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Inside The Innovation Machine: How The Cloud Turbocharges Business

Oracle

The CIO of a $1 billion-a-year manufacturer recently described his company’s on-premises enterprise resource planning to me as his “concrete.” And not entirely in a good way.

Cloud apps have a glaring speed-of-innovation advantage over on-premises software—enabling companies to add new software features every few months, compared to every three to four years with software maintained on premises. This speed of innovation is the single most important benefit that companies get from cloud software, according to Steve Miranda, Oracle’s executive vice president for applications development. The much faster cadence of cloud innovation is much closer to the speed of business—and to today’s customer expectations for change.

At that manufacturing company, the CIO is leading dramatic improvements in the company's ecommerce, digital marketing, call center communication, and product development, and he’s using cloud-based software to drive this digital transformation. But he’s not considering changing his long-running, on-premises ERP software system, which he believes would be too costly and time-consuming to mess with. For now, he’s surrounding his ERP with more flexible and innovative cloud apps.

There are other cloud advantages besides speed of innovation, of course, such as lowering a company’s total IT operating cost by freeing IT staff from having to deploy, patch, and support on-premises apps. But “speed and the need to innovate with applications is much more important,” Miranda told a gathering of business technology leaders at a recent Oracle CloudWorld event in New York City.

Miranda illustrated three critical points about how the software innovation cycle speeds up in the cloud model—including in cloud-based ERP—compared with last-generation’s on-premises model:

  1. Companies using SaaS can get new features deployed and in employees’ hands every six months or less, instead of every three to four years.
  1. Software as a service (SaaS) providers can be much more precise—we’re talking click-stroke granularity rather than individual observations and recollections—about the features and innovations companies want, since they can observe how customers use the software.
  1. Companies using SaaS can personalize and add new features to their apps without the complicated customizations that used to prevent businesses from upgrading at all.

Here’s more from Miranda on each of these three ideas.

Innovation in Months, Not Years

Miranda described how the innovation cycle creaked along in the old on-premises model—not just for Oracle, but for every provider of on-premises software.

Providers would diligently work to understand their customers’ needs through interviews, surveys, user groups, and case studies. But gathering that information and then developing a new version of the software would take at least a year and more likely two. “The chance that this problem stayed the same during those two years was slim,” Miranda said.

Even after a software upgrade was released, companies would need another year or so to deploy the new version. So, even in the best case, it was three to four years before a new innovation actually got deployed. And by that time, the likelihood that the business environment had stayed the same was zero.

In the SaaS model, providers using more precise feedback can develop new features in months, since every customer is using the same version. New features can be deployed to everyone instantly, with no deployment work done by the customer.

More Precise Feedback Equals More Relevant Innovation

Because Oracle encrypts data in its cloud apps, Oracle employees can’t see a customer’s data in a SaaS application. They can’t see who a company is invoicing, paying, marketing to, or hiring, Miranda said. They can, however, closely study what functions people across the 4,000-plus SaaS customer base are using. That tells them which functions are most popular, which are causing problems, and which features might be missing.

Here’s just one example. “Our process is very simple—the slowest 10% of clicks we send as defects or bugs to development to make those clicks faster,” Miranda said. “It’s not anecdotal feedback, it’s not based on a survey. It’s very precise.”

Not only was the old model less precise with regards to needed improvements, it was complicated by the fact that customers might be on any number of different versions of the application, and might have heavily customized the app, making it harder and more expensive for them to implement newer versions.

Cloud Extensions Instead of Risky Customizations

In the on-premises model, sometimes even that three- to four-year innovation cycle failed, because companies had so heavily customized their apps that they couldn’t upgrade at all without breaking the app. Software as a service, especially combined with platform as a service, can fix that model, so apps remain “future-proof” even if a business needs to add new functions, Miranda said.

All customers run on the same version of the software, Miranda explained, and they can’t customize it. They can, however, bend the app to their needs, through two means: configurations and extensions.

Configurations are tools within the app that allow customers to alter things like workflows, account setup processes, colors, and tile arrangements. Those changes all remain in place when Oracle upgrades the SaaS app. “These are configurable applications that allow you to personalize the app, and still consume the innovation we have much more rapidly than ever before,” Miranda said.

Companies also can tack on new features to Oracle apps. Using Oracle’s platform services (such as Oracle Database Cloud Service or Oracle Java Cloud Service), they can create extensions—functions that meet a company’s very specific need, run on a cloud platform, and integrate with the SaaS app without having to rewrite or customize the code. For example, a business could add an employee rewards program to its existing Oracle HCM app.

Companies with huge investments in on-premises software often have good reasons to stick with what they have for now, and Oracle promises to continue supporting and creating new versions of its on-premises applications, such as JD Edwards, PeopleSoft, Siebel, and Oracle E-Business Suite. Customers should be able to choose when moving to the cloud makes sense for them, Miranda said, and Oracle intends to support them in the cloud, on premises, and in hybrid modes.

But moving to the cloud is more of a “when” choice than an “if,” Miranda contended. And the biggest driver for that shift will be the cloud’s ability to deliver more relevant innovation, much faster.

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