Cloud ERP, or Cloud-based Enterprise Resource Planning, refers to a software system where the ERP applications are hosted and managed in the cloud. It allows businesses to access this software over the internet on a pay-as-you-go basis, eliminating the need for internal hardware and maintenance costs.
On-premise ERP, on the other hand, is a traditional software deployment model where the ERP software is installed and operated from a client’s in-house server and computing infrastructure. It requires an upfront investment in hardware, software, and ongoing costs for system maintenance.
The merging of these two ERP models—cloud and on-premise—gives rise to the Hybrid ERP system. This innovation in ERP technology delivers a flexible and scalable solution, allowing businesses to leverage the strengths of both models. It provides the security and control of on-premise systems, combined with the flexibility and cost-effectiveness of cloud-based systems, creating a synergized approach to business process management.
What Is Hybrid ERP?
Hybrid ERP is a modern approach to business process management that combines the best aspects of both on-premises and cloud-based ERP systems. It integrates the robustness and control of on-premises ERP with the flexibility, scalability, and cost-effectiveness offered by cloud-based ERP. By unifying these two models, Hybrid ERP allows businesses to customize their ERP ecosystem according to their unique needs and strategies.
In technical terms, hybrid ERP involves hosting some ERP applications on-premises while others are hosted in the cloud. This bifurcation is usually based on the specific needs and strategic objectives of the business. For instance, core applications that require stringent data security or control may be hosted on-premises, while auxiliary applications that require scalability might be hosted in the cloud.
Hybrid ERP provides a flexible architecture that enables businesses to manage their ERP applications more efficiently. It allows businesses to transition applications from on-premises to the cloud or vice versa, depending upon evolving needs and circumstances. This fluidity ensures that businesses can adapt their ERP systems to align with changing business strategies, regulatory changes, or technological advancements.
In essence, hybrid ERP is not merely about having a mix of on-premise and cloud-based ERP applications. It’s about having an integrated, cohesive ERP ecosystem where both on-premises and cloud-based applications coexist and interact seamlessly. This harmony ensures that businesses can reap the benefits of both models and have the flexibility to adapt their ERP landscape as per their changing needs.
Common Hybrid ERP Arrangements
There are several common arrangements for deploying a hybrid ERP system based on the specific needs of a business:
Two-Tier ERP: In this arrangement, a business maintains an on-premise ERP system for core operations while deploying a separate cloud-based ERP system for a subsidiary or a specific division. This approach enables the company to maintain control over crucial data on-premise, while benefiting from the agility and flexibility of the cloud for less critical, more dynamic operations.
Point Solutions: In this configuration, a business utilizes an on-premise ERP system for most applications but integrates cloud-based point solutions for particular business functions like Customer Relationship Management (CRM) or Human Resource Management (HRM). It allows businesses to leverage specialized functionality provided by cloud solutions, while retaining the continuity and control of an on-premise ERP system.
Custom Hybrid ERP: A tailored solution where a business selects specific applications to reside on-premise and others in the cloud based on individual business needs, data sensitivity, and regulatory requirements. This selective approach offers the highest level of customization and flexibility, allowing the business to design an ERP environment that best aligns with its operational and strategic objectives.
Each of these arrangements is chosen based on a variety of factors, such as the business’s industry, size, geographical distribution, regulatory landscape, and strategic goals.
What Are the Benefits of Hybrid ERP?
Hybrid ERP systems offer numerous advantages, with the primary one being flexibility. In contrast to traditional on-premise ERP systems, which often require significant time and financial resources to modify, hybrid ERP systems allow businesses to adapt rapidly to changing needs and circumstances. They can easily transition applications from on-premise to the cloud, or vice versa, as their needs evolve. This flexibility extends not only to costs and resources but also to the speed of implementation, as cloud-based ERP components can be rolled out more quickly than their on-premise counterparts.
Another significant advantage of hybrid ERP systems is their cost-effectiveness. This type of system combines the predictability of expenses associated with on-premise ERP, where costs are incurred upfront and depreciation is spread over a longer period, with the economic advantages of cloud-based ERP, which typically involves lower initial costs and a pay-as-you-go model. This combination provides companies with more flexibility in managing their IT budget and reduces the total cost of ownership of the ERP system.
The third outstanding benefit of a hybrid ERP system relates to data security and compliance. By allowing companies to keep sensitive data on-premise while utilizing the cloud for less sensitive or more scalable applications, hybrid ERP systems provide a balance between data security and operational efficiency. This is particularly beneficial for businesses operating in highly regulated industries, where data protection is a critical concern. The hybrid approach enables these businesses to comply with data security regulations while still enjoying the benefits of cloud computing.
Reasons To Deploy Hybrid ERP
There are several compelling reasons why businesses should consider deploying hybrid ERP:
1/ Scalability of Operations: Hybrid ERP systems allow businesses to scale operations rapidly, aligning with their growth or contraction. For example, an enterprise expanding its operations can use cloud-based ERP applications to quickly roll out processes in new locations, without investing heavily in on-premise infrastructure.
2/ Business Continuity and Disaster Recovery: With data and applications distributed between on-premises and the cloud, hybrid ERP provides a robust framework for business continuity and disaster recovery. If an on-premise data center faces an issue, the cloud-based components of the ERP system can continue functioning, ensuring minimal disruption to business operations.
3/ Innovation and Agility: Hybrid ERP supports business innovation and agility by providing the flexibility to quickly implement new applications or technologies. For example, a business might want to adopt advanced analytics or AI to enhance decision-making. With a hybrid system, these new tools can be integrated rapidly in the cloud, without affecting the existing on-premise ERP system.
4/ Regulatory Compliance: Businesses operating in multiple jurisdictions often face varied data residency and privacy regulations. A hybrid ERP strategy can help address these challenges by keeping sensitive data on-premise in the region and using the cloud for less sensitive, more scalable aspects of the business.
5/ Gradual Digital Transformation: For organizations with substantial legacy systems, shifting entirely to the cloud can be daunting and risky. Hybrid ERP allows these businesses to undertake a gradual digital transformation, moving parts of their ERP system to the cloud while maintaining certain elements on-premise. This approach reduces risk by enabling a controlled and progressive transition to newer technologies.
In sum, a hybrid ERP system serves as a versatile tool, granting companies the adaptability, cost-efficiency, and secure control over their data that they need to thrive in today’s dynamic business environment. It provides a strategic pathway for businesses to capitalize on the strengths of both on-premise and cloud solutions, fostering growth, innovation, and resilience. As businesses continue to face the relentless pace of change, hybrid ERP systems stand out as an enabling force for robust, future-proof operations.