ERP software has long been a core business solution and is considered crucial to mid-market and enterprise-sized companies.These essential financial planning and management platforms have grown greatly in functionality to include procurement, payroll, billing, asset management, project management and other financial governance and planning functions.
In recent years, ERP systems have continued to evolve with the increasing need to have business information shared among users to support interdepartmental collaboration and data driven decision processes. The preferred model, and the model that tends to provide the most up to date features and functionality is the public cloud model, but a number of deployment methods still exist for ERP products.
Types of ERP Software Deployment
Deployment of these robust systems has adapted with the times and users should determine the appropriate deployment method to ensure smooth implementation and adoption within their organization. When it comes to ERP deployment, you will frequently see products that fall into these four deployment types:
This method was the standard, old school deployment method of what are considered legacy ERP suites, deployed on-premises and licensed in a perpetual type license model. Up until the surge in the public cloud trend, this was considered the norm for deploying an ERP platform. The implementation of these products can take a considerable amount of time and resources due to the vastness of the software and the need to customize the solution to a specific business.
On-premises solutions also require a data center setup with a complete infrastructure to support the system including servers, database, middleware and network management. Today this data center can be managed and owned by the end user organization or outsourced to a hosting provider. On premises deployment can leverage some of the efficiencies of the public cloud model by deploying in a private cloud, but that deployment still infers that the company is responsible for the infrastructure directly or through a provider.
Legacy ERP systems are generally considered rigid and costly, partially because of the heavy customizations that are often done during implementation, and also because of the requirement of maintaining and managing the infrastructure. They are not nearly as flexible nor as easy to integrate as the often more modern public cloud versions, and are many times considered somewhat outdated and costly to maintain in today’s public cloud-focused software world.
A hybrid approach to ERP systems means that a company has utilized both public cloud and on-premises deployment methods. Companies can use cloud applications, often to add-on a best of breed solution and integration to their on-premises ERP. You may consider this method if you already have an on-premises ERP in place and are content with its performance in its current function, but are interested in expanding its capabilities to new departments and/or new functions.
It can be easier and more resource-conscious to deploy certain cloud applications, adding or replacing functionality instead of attempting to replace your entire on-premises ERP at once. You may be modernizing your current software but doing so in an incremental fashion, slowly moving to the cloud but using older systems in some functional areas until the replacement offers some significant business return. Either way, this can be a cost effective transition approach for growing companies, but can create data silos if integration is not a priority.
Public Cloud ERP
As the cloud trend continues to expand rapidly across most, if not all software markets, ERP has not been left behind. Public cloud ERP systems are often the most modern and may be the best option for businesses today for a few reasons; short term cost (often from operating budgets instead of a capital expense), ease of deployment, configurability without expensive customizations that limit upgrades, and rapidly evolving feature sets based on the much faster release cycles of most public cloud software companies.
Software as a Service (SaaS) products, licensed as a subscription instead of the legacy perpetual license model with its ongoing maintenance and upgrades, can be much more cost effective than the legacy, on-premises ERP systems by smoothing out costs over a longer term and by reducing the expense of large upgrades every 2-4 years. SaaS upgrades are smaller, more frequent, don’t have the baggage of unupgradable customizations, and in general less costly both in direct costs and in lost time and resources. More importantly though, the resource savings for the businesses that don’t have to maintain the data centers and infrastructure to operate the system, can be used to accomplish core business functions that help grow the business. In addition, the subscription model, with its “pay as you go” mentality, ensures that companies are only paying for what they actually use when they use it.
Public cloud implementations are generally quicker and less resource-intensive than on-premises deployment, particularly because they eliminate the need to set up company owned data centers and infrastructure, or work with a hosting provider on top of the upfront license costs. The implementations also tend to take less time, even though business processes and procedures often have to be modified to take advantage of the benefits of the new system in a similar fashion to on-premises deployments. Also, integrations can be much easier with the more modern architecture of most public cloud applications, even if they are cloud to cloud (from more than a single vendor), than attempting to integrate with older on-premises ERP solutions.
Postmodern ERP systems are a collection of cloud services, often from a variety of vendors, that work as a series of micro-services that loosely integrate to create a larger, overall ERP solution built on a single, underlying platform or PaaS. This could help your company break down your software enabled business processes to a simpler, more granular level, offering much more flexibility and creating systems that can be adapted to rapidly changing market conditions. This flexibility is particularly important in helping businesses stay competitive in an age where business model innovation often outweighs product and service innovation at disrupting markets.
This is still an evolving concept, but one of the most contentious issues is the certification of granular micro-services that originate from a variety of sources. Combining these services will often require highly skilled engineers or extensive help from third-party implementers. That doesn’t just depend on technical issues though, businesses will have to clearly define business processes to aid in the configuration of the micro-services into complete, end-to-end processes. Despite any hurdles, companies are starting to use this method for extending current ERP deployments and in accessing standard API’s for integrations from a marketplace. This trend, based on the value of the PaaS, an ecosystem of micro-services in a marketplace model, and the underlying business flexibility that it could offer, has created considerable interest from businesses, PaaS providers and others in the services ecosystem. It has the potential to be very disruptive to more traditional software companies, even some public cloud vendors, in the not so distant future.
The different ERP deployment methods each have their own strengths and shortcomings, and every company will have its own requirements and regulatory challenges that may steer them toward a certain deployment method over another.
Considerations to keep in mind throughout the process include: budget, resources for implementation, and overall integration needs. ERP vendors are rapidly moving toward only providing public cloud options, though hybrid deployments still remain a reality because companies are reluctant to completely abandon their elaborate on-premise ERP. Postmodern ERP could become increasingly more prominent as a deployment method, but the labor-intensiveness of the deployment, the complexity of finding the correct micro-services, ensuring that they would work together and on a single PaaS, will keep the current model of using this method for extending public cloud applications in play for the foreseeable future.
If you’re considering an ERP system for your company, you can find more information about ERP products and what real users think of them on the ERP category page.