Five ERP Models to Know
When evaluating future enterprise software directions, keep these four options in mind:
TRADITIONAL SOFTWARE APPLICATIONS Leaders: Oracle Corp., SAP AG, SunGard, numerous others Upside: Very reliable, predictable, and scalable Downside: Potentially high acquisition and customization costs; potentially high support costs
HOSTED APPLICATIONS Leaders: Oracle, SunGard, Drexel University (Pa.), RightNow Technologies, numerous others Upside: Monthly subscription fee is an operational cost rather than major capital expenditure; applications can be easily accessed from web browsers. Downside: Many hosted application providers are small businesses with unproven financial models; universities must carefully negotiate service level agreements (SLAs) to ensure availability.
OPEN SOURCE APPLICATION PROVIDERS Leaders: Sugar CRM, Centric CRM, several smaller firms Upside: Few if any acquisition costs; potentially low maintenance costs; ability to customize source code and tailor application for your university Downside: Many open source providers lack global support teams and are not yet profitable.
HOMEGROWN OPEN SOURCE Leaders: Indiana University, Cornell University, others Upside: Universities partner together to write and share applications from scratch; leverages strong “collaboration” heritage found within universities; no ongoing fees to third-party software companies Downside: You may need to hire a team of programmers; one bad piece of code from another university can undermine your own applications.
HOSTED APPLICATIONS Otherwise known as software as a service (SaaS), hosted applications are generating strong buzz in the IT industry. Customers pay a monthly fee to access applications housed and managed by remote data centers and software providers. The model is simple, easy, and efficient but is it a case of a host with the most?
The model is certainly not perfect. Some IHEs face cultural pushback from trustees and privacy advocates who worry that remotely hosted data can be lost or stolen. But in reality such concerns appear baseless: Data stored remotely is at no greater risk from security breaches than data stored locally, according to Gartner, a technology research firm.
In a hosted model, there are also concerns about service level agreements (SLAs) and application availability. When Research In Motion’s BlackBerry e-mail system briefly went dark in mid-April because of a software glitch, many users were reminded that hosted applications fail from time to time.
Another potential concern is that many hosted application providers aren’t profitable. “People forget how many application service providers went out of business during the dot-com implosion,” says Golod. “I’m not suggesting that will happen again with hosted application providers. But the financial viability of your partners is something to keep in mind as you weigh your hosted options.”
If any one university doesn’t hold up its end of the bargain in a homegrown open source project, peer universities could wind up with buggy or incomplete code.
Apparently, RightNow, which isn’t yet profitable, has tell a program how to function. From there, plenty of true believers. More than 100 colleges and programmers can tailor it to institutional needs. universities have embraced its hosted CRM software
to manage recruitment and retention. For example, the University of Houston uses it to provide students with up-to-date information on academics, financial aid, and campus life. The system saves the university about $1 million annually because it eliminates thousands of expensive, labor-intensive phone calls between students and UH administrators.
Aware of the hosted buzz, traditional software companies also offer hosted versions of their products. But keep the hype in mind. Oracle estimates that five percent or fewer of North American universities have embraced hosted ERP, CRM, and financial services. (Company officials say the adoption rate is growing quickly.) One reason for this: Hosted applications don’t involve big capital expenditures for licensing fees and upgrades. The monthly costs are operating costs, which are predictable and easier for college and university CFOs to stomach.
Some colleges and universities are even developing and hosting applications for partner institutions. Such is the case at Drexel University (Pa.), which deployed and now manages the SunGard SCT Banner platform for nearby Cabrini College, which didn’t have the internal resources to manage such a deployment, notes John A. Bielec, CIO at Drexel.
OPEN-SOURCE INDUSTRY APPLICATIONS At some IHEs, however, IT leaders want access to an application’s inner workings so that they can tinker with the code and make enhancements on their own. In such schools, open source solutions from Centric CRM, Sugar CRM, and others might make the grade. In the open source model, IHEs typically pay a nominal or even no licensing fee to use the software. The only real ongoing cost is typically an annual maintenance fee that is usually a fraction of traditional “closed source” application fees, notes Golod.
Universities also gain the right to look into the software’s source code the hidden instructions that Open source solutions such as the Linux operating system, MySQL database, and Apache web server have gained critical mass within higher ed. CRM and ERP applications are newer. Although more technology consulting firms and integrators now support open source applications, it can be difficult for administrators to find the talent they need, when they need it, for an open source project.
Seven Questions Worth Asking about ERP
A growing number of colleges and universities now use hosted applications. Administrators should be sure to ask questions about the following issues before signing on the dotted line with a managed service provider.
- Service Level Agreements: Does the hosting center offer fivenines (99.999 percent) or better availability? If not, what are the contingency plans to restore failed applications?
- Backup Sites: Where are primary and backup sites located, and how is data moved between them in the event of an emergency?
- Upgrades: How are software updates delivered, and do they trigger any system outages?
- Data Protection: Where is student and university data stored, and how is it protected?
- Financial Viability: How is the application provider funded, and what is its current financial standing?
- Guarantee: What happens if the university isn’t satisfied with the system? Is there an easy, reasonable path back to your old system?
- References: What do staff at peer universities that are using the system have to say about pricing, performance, support response times, and the benefits delivered by the system?
HOMEGROWN OPEN SOURCE
If you want the benefits of open source but don’t want to purchase such software from small software companies, there is another option: homegrown open source.
In this scenario, multiple IHEs partner to design and share open source applications. Indiana University, for one, is working with several peer institutions on the Kuali Project and the Sakai Project. While Kuali focuses on financial software, Sakai involves course management, notes Brad Wheeler, CIO of IU.
During the 1990s, IU administrators worked with an outside consulting company to write and develop the university’s own financial software platform. But as the industry shifted from client-server to internet computing, the university had trouble keeping pace.
Kuali, which several universities are already testing, could change all that. By sharing code between universities, each institution can focus on one or two key areas of software development. The project should speed ongoing code enhancements and information sharing. Indiana University, for instance, plans to use a reporting module written by staff at Cornell University.
What’s the downside? If any one university doesn’t hold up its end of the bargain, peer universities could wind up with buggy or incomplete code. Also, here again, universities must clearly document all code changes. This will ensure that universities continue to have a clear feel for product changes and upgrades even if IT staff members come and go over the years.
Kuali and Sakai are real-world solutions that have only been deployed on a limited basis. “It’s safe to say that the open source community will continue to gain momentum,” says Golod. “It’s a natural fit for the universities that like to collaborate with one another.”
Still, in the enterprise software space, one thing is clear: No one size fits all. Universities have at least four software models from which to choose. Weigh the options carefully. Examine long-term product roadmaps closely. The end-result should be a software system that manages student relationships from recruitment all the way through alumni giving.