Hybrid ERP and Digital Transformation

In recent years, technology has been going beyond simply increasing efficiency through automation. Businesses have been adopting new technologies at varying paces, but many are in the midst of an ongoing digital transformation as they incorporate digital technologies in new and interesting ways.

The extensive use of digital technology is changing business processes at an accelerating rate. External users are now connecting to internal processes: think of your vendors or suppliers accessing supply chain information, as well as consumers connecting with their portion of your data via multiple channels, such as through mobile apps and inbound voice response (IVR) systems. We’re also witnessing the rise of predictive analytics, machine learning, and artificial intelligence (AI), as well as the onset of user individualization through the use of application programming interfaces (APIs). The growing availability and use of data analysis is another example of how technology is fueling digital transformation.

Cloud computing and cloud storage are also helping to fuel the increase of digitization in the business world by putting affordable advanced technology in the hands of small and medium-sized businesses (SMBs). Just a couple of years ago, businesses and individuals alike were wary of storing their important data “out there somewhere,” but the prevalence of smart phones and tablets has perhaps helped more people feel comfortable with storing data in the cloud.

That said, some businesses have maintained a cautious, even skeptical, approach to moving their critical processes and most sensitive data to the cloud. This is despite experts’ assertions that security concerns are largely either mythical or overblown. This continued general reluctance, however, is constantly butting up against the realities of cost considerations.

It may be easy enough for an individual to store computer data and backups on a small external drive, but for all but the smallest of businesses, keeping things entirely on-premise is quite an undertaking. Most businesses don’t have enough human and capital resources to fully invest in a robust in-house IT department along with the necessary hardware and software (all of which must be continually updated). This is where a hybrid enterprise resource planning (ERP) system, combining on-premise and cloud technologies, can be beneficial.

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Hybrid Hits New Highs In the Clouds

A hybrid ERP solution incorporates on-premise technology, as well as a private cloud, a public cloud, or a hybrid cloud. Hybrid cloud computing is simply a mix of on-premise and cloud computing models. However, it can start to get complex with the multiple options that now exist for cloud-based computing.

Public clouds are mainly distinguished by freeing users of any responsibility for hosting data since the data is stored by the provider at their own data center. This not only saves on equipment but allows businesses to more easily adapt to changing needs. They can test and deploy new products and processes, scale up or down to respond to demands, and more—all without worrying about adding extra servers or storage space.

Some businesses are wary of security when using a public cloud, but in reality, security breaches are exceedingly rare. It is a common misconception that your business’ data is stored together with that of others on a public cloud. Through the use of partitioning, different clients’ data remains separate, although computing resources may be shared with others. Just as you are only able to access your own company’s data, other cloud computing customers can only access their own company’s data.

A private cloud, sometimes referred to as an enterprise cloud, is hosted on a company’s intranet or private data center. That data center may be on the company premises or at an off-site location. For companies that already maintain a data center (such as those that had been using on-premise solutions before moving to the cloud), setting up a private cloud allows them to continue to make use of their infrastructure. All data is kept behind a firewall and resources are typically not shared with any other companies.

Hybrid cloud takes a middle-of-the-road approach; it is a mixture of private and public cloud services. Basically, it aims to be a best-of-both-worlds solution through the orchestration of services between platforms. As mentioned above, some organizations digitized rather cautiously and reluctantly due to concerns about security in the cloud. Their natural preference would be for on-premise solutions, but cost can be a barrier. Rather than committing wholly to an on-premise or cloud ERP, a hybrid ERP offers something of a “best of both worlds” answer to this dilemma.

Just as the move to cloud-based computing has made digital transformation more accessible and affordable for SMBs, hybrid computing has helped to bridge the gap between organizations that had traditionally relied on on-premise systems (i.e., larger companies with budgets for robust in-house IT departments) and smaller organizations with more limited resources that have perhaps only recently made the move to ERP.

How ERP Solutions Benefit from a Hybrid Approach

An ERP system connects various business processes (sales, order processing, inventory, etc.) within an organization and also often connects it with external stakeholders such as customers and partners.  Such integration is a primary feature of digital transformation, and it gives rise to many of the advantages that come with this transformation, such as the ability to respond more quickly to changing demands and emerging business opportunities.

In some cases, users consider it advantageous to retain flexibility by keeping at least some processes or functions non-integrated. For example, perhaps they wish to test some new functionality before fully committing to it. This is an area where the managed platforms of hybrid clouds—moving between public and private clouds as needed—offer a way to gain flexibility and deployment options in the face of cost constraints and evolving needs that can change seasonally or based on the sales cycle.

The drivers and/or effects of digital transformation on hybrid ERP that incorporates hybrid cloud computing include:

  • External connectivity: Outside stakeholders expect to be able to use apps to connect with organizations. Keeping everything safely tucked behind portals will become relatively rare.
  • Adopting new technologies: Moving beyond optimizing business processes, hybrid ERP can make it easier for users to respond quickly to change by adopting new technologies, such as AI.
  • Accelerated agility: Many companies adopt a limited-scale trial-and-error approach to minimize risk when trying out new business strategies or changing products and services. The inherent flexibility and scalability of hybrid ERP will make such trials easier and faster.

Digital Transformation as a Game Changer

A continuing digital transformation is likely to cause many organizations to re-think the way they run their operations as well as how they relate to all external stakeholders, from suppliers to customers.

At the same time, the days of large-scale, robust, and fully funded and fully staffed internal IT operations are largely gone, except among the largest and most profitable companies. This comes at a time when there is an increased risk of rapid obsolescence in IT hardware and software due to the pace of change. This opens up the door for a continued increase in hybrid ERP solutions and hybrid computing.

Getting Answers

While all of this change leads to new opportunities, it can also lead to greater complexity. For organizations that lack the knowledge, experience, or even the confidence to go it alone when determining their requirements vis-à-vis ERP and its deployment, there are independent, impartial consultants available.

So long as such consultants are not beholden to any particular software vendor or type of enterprise solution, they can be impartial and act as valuable guides in the journey to modernizing ERP and the underlying business processes it serves. Even a quick examination of the cost vs. benefit of such services can easily justify their use.