Hybrid ERP brings two powerful concepts together: ERP and cloud-based applications.
ERP from the likes of SAP, Oracle, Infor and Unit4 has been around for a long time and allows organizations to use integrated applications, each of which is typically dedicated to a distinct business process such as financials, human resources, sales and the supply chain. While cloud-based SaaS ERP is becoming increasingly popular, most ERP systems still run on premises and are generally installed on the company's internal hardware behind a network firewall.
Cloud-based apps run on the internet -- typically as SaaS -- and users only need a web browser to connect to them. Popular cloud apps include Salesforce for managing customers, leads and campaigns; Workday for human resources and financials; and NetSuite for financials, customer management and e-commerce.
Most hybrid ERP setups consist of on-premises ERP that's integrated with one or more cloud apps.
In theory -- and often in practice -- this combination works well. An ERP system that manages the backbone of your organization, for example, may adequately cover most parts of the business areas, but often lacks functionality in very specialized areas. These specialized functions can often be efficiently fulfilled with cloud apps, many of which are easier to access and use than on-premises applications.
At the end of the day, it's a matter of integration. Suppose you have a central ERP system and 10 cloud apps that you're accessing on the web. How do you combine these applications to run your business successfully? Let's consider some of the best options for integrating hybrid ERP:
- Business process integration. Many companies use their ERP system for order management. While they're pleased to take orders from new customers, it's imperative they check their credit worthiness. Credit checking is therefore a common cloud app in hybrid ERP. For this to work well, the ERP system must send a message to the cloud app identifying the new customer. Then the cloud app must send a message back with a credit rating. This business process integration must behave as if the ERP system and cloud app are a single application, and the flow between the two must be documented. Business process integration software works well to document the flow of the newly integrated application. Notably, most business process integration tools run on premises.
- Extending the ERP data schema. A company's ERP may communicate with cloud apps to get standard costs for raw materials by region. If there are 500 raw materials across 20 regions, the data is sizable. The ERP system's data schema must be extensible and allow for new data elements such as raw material prices. Allowing for indexes of this data is even better.
- Data aggregation. For applying advanced analytics to the business, it often pays to create a data warehouse for orders that contain data from the ERP system and the web. For each order, the data warehouse would contain the amount charged to the customer, when the customer paid, the customer's credit rating, the raw material prices and total labor. You can then use business intelligence (BI) techniques to perform aggregate analysis of customer behavior.
- Business intelligence. BI takes good advantage of hybrid ERP data -- especially when it's managed in data warehouses. You can use BI's pie charts and other visualization tools to gain insights according to horizontal functions like finance and HR, product category or geographic region. This level of analytical insight comes from the hybrid ERP but can only happen if data scientists within the organization design an approach toward data aggregation that draws from the necessary cloud and on-premises data sources.
ERP apps are often run behind the firewall. Thousands of web systems are available for specific point applications. The power lies in the combination. Messaging technology is essential for the business process integration and the seamless business flows required for hybrid ERP to work. What's more, running the business on a hybrid ERP setup requires that the data generated in it is readily available for data analysis.
There's one more twist. Sometimes, the ERP system -- say, FinancialForce -- runs in the cloud. In this case, the applications that comprise the hybrid are ERP, other apps in the cloud and any other business apps that run on premises.