Information technologists are fond of predictions in which the next big thing quickly and entirely renders the existing thing so completely obsolete that only troglodytes would cling to such outmoded
For ERP, vendors draw the rhetorical battle lines as on-premises vs. the cloud, but in the end it’s more likely to be a combination of the two. The term “hybrid cloud” refers to an environment where one or more clouds are connected to or combined with on-premises systems. These clouds may be private (that is, controlled by a single company for its sole use), public (a service offered to all comers) or a community cloud (available to a limited set of organizations or individuals). Clouds can be multitenant (where a single instance of some software serves multiple customers) or single tenant (where it serves just one).
Our benchmark research shows that more than half (55%) of companies are using cloud computing, and one-third (34%) more intend to. Cloud deployment has come to dominate many business applications categories such as HR,
We see three main reasons why companies have failed so far to embrace the cloud for ERP as fully as in other categories. The most important is that, as I’ve noted, multitenant ERP offers users only limited configurability, and this often is incompatible with what companies need to manage their business. The second reason has been data integration, which until recently could be complicated and difficult to manage. The third reason is that finance departments have been more conservative than most in embracing the Web, especially for ERP systems, because the information in them is sensitive and they fear security breaches. These last two factors are starting to diminish in importance. Data integration between cloud and on-premises systems has been facilitated by new tools and methods. Concerns over the
Many existing ERP systems already are hybrids. Companies often manage payroll,
There’s also a case to be made for midsize companies and second-tier ERP installations moving off premises into cloud-based, single-tenant deployments. Some midsize companies (those with 100 to 1,000 employees) may find the total cost of ownership of a cloud-based, single-tenant system lower than for an on-premises approach because of lower costs in implementing and maintaining the hardware and software. Even when those costs are higher, midsize companies that cannot accept the compromises that multitenant deployments entail may find it attractive not to employ an IT staff to support its software and outsource the maintenance of their ERP system to a software-as-a-service provider. For decades, large corporations that use enterprise software for their main business systems have used ERP tools designed for midsize companies to support smaller, stand-alone
Until now, many companies have been reluctant to embrace the cloud for ERP. That is likely to change over the coming decade as security issues diminish and companies decide to take advantage of the cloud’s benefits. On-premises ERP software vendors and their partners can diminish their vulnerability to cloud-based software vendors by creating offerings that improve the economics and affordability of single-tenant ownership and facilitate using their software in a hybrid cloud environment.
Regards,
Robert Kugel – SVP Research