Don’t be fooled by ‘fake cloud’ finance systems

I have worked with finance organizations for the last 20 years to help develop their application strategy. In recent years, the “cloud” has transformed the way my clients have thought about the right technology solution to fit their needs. One vendor sales person proudly stated:

“We’ve been providing cloud applications for the last twenty years.”

This was a head scratcher for me and my client. Many vendors are saying their product is in the “cloud,” but what does that really mean? How can you tell what is a boastful marketing statement from a “fake” cloud application vs. identifying applications that are true multi-tenant cloud applications (a.k.a the “real” cloud)? To help you determine a “real cloud” from a “fake cloud” here is a breakdown of the four main deployment options for finance application software:

1. On-premise. This is the traditional deployment model. The vendor sells you software for a perpetual license fee and then annual maintenance fees. After that, you do the rest. You buy the infrastructure (e.g. servers, databases). You install the software on the infrastructure. You hire staff to maintain and support it. You are forced to upgrade everything every few years. This has been the model for the last thirty years. Think of the on-premise solution as a rock. You own the rock. You house the rock. You maintain the rock. It is your rock (congratulations). Other people have procured similar rocks, but they are maintaining theirs separately from yours.
2. Hosted. The hosted model has been around for years, and it is probably the model with which the salesperson was boasting. Here is how it works: an infrastructure services company will host your hardware and software for you, and you pay them to do all of the legwork that you did previously in the on-premise solution. You still own the rock and pay to keep it maintained. The rock lives in someone else’s house (you can visit it though), but it’s still your rock. Some people claim this as a cloud service, but it is just shifting the infrastructure from an internal-hosted to a vendor-hosted solution. It is the same rock that you need to own, maintain and upgrade – you just no longer see the rock. This is definitely “fake” cloud.
3. Single-tenant cloud. There are many vendors that have taken the single-tenant approach to “clouding” their software. This entails taking their on-premise software and hosting it for you at their data centers. They charge you a subscription fee. You access it through a Web browser or mobile device. It feels cloud like, but it is not the “real” cloud. Everyone that buys a single-tenant cloud product has their own version of the software. So the vendor needs to support and maintain hundreds of versions of the application. Software sold this way is cloudy, but you don’t gain the true benefits of a multi-tenant cloud application. With single-tenant cloud, the vendor has painted some clouds on a rock. It is still that same rock, but with a fancy new name (typically the old product name with the word cloud after it — very clever and catchy).
4. Multi-tenant cloud. The multi-tenant cloud is what I refer to as the “real” cloud. In this model, you buy a subscription to a service and that same service (and software) is used by you and every other customer. A good question to ask your vendor to determine if the cloud is multi-tenant is “what percentage of your customers are on the latest version of the software”. If they say anything other than “all of them,” then it is not the “real” cloud. With all users on the same version you get many benefits:

• Upgrades are pretty seamless, frequent and vendor led with typically little effort on your end. The vendor does the heavy lifting for everyone at the same time. The vendor can also innovate and adapt to the market very quickly as they only have one version of the software to support and enhance. You get changes faster and more frequently in multi-tenant solutions.
• Since all customers are all on the same version of the software, when another customer finds a bug, the vendor can fix it and release the updated version to all of their customers simultaneously. This way, bugs are found and fixed long before you even know there was a bug.
• There is a much stronger sense of community and support. Customers can collaborate more openly as they are all on the same version of the software. When you talk to another customer or call support to open a ticket, you don’t need to qualify the discussion with “I am on version 8.3, tools 9.2138 running on DB2 in a virtualized environment with apache Web servers.” You can just say “how can I process my deferred revenue so I can recognize it?”

In a multi-tenant environment, there is no rock weighing you down, just on-demand application services that allow you to get your job done. The rock does not exist (wow that was a little zen).

So don’t be weighed down by owning a rock, paying someone to maintain your rock or by painting clouds on the rock. With the “real” cloud, you don’t need the rock. You need a multi-tenant cloud solution.