Glenn Johnson is a Senior Vice President at Magic Software Americas.
ERP cloud offerings are growing in demand because they enable companies to reduce upfront development costs, scale systems up and down easily and speed up deployment times. Unlike traditional ERP systems, which are installed on dedicated servers located on a company's premises, cloud-based ERP systems are installed on third-party servers and software and accessed via the Internet. While businesses can run their ERP in public Software-as-a-Service (SaaS) models or as private self-managed ERP cloud installations, we are seeing an increasing trend toward a hybrid cloud computing model where core ERP processes are being deployed in the cloud while some best-of-breed solutions are still hosted on-premise in the company data center.
Companies are faced with the challenge of deciding which ERP cloud computing model gives them the right balance between agility and control, and then managing all the ERP data in a consistent and efficient way while having the flexibility to evolve with rapidly changing business needs.
What Goes Where?
In addition to choosing whether to run ERP in a public or private cloud, companies can choose to extend ERP functionality with third-party best-of-breed solutions on-premise or in the cloud. Public clouds deliver services over a network that’s shared by other businesses in a multi-tenant fashion, making the service more cost effective while leveraging investments in advanced technology by giants such as Amazon, Microsoft, Oracle and Salesforce.
The pay-as-you-go scalability of public clouds is ideal for heavy or unpredictable traffic and when there is a need to implement a single set of operational and administrative processes globally across several locations or subsidiaries of a large multi-national corporation.
With a private cloud, services are maintained on a private network protected by a firewall. Private clouds provide enhanced security and ultimate control with more data visibility which can help organizations meet data security regulations for health and financial organizations. An externally hosted private cloud provides the cost advantages of hosted services with more privacy than public clouds.
The Pros and Cons of Hybrid Solutions
A hybrid cloud includes both cloud and on-premise solutions – often from multiple providers. Hybrid clouds offer variety, so companies can pick and choose which aspects of their business are better off in a public or private cloud versus on premise. In addition, if users want to scale computing requirements beyond the private cloud and into the public cloud, they can switch resources quickly - otherwise known as “cloud bursting”.
A hybrid cloud can also involve on-premise ERP systems and integration to cloud-based third-party applications. Stellar, a leader in the Engineering and Construction Industry, uses Magic xpi to integrate their on-premise Oracle JD Edwards ERP system with an F1 Field Service Management system in the cloud.
A hybrid two-tier ERP model in which companies run more than one ERP system, often a primary one at headquarters and additional cloud ERP services at subsidiaries, is popular with many customers of cloud ERP vendors.
The Integration Challenge
However, all of these different cloud computing models mixed with on-premise solutions creates confusion as to where integration should reside. For example, it’s possible for one company to run JD Edwards on Oracle private cloud, SAP ECC HANA in the private cloud and a separate Salesforce.com SaaS application in a public cloud that integrates to both ERP environments.
The challenges are finding ways to manage all the different data flows in and out of public and private clouds. Finding the most painless path to cloud integration means having an integration platform that is fully interoperable and not locked-in to one environment or architecture and that is able to handle all of the different data types and computing environments.
This is important since the “best” deployment model for today might not be the best model in a few years, or even a few months. Integration platforms can provide the flexibility to maintain ERP integration as requirements evolve. For example, an integration platform makes it relatively easy to adapt data incoming from a CRM system from a private ERP cloud to a public cloud ERP offering as public ERP clouds become more commonplace due to enhanced functionality, improved security and lower operating costs.
Private clouds are easier to control and customize while public clouds are more resource efficient. Hybrid cloud configurations can provide enterprises with the best of both worlds with the option to shift resources back and forth as business needs evolve. Integration platforms deliver the agility companies need to provide one unified platform to manage data and business process complexity for today and tomorrow’s cloud computing needs.