Posts

Hybrid ERP

Is A Hybrid ERP the Key to A Successful Implementation?

Enterprise resource planning (ERP) systems are critical to the success of many business processes. However, over the last decade, cloud-based services have emerged to take some of the business process responsibilities from employees.

While organizations may prefer to process or manage various types of data in-house, some industry leaders are now suggesting higher ROI can be achieved through a hybrid approach, i.e. using cloud solutions and in-house ERP systems.

Hybrid ERP

Hybrid Cloud ERP

Implementing a new ERP system is expensive. The initial implementation cost, set up, and training demand significant resources.

For small and medium sized enterprises (SMEs), these issues mean that implementing a full scale ERP solution is risking incurring high maintenance costs and even overwhelming their IT departments. Cloud solutions eliminates some of the issues that SMEs may have with legacy ERP systems.

However, for large organizations, cloud is just not the answer. In most cases, executives do not trust their organization’s financial data being managed by a third party. This is in spite of the security advances cloud providers have made in recent years. Moreover, IT managers may be reluctant to switch from systems specifically tailored to their business to cloud solutions.

When Does Cloud ERP Make Sense?

Organizations that are not comfortable with the loss of control and/or risk of completely moving into cloud ERP computing, but still want to enjoy some of its benefits, will find a hybrid ERP approach the right answer.

Hybrid ERP refers to use of on-site ERP, but with a few carefully selected applications hosted on the cloud. So, which applications can you opt to host on the cloud?

  1. i) A third-party on-site ERP add-on. Perhaps the practicality of the add-on was not apparent until the successful implementation of the ERP. And while you wouldn’t want to spend more to purchase the add-on, the financial payback on monthly subscription costs makes it attractive.
  2. ii) All data is not created equal. You may not be comfortable with confidential employee information and financial data being handled by a third party. However, there are other datasets that won’t have a major impact on your company if they are breached, for example, quality control and inventory data. These less sensitive data can be hosted on the cloud.

iii) Applications that are on the sidelines of your operations can also be hosted on the cloud. These applications are mostly those that are never core competencies, but can still improve operations. Examples of such applications include freight invoice auditing, product lead management and supply chain collaboration with vendors, all of which typically don’t require a big solution.

As is evident from the above, the best ERP applications to host on the cloud are those that are almost standalone, except for the basic input/output interface. Other characteristics of the apps are those with conservative financial outlay and minimal security.

From the onset, ERP was meant for analytics and reporting but not transaction processing, which is the primary focus of cloud applications. This is where the two systems can meet.

Implementing ERP is expensive and managing it complicated. Organizations can ease some of the pains associated with ERP by switching some processes to cloud.

Hybrid ERP Solutions for Businesses

Cloud computing is increasingly being adopted as the default infrastructure for many IT solutions. However, this does not mean it will fit perfectly everywhere. While an organization may be drawn to the obvious benefits of the cloud, concerns about pertinent processes and data being handled by a third party can prevent a wholesale switch. And this is where hybrid ERP comes in.

Hybrid ERP provides a balance between on-premise and cloud application management for various business processes. Organizations can relieve pressure on their infrastructure and IT department by migrating some of the solutions that a third party can handle to the cloud and leaving those that cannot be migrated to be managed in-house.

Cloud software should not be implemented to replace on-site ERP. Rather, it should be used to complement the ERP by integrating exchange of data that will feed and support analytics, reporting and enterprise planning.

In the end, both cloud and ERP systems have their own turfs in modern organization processes.






SaaS ERP

The ROI of ERP: SaaS ERP vs. On-Premise ERP

Use of software-as-a-service (SaaS) is increasingly being adopted in customer relationship management (CRM). However, SaaS adoption in enterprise resource planning (ERP) continues to play catch-up. When looking for an ERP solution, companies need to evaluate both SaaS and traditional on-premise deployment options beyond the pure cost trade-offs.

ROI of SaaS ERP

Few tools exist that can help organizations evaluate a more inclusive and accurate picture of the ROI of SaaS and on-premise systems. However, companies can build upon models for evaluating the two solutions and go beyond traditional cost approaches like total cost of ownership (TCO) to include business benefits, risk and flexibility.

Comparing ROI of SaaS and On-Premise ERPs

According to a 2014 ERP Report by Panorama Consulting Solutions, nearly 25 percent of organizations are using cloud-based ERP solutions. However, majority of respondents the organizations indicated they still prefer on-premise ERP software to SaaS and cloud options. According to the report, most companies only report achieving between 0% to 40% cost-savings from using cloud ERP.

One factors most organizations fail to consider when opting for SaaS deployment is the cost of customization. This is an important factor to be looked into, especially over the long run. Carrying out due diligence on both deployments is important to finding the right solution for an organization.

In comparing the ROI of SaaS and on-premise options, substantial differences can be identified in their:

i) Costs

Generally, on-premise solutions are costlier, especially when comparing subscription and license fees. The systems typically require support, upgrades and hardware maintenance fees on top of license fees.

On the other hand, most SaaS deployments bundle these costs into the subscription fees. Moreover, SaaS deployments avoid charges for end user support and administration, temporary business support and backfill, hardware and upgrades.

Some of the cost drivers in SaaS include fees for extra features such as premium helpdesk support, storage capacity beyond a preset limit, industry-specific functionality, mobile and offline access, among others.

In the long term, on-premise systems are less costly than SaaS options. However, theirs costs increase during upgrade cycles, which represent about 65% of the initial costs of implementation in year eight.

ii) Benefits

SaaS deployments bring immediate business benefits including shorter time to deploy, automatic updates, improved usability and independence from IT. The result is enhanced integration with other IT and operational systems, especially when real-time integration is important. On the other hand, on-premise ERP has more pronounced integration than SaaS.

Given the lack of disruption in change management, usability, implementation, and upgrades, it is clear SaaS deployments have an initial and significant advantage in achieving benefits.

iii) Flexibility

Both SaaS and on-premise deployments deliver ease of configuration, technical flexibility, and scalability. On-premise solutions deliver tailored configurations capacity, stronger tools sets for customizations and proven integration capabilities. On the other hand, SaaS systems deliver technical agility by allowing migration to on-premise, greater deployment options in bandwidth-constrained environments and reduced IT staffing requirements.

When looked at objectively, the advantages of flexibility of one solution over the other are canceled out by each other. Hence, there are negligible advantages in flexibility when comparing either deployment option.

iv) Risks

With SaaS, risk tends to center around impact risks like limited verticalization and customization capabilities, weaker integration and loss of control. On the flipside, on-premise risks tend to be related to implementation risks such as support issues, training needs and deployment complexities.

Here, the risks of on-premise solutions are slightly greater than those of SaaS solutions.

Which ERP is Right for You?

While the advantages of SaaS cannot be downplayed, the deployment is not ideal for all organizations. Generally, SaaS ERP is more suitable for smaller, less complex organizations that do not have very unique requirements. On the other hand, large organizations with more complex operations will find on-premise solutions appropriate.

Companies weighing between SaaS and on-premise options should assess ROI in 10-year periods, factor in the number of centralized users, adjust assumptions based on historical data and also consider hybrid models.

Regardless of whether an organization goes for a SaaS or on-premise solution, the advantages and disadvantages must be carefully reviewed. The two scenarios must be compared objectively against the business needs of the company to determine which would be the right option.






On-Premise vs Cloud Based ERP

Cloud Based vs On-Premise ERP: Which Is Right For You?

Choosing between cloud-based and on-premise ERP deployment methods has become a common issue in today’s business world. While on-premise solutions, also referred to as legacy or traditional systems, are built on time-tested concepts with proven success across various horizontals and verticals, cloud ERP software solutions have been developed much later, proposing a quite new deployment model whose efficiency and reliability are yet to be thoroughly tested.

On-Premise vs Cloud Based ERP

In this post, we’ll explore the differences between cloud-based and on-premise ERP systems along with their advantages and disadvantages so that you can select the best deployment option for your organization.

The Could-Based Model

Cloud ERP solutions propose a software delivery model in which infrastructure and data are hosted on remote hardware, commonly referred to as “cloud.” In this deployment method, apps and data are accessed via an interface, across the Internet.

Advantages

  • Flexible Pricing: Cloud-based ERP is available in “lease it” and “buy it” software alternatives. While the former involves monthly recurring charges for software, hardware and IT services, the latter implies buying the software and/or the hardware and paying monthly hosting and maintenance fees. Although both alternatives require a much lower startup cost compared to an on-premise system, an organization may need to pay significant annual subscription fees, which will add up, potentially going beyond the overall cost of an on-premise solution over the long run.
  • Easy Implementation: Cloud solutions provide ready-made platforms that are implemented and tested by service providers. Basically, this means that there are no servers to set up, no CDs to install, and no risky customizations to be made by your employee.
  • No Maintenance: Since the service provider offering the ERP solution will take care of any hardware and software issues, you don’t need to hire IT staff to monitor and maintain your cloud ERP system.
  • Superior Flexibility: Most cloud-based ERP solutions allow for adjustments in activity levels, facilitating addition/removal of users, apps and features. Additionally, even though cloud-based systems are associated with a series of bundled services, you only pay for what you actually use. Even greater is the fact that you and your employees can access the system from anywhere, at any time.

Disadvantages

  • Dependence on the Internet: When it comes to cloud ERP solutions, it’s very important to know that accessing the system is impossible without an Internet connection. For the best results, you must ensure that there are no Internet connection problems before implementing the system.
  • Lack of Control: An essential drawback is that cloud-based software are unable to provide the same level of control as on-premise systems. Besides, these solutions imply specific restrictions on supplying complex functionality, which may prevent large enterprises from achieving certain objectives.
  • Security Issues: Since cloud-based ERP systems can only be accessed via the Internet, they involve certain security risks, ranging from non-targeted cyber attacks to cyber espionage.

The On-Premise Model

On-premise ERP systems imply sourcing the software together with additional apps in-house. This means that you need to invest in software and hardware, designate a physical location to store the equipment and hire IT experienced staff to monitor and maintain your system.

Advantages

  • More Control:  Since you own both the solution and the equipment, you can replace equipment pieces, upgrade the software and make customizations whenever you want. Furthermore, on-premise systems are highly customizable, allowing consultants and in-house staff to adjust different software and hardware areas in order to deliver very specific business uses.
  • Advanced Security: Since data is stored internally, accessing sensitive information is almost impossible without authorization.

Disadvantages

  • Massive Upfront Investments: If you choose an on-premise ERP solution, you not only need office space, hardware and software, but also air conditioning, IT staff and advanced security equipment, such as CCTV systems, access controls and burglar alarms.
  • Maintenance Issues: Regardless of how knowledgeable and skilled your IT employees are, they may be unable to fix certain issues. In this case, you may need to hire a consultant or outsource particular tasks, which implies additional costs.

Which Model Should You Choose?

The CFOs who are more concerned with optimizing return on assets will always favor on-premise ERP solutions. In contrast, those who want to reduce annual expenses will lean toward cloud ERP systems.

From a strategic, functional perspective, we advise you to select an on-premise ERP solution only if your company has more than 50 employees. Why? Simply because an on-premise system includes two additional yet indispensable advantages, especially for large companies:

  1. It offers advanced flexibility for accessing app databases, facilitating custom reporting and leveraging the power of business intelligence and analysis capabilities.
  2. It provides more control of when and how to upgrade the system or replace the hardware.

Regardless of the deployment model you wish to adopt, it’s critical that you examine the pros and cons in the context of your own company’s needs and priorities in order to make the right decision.