QAD Raises the Blended Cloud/On-premise ERP Bar

QAD is a leading provider of enterprise applications for several thousand global manufacturing companies specializing in automotive, consumer products, electronics, food and beverage, industrial, and life sciences products. QAD Enterprise Applications On Demand, which provides the same functionality and user experience as its flagship on-premise counterpart QAD Enterprise Applications suite, has been a growth engine for the vendor as of late. As a software-as-a-service (SaaS) offering, QAD On Demand offers benefits to customers via automatic upgrades and rapid implementation, per-user pricing, and global accessibility.

Information technology (IT) departments in organizations worldwide are recognizing the benefits of having QAD manage application support, server hardware, systems administration, database administration, upgrade planning, first-line user support, disaster recovery, usage, and analysis reporting on their behalf. QAD finds the following mix of companies going with QAD On Demand thus far:

  • Many of its existing customers that open up new plants or divisions, particularly in Asia-Pacific or areas where they don’t have a presence, choose QAD On Demand, as it can be deployed relatively fast without the need to be maintained by an IT staff in the region.

  • Companies that are on an old QAD release sometimes choose to go on demand as an easy way to get on a current version.

  • Brand new customers are often startups or larger companies in the key life sciences and automotive verticals. Life sciences customers are attracted by QAD's qualified environments (for the process validation purpose), whereas automotive customers know QAD well owing to its leadership in the Materials Management Operations Guidelines/Logistics Evaluation (MMOG/LE) training—QAD works with Automotive Industry Action Group (AIAG) and ODETTE International (they are sole providers of automotive data exchange and other standards), as well as the largest auto companies in the world to deliver the MMOG/LE training (see the blog post).

  • QAD also finds heavy on-demand interest in areas of the world where there is fierce competition for IT skills, such as Eastern Europe or Asia-Pacific.

For the aforementioned validation requirement for life sciences, QAD provides a separate qualified environment (single-tenant private cloud) to each customer. QAD has worked with a US FDA certification agent to get approved, and it has a letter stating that it offers a qualified environment. In other words, the qualification letter states that QAD software and procedures meet the strict FDA regulations. Each customer still has to get its internal procedures certified, but the company doesn’t have to worry about getting its systems and IT procedures documented and certified, which is a huge time and money saver.

Life sciences customers also like the on-demand concept, as it allows them to conserve capital. A large majority of cloud enterprise resource planning (ERP) vendors have yet to solve the validation puzzle, particularly those cloud vendors that enhance their software continually. But for life sciences companies, validation means “frozen” (unchanging) procedures.

Enter Blended Deployments

In December 2012, QAD announced that the QAD Enterprise Applications solution now allows global customers to blend deployment of ERP in the public cloud and on premise (see the press release). Designed exclusively for global manufacturers, QAD’s innovative domain-based architecture enables enterprises to implement a full-strength ERP solution either fully via the cloud or as a blended deployment model containing a mix of both on-premise licenses and cloud users. Customers leverage the same functionality, business processes, internationalizations, and user experience across QAD Enterprise Applications regardless of the deployment model.

Global manufacturing companies that choose to migrate to the cloud can rarely move their existing on-premise implementations overnight. QAD blended deployment allows customers to gradually migrate ERP solutions to the cloud. Below are some use case scenarios for QAD customers that might want blended, module-based cloud and on-premise ERP deployments.

  • Although many manufacturing companies are fine to keep their core ERP modules on premise, they can’t have some newer modules such as transportation management or portals in the cloud.

  • Many companies that have set up a new division or have acquired another company will select a bunch of needed ERP modules and have them quickly run in the cloud and then integrated back to the on-premise headquarters’ ERP (for consolidation reporting, etc.).

How Is This Achieved?

QAD credits the blended ERP deployment capability to the so-called "domain-based" architecture, where each module and object can be set up to be either central (shared, e.g., centralized purchasing) or divisional (inventory policies, customers, planning rules, etc.), and to be available either on premise or on demand. QAD uses the domain architecture to specify what data is shared and which is site specific. Companies typically decide how to run based on either corporate structure or by business process.

For example, a company might have a plant in a remote area running on demand, as it doesn’t have technical resources on-site. In this instance, neither site needs to know where the server or data resides. If the chief financial officer (CFO) looks at a financial statement or transactions register, for example, all data from all sites is included, without having to run any update or batch job or take any special steps. The data is visible, and its location doesn’t matter.

In another scenario, the company might have plants using local purchasing but sharing accounts payable (AP). In this case, it doesn’t matter whether the modules are both on premise, on demand, or a combination of both—as the data is visible and the functions run the same regardless (subject to the user’s password security, of course). The same holds true for item characteristics, bills of materials (BOMs), routings, etc. An on-demand plant and an on-premise plant may make the same product. They can have plant-specific BOMs, or share a common BOM—it doesn’t really matter.

Licensing for QAD Enterprise Apps is by user for the bundle. For on premise, it is a perpetual license per user, whereas for on demand it is by user/month. In both cases, there are some add-on modules such as transportation management by Precision Software, a division of QAD, that are an extra fee (see the blog post). If the company runs on premise, the fee is based on shipment volume, but if it runs on demand, it is a monthly fee calculated from the company’s shipping volume.

More Details To Be Ironed Out

QAD seems to be onto something with this granular pick-and-choose manner for customers to decide which modules are to be on premise or SaaS, all within the same ERP instance. When other vendors talk about their deployment choice, it typically can either be the entire ERP SaaS or on premise (and then perhaps switch to another deployment), but not one part of ERP SaaS and the rest on premise in a mix-and-match manner.

In addition, when some vendors and pundits talk about hybrid deployments, that mainly means on-premise core ERP with some cloud services, such as credit card payments, e-commerce add-ons, etc. This setup is also known as “software plus services” and “connected services.” To further add to the confusion, I also notice some analysts also calling mixed public and private clouds as “hybrid” deployments.

While QAD’s blended ERP offering sounds avant-garde and this is what some customers might ask for, I wonder how hard it will be to sell. Namely, it is complex enough to sell and price by SaaS subscriptions, or licenses only, let alone in a mixed manner. Only time will tell if this licensing model is workable for a mix-and-match by module setup. There could also be some hurdles to customer uptake on this blended deployment for the following reasons:

  • If a company has a single database (presumably on premise) and is integrating data/actions from cloud-based applications into it, there could be a significant lag in performance, as well as escalated security issues and cost.

  • If a company has dual databases (on premise and in the cloud), there could be some synchronization issues (much like you see when you work disconnected on your laptop or as there were in the batch processing timesharing days).

It will be interesting how QAD fine-tunes its value-prop message and deals with the aforementioned potential issues and user concerns.

References and Recommended Reading
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