoestring budgets towards technology. Historically, SMEs focused on core business, rather
than investing on support systems. That is changing. The SME ecosystem in India is on the verge of
the next phase of growth. SMEs now want to be globally competitive and are putting their systems in place. They have realized that technology is an important enabler to scale up. Compliance is another driver for IT investments. GST for instance is a huge driver for increasing ERP adoption among SMEs.
Many of these businesses are now being run by the Gen Y, who are very tech savvy. So there is a
fundamental cultural change. Interestingly, most of these businesses also come with realistic
expectations from technology. They learn from the digital disruptors and leaders in the market and
follow a model that works best for them. There has to be a case for technology adoption for SMEs.
CT: What are some of your plans for the next one year?
Veera Swamy Arava: We are quite upbeat about our packaged solutions in the upcoming quarters. Both our packaged offerings –SATEDGE for manufacturing and SAP ECC to SAP HANA migration module—are doing pretty well already. While cloud will remain our primary focus, we are not going to be aggressive about achieving numbers. We will remain specialists and focus on niche, high-value projects. Our existing installed base itself is a huge opportunity for cloud business. So migrating them to the cloud model is going to be the focus. While our vision has been “Technology for Human Excellence” , our mission has been packaging “SATEDGE for Manufacturing” powered by SAP S/4 HANA affordable to Indian SME.
We also plan to introduce Disaster Recovery (DR) as a service, which is going to be a big growth
area in the SME space. A lot of SMEs currently do not have a concrete DR strategy. But moving
forward, DR is critical from a data point of view and compliance requirements will further fuel the
need for disaster recovery. It is a highly potential area.
We are also working with SAP on productizing one of our innovations for the agricultural sector. It
will be a big turning point for us, once it materializes