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For some companies considering cloud ERP, managed hosting might be the vehicle that takes them there. It’s true of TUG Technologies Corp., a manufacturer of aviation ground support equipment based in Kennesaw, Ga., that is moving its Oracle JD Edwards ERP to a “virtual private cloud” at its New York-based managed hosting provider, Velocity Technology Solutions Inc.
“I was one of those who was -- and still am, to some degree -- skeptical about public cloud, especially about public cloud storage,” said Mike House, TUG’s director of information technologies. But House is sold on the best-of-both-worlds measure that Velocity promises with its virtual private cloud option.
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There’s some disagreement, however, among vendors, analysts and customers about what the term really means. To some, it’s not really cloud computing unless users are sharing pooled resources in a public cloud. “Is there actually space within a public cloud?” asked Amy Wohl, president and principal analyst at Wohl Associates, based in Cherry Hill, N.J. “If you buy a virtual private cloud, theoretically they have all the privacy and security, but within a public cloud. Theoretically, it can grow or shrink over time.”
To others, hosting a private cloud on remote virtual infrastructure is enough. "The 'virtual cloud' is real," said George Goodall, senior research analyst at Info-Tech Research Group, based in London, Ontario. "We've seen an evolution in hosting. Initially, enterprises put their own hardware into a provider's data center. And then the provider offered managed services with patching and upgrades on standardized hardware. And now that hardware actually hosts a variety of different applications in a virtualized infrastructure, hence the virtual cloud."
Such flexibility is exactly what House wants for his ERP system. “The architecture of the virtual private cloud lends itself to a more client-controlled environment with a higher level of available resources versus a dedicated machine, or machines, where you will only be able to process up to its level of capabilities,” he said. With traditional ERP hosting, “you have no wiggle room. You have what you have -- nothing more, nothing less.” In a virtual private cloud, “I’ll have more control over the resources I can control or purchase.”
What makes Velocity’s private cloud offering “virtual” is that it runs on the hosting provider’s machines instead of the customer’s, claims Doug Mow, Velocity’s senior vice president of sales and marketing.
“From a technology perspective, virtual refers to a partition or secure ‘slice’ of a large server or supporting compute resources," Mow said. "We run large server farms and create virtual environments to manage each customer. These virtual slices are secure and separate from each other.”
It’s also not cloud ERP in the way that Software as a Service (SaaS) ERP is. “This is not a multi-tenant, SaaS subscription model,” Mow said.
SaaS ERP also tends to be more limited in its capabilities, according to Goodall. "Cloud-enabled ERP simply enables enterprises to run traditional on-prem ERP applications in a shared infrastructure," he said. "The key cloud features we see come from the ease of monitoring the system and the ability to dynamically provision new capacity in peak load scenarios."
Amazon also offers a virtual private cloud, defining it as a private, isolated section of its Amazon Web Services (AWS) public cloud offering. But in contrast with Velocity’s managed private cloud, it leaves more of the network management responsibilities with the user, according to the AWS website.
Migrating from on-premises to hosted ERP
TUG’s 11-year history with JD Edwards begins with on-premises deployments and moves through traditional hosted ERP to the mostly virtual servers the company has now. In 2001, its then parent company replaced a Symix (now Infor) ERP system with JD Edwards OneWorld Xe running on the IBM iSeries (formerly AS/400) midrange platform, linking approximately 35 locations over a frame relay network back to the parent's Houston headquarters, House said. In 2006, after being divested to a private equity firm, TUG struck out on its own with Xe’s successor, EnterpriseOne 8.11 SP1 on Microsoft SQL Server 2000, quickly upgrading to 8.95 because of performance issues. It still runs that version today.
The company accesses Velocity’s Seattle facility over point-to-point and dedicated circuits internally, with Secure Sockets Layer for outside connectivity, House said. “Our ERP system runs our entire business,” including manufacturing, inventory, procurement, sales and financial operations. For now, it is only deployed in headquarters but will be installed in 10-plus operating locations this year, he said.
TUG’s sale caused it to re-evaluate its commitment to JD Edwards and consider managed hosting, according to House. “We determined that because of our size and revenue stream, it would be more cost-effective to use an outside hosting provider,” he said.
TUG chose WTS, later acquired by Velocity, because of its JD Edwards knowledge, longevity in the hosting space and value, House said. The company also decided to stick with JD Edwards, “mainly because of the ease of conversion from an already existing JDE system and minimizing the impact to operations.”
House oversees the ERP system and has one network administrator who also handles other IT support tasks, but Velocity otherwise manages the application, the underlying infrastructure and tech support. “The nice thing about being partnered with a hosting provider such as Velocity is that they bear the majority of the interactions between [ERP] manufacturer and client. From my chair, I rarely have the need to interact with Oracle unless we have an issue that can’t be resolved through the standard processes we have with Velocity.”
Seeking the benefits of cloud ERP systems
The architecture that TUG’s ERP system runs on at Velocity has likewise evolved as virtual JD Edwards Java Application Server (JAS) systems have gradually displaced physical servers. “As we moved our infrastructure to a virtual private cloud infrastructure, we migrated many of TUG’s JDE components to the cloud,” Mow said. “There remains one component that is still on a dedicated server, and that is the piece that we will move to the cloud with the [JDE] version upgrade."
The transition is going smoothly, according to House. “The migration to these virtual servers was a seamless migration with no interruption of services or changes to our contract with Velocity,” he said. “I was definitely notified by Velocity that these changes would be happening and the migration was scheduled during a time when our production activities were at a minimal state. This will be the platform moving forward but new technology will be introduced to make these virtual JAS servers more stable and reliable.”
House doesn't know how much he’ll save by moving from Velocity’s traditional hosting to its virtual private cloud. “Even though the managed service doesn’t change, it’s the equipment cost and the cost of the contract that should be less. The managed service is not going to change much because you’re talking about people and time.” Nevertheless, TUG will no longer have dedicated servers at Velocity. “Company XYZ and us will be sharing a server, so naturally the amount may be less.”
Regardless, the final server move -- tentatively planned for next year -- won’t happen without an upgrade of JD Edwards. “That’s an opportunity to do that,” House said, adding the company is looking closely at EnterpriseOne 9.0 or 9.1. “If I’m not going to do an upgrade, I think we’re going to have a big, hard decision.”
House advises other manufacturers that are considering moving their on-premises ERP systems to hosted ERP to solicit ideas from all parts of the organization. “Do your due diligence in considering what your company can gain from hosting internally versus an outside hosting provider. If you are weighing the cost of sustaining a tier 1 ERP system against the cost of hosting, you may find you have a better cost structure in outsourcing with a value-added hosting [provider].”