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Cloud or On-Premise EDI Integration? A Unique Approach to Selection

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Guest blogging for GraceBlood today is Nathan Camp of Liaison Technologies.  Photo courtesy of Mikhail Koninin.

Organizations of every size are evaluating every piece of technology to determine whether they retain or expand solutions with on-premise software and hardware, or move the functionality up to the “Cloud.”

A major tile and masonry products supplier based in Los Angeles, CA, with dozens of stores across the US, had such a decision as they looked at their EDI operations.

This company was using Oracle JD Edwards for their ERP system, and they had decided to keep this system in house running on Oracle servers. While they had an enterprise-class ERP system, their revenues and therefore budgets were also still directly tied to a very tight home improvement market. Cost, delivery capability, control, and growth were constant considerations as they looked at IT resources. In order to stay in business, this company knew they had to expand their markets in big home improvement chains. And that made one choice an absolute must: find a new EDI integration system. Since JD Edwards typically uses staging tables for data integration, both on-premise and Cloud delivery models were options.

Many IT directors are faced with that conundrum today: “To Cloud or not to Cloud, that is only one of my 1,400 decision e-mails sitting in my inbox.”

While Cloud and mobile continue to be the darlings of media, the software industry is providing signals that on-premise is not dead nor quietly drifting off into obsolescence. In a recent post by Pete Barlas of Investors Business Daily, he cites Gartner’s research that says, “By 2016, global revenue from public cloud software services is expected to reach $210 billion, up 60% from the $131 billion expected this year, says Gartner. The research firm expects total software revenue of $369 billion in 2016, so public cloud software would be nearly 57% of the total vs. 43% this year.” And Barlas correctly summarizes, “That, of course, still leaves a lot outside the cloud.”

Turning back to the tile distributor in Los Angeles, they had the following critical factors as their main consideration factors:

  1. They absolutely needed to satisfy the EDI needs for Home Depot, Lowes, and other home improvement giants.
  2. They needed a flexible solution that could work with JD Edwards via database connectivity.
  3. They demanded that their new EDI solution must perform complicated pricing and unit measure look-ups and conversions to transform internal costs and product units into the appropriate values required by each retailer.
  4. Large product catalogs also needed to be compiled from the JD Edwards database on a regular basis, and posted on a secure FTP server for immediate customer pickup by customers using the Retail Flooring Trade Association RFMS system.

With this list of requirements, the tile distributor began the search for solution providers. They knew that they needed to evaluate solutions covering a broad spectrum of delivery methods. In the end, they whittled the list down to a Cloud integration service provider and an on-premise solution. And here is where this company did something that most others haven’t considered. They decided to have a live competition between the two solution options. The Home Depot integration project was given to one solution provider, while Lowes was given to the other solution provider.

This unique solution to choosing a new vendor provided the tile distributor with four practical take-a ways:

  1. Could the solution provider easily connect to the JD Edwards staging tables without disrupting too many internal systems nor compromising security?
  2. Could the solution provider actually deliver what the sales person had promised?
  3. Were budgetary objectives met?
  4. Was the system adaptable to be managed by either internal or external resources on an as-needed basis?

While the results might surprise you (on-premise software won the day), what should impress you is the creative approach to the solution process. This tile distributor recognized the absolute strategic importance of this decision, and they systematically determined the best course for their business. This required duplication of work efforts across two competing solution providers, cash outlay for the professional services provided in the proofs of concept, and the critical analysis that this exercise needed to quantify the cost-to-benefits of both products.

While this customer ended up evaluating on-premise systems compared to Cloud delivery, I argue that the same approach can be taken in on premise versus on-premise or Cloud versus Cloud. This approach does not have to be taken for every decision because many IT purchasing decisions can be more obvious.

But when faced with a more difficult capital investment decision which could lead to substantial hidden costs, a little upfront sacrifice is worth it. Without the exercise of the proof-of-concept trail, the supplier would not have uncovered the new costs of working with this particular Cloud provider that demanded the client adhere to its canonical file structure, which then made it necessary to add a second data translation map between the “converted” EDI file and JD Edwards. Yes, this is a common, hidden pain point that is highlighted as point 1 in this blog article.

On the positive side, because this tile distributor was able to find success and a strong working relationship with the Aurora EDI Alliance, both this company and the solution experts continue to look for new opportunities to expand the ways to use the middleware solutions beyond just client EDI. In fact, the tile distributor is now looking to work with the solution provider to run a supplier enablement program and offer a multi-lingual Web EDI product to tie their international based suppliers directly into their EDI system.

Learn more about the relationship between ERP providers and EDI partnerships in our free whitepaper: EDI Partnerships Deliver Value to ERP Solutions Providers

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