Be Future Ready with a Flexible ERP | On Premise ERP vs SaaS

Nowadays, standing still is no longer an option. Today, in an era driven by Social, Mobile, Analytics and Cloud (SMAC), flexibility and agility have changed from “nice to haves” to “must haves”. 

Companies are faced with many challenges: integrating online and offline business, leveraging mobile applications, figuring out how to take advantage of the Internet of Things (IoT), Social Media, Robotisation, Big Data and 3D printing, to name but a few.

Today, in many cases, a company’s very survival depends on its ability to adapt and evolve. If this seems like a bit of an exaggeration, just think about Nokia - not that long ago it was the world’s dominant and pace-setting mobile-phone maker. 

So how do you ensure that a complex system like your ERP system is flexible enough to adapt to this rapidly changing world? What is the best way to manage the integrations with other applications and how can you organize your business processes to ensure that you will be able to quickly adapt to changing market conditions?

There are a couple of options available, each with various advantages and disadvantages.

Strategic Option 1: Standard ERP & Satellite Applications

In this scenario, you standardize your business processes as much as possible so that you can implement an ERP system more or less “out of the box”,  with little or no customization. This ERP system can run On-Premise or in a Private Cloud. If you require additional functionalities, unavailable in the ERP, you can link other (satellite) applications to the ERP using Middleware.  

In this scenario, the ERP system is primarily used as a central transactional system, for example, for finance, order processing, inventory and production orders. Flexibility can be achieved by, for example, developing integrated mobile applications. The mobile ERP integrations are done via Middleware. This combination has the advantage that upgrades will be simpler, faster and will cost less than upgrading an ERP with many customizations.

This approach also offers you the benefit of enabling you to take ERP standardization at your own pace. With this approach you can standardize and streamline processes in phases, eventually leading to the elimination of all customizations.  

However, this can also be a disadvantage, with no real deadlines the evolution of the application may be slow or pushed down the “to do” list.  A focused approach and strict planning is therefore essential for success.

Strategic Option 2: ERP in a Public Cloud & Satellite Applications

This option is very similar to Option 1. In this scenario, however, your ERP system is hosted in a Public Cloud and satellite applications are linked through middleware. The satellite applications can run either On-Premise or in the Cloud.

With your ERP in a public Cloud you share infrastructure and software, but have a private facility in terms of processes and a private environment where data is stored. The supplier of the Public Cloud Application provides regular updates of the software and infrastructure.  Extensive standardization of business processes in this scenario is almost obligatory. Customizations are often very limited or impossible.

Just as in strategic option 1 satellite software or mobile applications may be linked via Middleware. These applications could run in a Private or Public Cloud. A major focus / disadvantage of this scenario is how the applications are integrated. Because the Public Cloud solutions are regularly updated, all Middleware interfaces must also be tested regularly, and adjusted if necessary. Testing and updates in this scenario will have to be carried out much more frequently than in an On-Premise or private cloud solution. In order to be efficient, you’ll have to look at automating the test process and/or looking at devoting some resources to testing and updating the middleware.

Strategic Option 3: Best of Breed Applications

Companies may also choose to implement vertical solutions (Best of Breed) which have been developed for specific industries or processes. These solutions can also be linked using Middleware.  These applications can run on-premise or in the Cloud.

By making use of several specialized solutions such as E-commerce, Finance, Warehouse Management, Production Planning, EDI, CRM, Supply Chain Planning, etcetera, one can build a “best of breed” solution to support the business. The upgrade of each individual application is fairly easy because all applications are linked via middleware.

There are two important points to consider in this strategy: Application Integration and Data. In terms of integration, you will have to think carefully about solution architecture and figure out how all these solutions can work best together.

In terms data you will have to figure out how you are going to get to one version of “the truth” as inevitably, you will be dealing with solutions from various suppliers and you will be confronted by various different data models. For example, how do you get the right information (Reporting and Business Intelligence) from the system? In options 1 and 2, a large portion of the information is stored in the ERP system, making it much easier to retrieve information from the system.

What is the best strategy for you?

There are many ERP vendors offering Public Cloud ERP solutions and, in the future this approach will become more and more popular. However, for many companies, it is just too early to think about moving their core ERP systems to the Cloud as the Cloud solutions on offer are not as mature and complete as existing ERP solutions. 

In addition, the coupling of satellite software and solutions through Cloud- Middleware are still developing and this leads to risks of higher costs in the development and management of interfaces.

Another important point is that to be able to adopt a Public Cloud ERP solution, you have to standardize all business processes. For many companies this is a real challenge. A great deal of change management is required to change the culture, especially if customizations and “work arounds” have been the norm.  

Starting now to standardize your ERP processes will lay a good foundation for a potential transition over time to a Public Cloud. Equally, putting some of your applications on a private Cloud today is a good way to learn and will help you prepare for perhaps one day moving towards a public Cloud.