Forking ERP into the forkin' Cloud

Article in Techcrunch arguing ERP needs to go all cloud:

SAP and Oracle should be pushing innovative cloud solutions that cannibalize their bases. Instead, they’re attempting to acquire themselves into innovation. That’s not a strategy. That’s a shift into survival mode.

Well, having worked with ERP systems and hosting and the Net for 20 years or so, we'd argue this is like saying all companies should buy electricity from the grid all the time. It is true for some companies all of the time, but for some companies it isn't. And information, despite what CloudCos like to argue, is still far from being a fungible commodity.

The argument though, is that by refusing to go cloud at the droplet of a hat, these companies are not innovative:

In each case, an industry leader first denies the relevance of a technology, then frets over losing marketshare to it, then finally spends big money to acquire it under the pretense that it’s the key to “expanding innovation”. Overnight, that technology is now worth far more in the eyes of customers and investors. But more importantly, the acquisition strategy failed in each case. Instead of leading the way, the deal makers never committed to the technology, and their actions usually helped open the door to a whole new class of companies to take over.

But this is basically saying "ignore your huge installed base to grab this small cool new thing over here". It's like telling Telcos in the 1990s to drop their huge PSTN revenues to embrace the Internet. Any smart company is going to manage the decline of it's bread and butter revenue while slowly moving up its ability in the new. These large businesses do not move when the new new thing is 1% of revenue, they acquire solutions that have come out of the primordial startup soup and jumped the chasm - ie proven themselves - at 5 to 10% of revenues. So to say:

The bottom line is this: A series of cloud acquisitions won’t help lumbering old ERP one bit. Acquiring cloud companies doesn’t make you a cloud company any more than buying a Giants jersey makes you Eli Manning. It’s not a strategy for an on-premise solutions company. It’s an attempt to distract customers and hope they will forget about the ERP boat anchor they’re stuck with.

...sort of misses the point. Yes you are right. And so? Can you buy a massive ERP from a CloudCo? No. Can you run a massive corporate on SOP, some Ajax and a Social Business network that a CloudCo sells? No. So rather than arguing that:

The big ERP players had their day, but now it’s coming to an end. This is the classic Innovator’s Dilemma. For too long SAP and Oracle have watched the enterprise market innovate around them, stuck to their knitting and failed to adapt. The cloud technology wave has passed them by, and now it’s too late.

...it is probably more interesting to ask the following question: Is it easier to stick your current Oracle system on some tins in the cloud, or easier to pull it pull it out and start afresh with a new ERP system?

The answer to that tells you the evolution of the game - which is why we still have Telcos. It's more useful to look at where earlier new point entrants came in. Where did PCs take hold? Where did the 'Net first take hold in corporates? Why hasn't Salesforce.com morphed into ERP.com yet?

Update - in other words, as Vruz points out, the real opportunity for CloudCos is the Medium sized business market (and point functions in corporate divisions)