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Advice and Information for Finance Professionals

Oracle CEO Mark Hurd Promotes Cloud ERP Solutions for Global Business Parity

Lynne Sampson
Managing Editor

Eight of the ten fastest-growing companies on this year’s Forbes Global 2000 Growth Champions list are not headquartered in the United States. The same is true for 70 percent of the 50 fastest-growing companies on that list. These companies are based in China, Spain, and Vietnam, among others, and they serve a wide range of industries, from real estate to telecommunications to software development.

There’s no one reason why so many non-U.S. companies are outperforming America’s brightest businesses, but equal access to world-class business software is likely a major contributing factor.

A decade ago, the majority of companies using enterprise resource planning (ERP) systems were based in North America or Western Europe. These systems were bulky and complicated suites of software installed to corporate data centers and employee machines, requiring regular updates and maintenance. Oracle CEO Mark Hurd observed “most of these applications… [have] all been very monolithic. They typically haven’t integrated cross-application. They’ve been highly customized to the processes that our customers have had, and those processes were automated 20 years ago.”

It’s true that the high cost of ERP adoption and upkeep prevented many companies based in developing countries from adopting on-premises solutions. However, it wasn’t just the high cost of on-premises ERP systems that often prevented their implementation in the developing world.

Differences in culture and language were barriers to adoption as well, particularly in many Asian countries, which have a different approach to workplace management than most enterprises in the Western world. For example, an ERP system coded by developers from North America to address problems common to North American companies needed extensive customization for deployment in Asia.

Even customization didn’t guarantee that a product designed in the West would properly serve the needs of a Chinese company or a Brazilian startup. A mismatch often arose when the ERP systems available weren’t localized to accommodate Chinese laws and language or if there weren’t enough technology professionals with the right skills and language fluency to help Brazilian companies navigate their ERP journeys.

The cost, complexity, and cultural incompatibility of legacy ERP systems has been largely addressed with the advent of cloud ERP. Not only do cloud ERP systems offer a more flexible cost structure and easier implementation than on-premises ERP systems, they’re often more effectively localized. Cloud computing requires data centers in strategic locations around the world, which, in turn, requires localized tech talent.

The need for local top-tier developers simply didn’t exist for on-premises ERP deployments. The companies that used on-premises systems were responsible for building out their own infrastructure and maintaining the local tech talent to keep it running smoothly. Software localization and customization were more likely to be the responsibility of a local contractor or employee with no direct relationship to the ERP developer. When top-tier coding talents emerged in the developing world, they were often lured to Silicon Valley, where they adopted the style and practice of Western developers coding for Western audiences.

On the other hand, a regional data center for cloud software can serve as a hub for talent as well as business development, encouraging people around the world to build the skill sets that later expand that software’s reach and adoption. Prototypical versions of this localized tech hub can be seen in several Indian cities, such as Bangalore and Hyderabad, which established business-friendly technology zones several decades ago and now host the campuses of many multinational technology companies.

Earlier this year, Hurd told Forbes that Oracle’s build-out of additional regionalized data centers is “really about extending our global reach. We have customers in countries all across the world... Having local capabilities is clearly a distinct advantage.”

The end result of having access to cloud ERP software, particularly software that’s been properly localized, is that businesses in developing nations can effectively use the same fundamental technology tools that companies in North America and Europe have used for years. These cloud ERP systems are more affordable and offer more utility than ERP systems developed in earlier years, which were designed for on-premises implementations by a team of programmers based in Silicon Valley.

Last year, Mark Hurd spoke to Recode’s Kara Swisher about the opportunities this access offers:

“Bimbo, for example, has moved to cloud ERP... you see a lot of innovation down in Mexico, a large desire to take advantage historically. Remember, in Mexico, like Latin America, one of the biggest issues has always been the lack of available skilled resource, which in the old on-premise world really hurts you. So, when you needed people that could write and extend and customize code, you didn’t have the talent... the IP that’s running at GE is the same IP that’s running at Bimbo... The opportunity now for companies in Latin America to get absolute leading-edge IP that you couldn’t get before has changed dramatically.”

Easier and less-expensive access to integral business software such as ERP systems frees companies in developing nations from the burden of creating their own software. Once deployed, a properly localized ERP system can give tech personnel more time to innovate. It also allows high-level users to focus on strategic initiatives instead of monotonous administration and manual data-entry work. When more companies around the world can start on the same solid technological foundation, the result is a stronger worldwide competitive business landscape.

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