It is a mistaken notion among many enterprises that when it comes to enterprise resource planning (ERP) solutions, you can only go for a conventional, well-known on-premises solution, or, instead, a cloud-based ERP solution. Actually, you can go for what is called a hybrid ERP solution. Now, it is true that persuasive arguments can be made for both on-premises and cloud solutions. On-premises solutions have the pedigree and reliability that comes with a long history of successful implementations. On the other hand, cloud-based solutions enjoy low capital costs and infrastructure upgrades are very easy to do.
Coming to the downsides, on-premises solutions are dependent on the presence of top-class, upgraded IT infrastructure and also consume significant capital investments. With regards to cloud-based ERP solutions, they are not as mature or tested compared to on-premises solutions. Also, in terms of functionality, they are somewhat weaker compared to on-premises solutions. That is where a hybrid ERP solution comes in.
So, what is a hybrid ERP solution?
A hybrid ERP solution gives you the best of both worlds by giving you the ability to tap world-class cloud-based software to supplement your on-premises solution. The basic selling point is that a hybrid ERP solution can give you implementation costs that are much lower compared to an on-premises solution while giving you significant advantages that come with a cloud-based solution.
What are the problems with an on-premises solution?
On-premises solutions are caught in somewhat of a time-warp due to the need for excessive customization. In many ways, on-premises solutions simply do not have the agility and responsiveness that many modern applications, and cloud-based ERP solutions in particular, are able to provide. While those who adopted on-premises solutions early, such as energy, distribution, and manufacturing companies, were at that time ahead of the curve, right now they are suffering the disadvantages of a long period of excessive customization.
Given the fact that cloud-based and hybrid ERP solutions are available, on-premises solutions are looking poor by way of comparison in terms of functionality, lower costs, and process flexibility. The same solutions that were looking reliable by way of being integrated are starting to look somewhat antiquated today. Heavily customized, inflexible, expensive ERP applications can find it difficult to meet rapidly changing business needs. While core system of record type functionality can remain on-premises, a lot of the differentiating functionality can be delivered from the cloud. This is where the promise of the hybrid ERP solution is reemphasized.
What are the advantages of a hybrid ERP approach?
We are living in a context where the notion that there can be single ERP suite that can meet all of the enterprise’s needs is now long gone.
- The hybrid ERP solution comes with the more realistic and contemporary idea that cloud-based solutions can be combined with very small, core, on-premises solutions such as for manufacturing and financials.
- The hybrid ERP solution is a lot more flexible because it allows for loose coupling among modules, each of which can be located in a different place.
- Needless to say, the hybrid ERP solution has costs that are intermediate between on-premises solutions and cloud-based solutions. So, the hybrid ERP solution is attractive on that front, too.
- There are some industry sectors such as business services, digital media, and professional services that have not been served well by integrated, on-premises ERP solutions, given the fact that they tend to focus on asset and product centric industries. These sectors can be much better served by hybrid ERP solutions. Many companies in these sectors have already moved a significant amount of ERP functionality to the cloud and are expected to continue to do so.
- Compared to pure cloud-based solutions, hybrid ERP solutions can boast much lesser training costs.
What is hybrid ERP all about?
Hybrid ERP is also called a two-tier model where you have a combination of core on-premises ERP capabilities combined with cloud-based capabilities in areas such as collaboration, CRM, and sales, all integrated together. In fact, a hybrid ERP system is a multi-sourced, modular application environment for the modern, digital, networked enterprise. It is characterized by these factors:
- It acts as a core building block of the entire digital enterprise platform.
- It boasts of hybrid deployment for components (on-premises vs. cloud).
- One more significant characteristic is that it easily integrates micro-vertical functionality.
- The hybrid ERP acts as the foundation for real-time reporting, analytics, and high-velocity transactions.
- It supports content-rich transactions (human to machine, machine to human, human to human, machine to machine) both outside and inside the enterprise.
- It maintains a consistent flow of master data in order to enable sophisticated analytics based on a mix of external and internal data.
What is two-tier architecture all about?
When we say two-tier architecture, we are referring to a hybrid ERP architecture in which all the core ERP capabilities are maintained in an on-premises solution whereas other ERP applications are deployed on the edge from the cloud. Particularly in the context of large, global businesses, it would simply be too expensive to deploy the complete on-premises solution to all local units or factories. It’s not only a question of cost, it is also a question of time, considering the amount of time required to complete the installations of the on-premises ERP across all offices.
It is very important to consider the fact that a single, global ERP template as is generally employed in the case of on-premises installations is oftentimes far too complex for small regions, offices, and subsidiaries. Whereas a two-tier kind of architecture as employed in hybrid ERP installations is a lot more flexible, better fitting, and cost effective. This is owing to the fact that the hybrid ERP solution combines the core capability housed on-premises combined with a lot of key capability housed in the cloud.