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The Rise Of The Hybrid Enterprise

As on-premises ERP dies a slow death, the hybrid enterprise, not pure SaaS, will be the dominant model for some time to come.

The future of the enterprise is very much up for grabs. Just as proposed the end of software and then became very much a software company, Zuora's CEO Tien Tzuo recently authored a much-referenced article on the end of ERP, despite the fact that Zuora is very much a player in enabling a new hybrid enterprise that needs ERP as much as it needs Zuora's subscription billing software.

What Tzuo does get right is that business models are rapidly changing globally, and those that are more suited to the services world aren't well-suited to using traditional ERP software--which itself is an outmoded term more rooted in old-style 20th century manufacturing than it is in the dozens of industries and lines of business to which “ERP” companies like SAP, Oracle, Microsoft, and Infor now develop and sell on-premises software.

What's really dead or dying is the pure on-premises business, and with it the notion that IT is a purely inside-the-firewall phenomenon. And what's growing rapidly, aided and abetted by pure-play software-as-a-service vendors like Zuora and Salesforce, is the hybrid enterprise. Indeed, the question for many of these pure-play SaaS vendors is whether, in the long run, they'll be able to sustain their growth and market clout without having something to sell to the on-premises world.

While there's no denying the extraordinary growth of companies like Salesforce, the problem of coexistence with the on-premises world has always been the bete noire of many pure-play SaaS vendors. Zuora embraces this coexistence, as its subscription services model is unlikely to become the system of record in most of the large enterprises it's now targeting.

For Salesforce, the extraordinary demand for automating customer interactions in every industry and geography has mitigated the problem, independent of an immediate need for back-office connectivity. But as CRM on-demand and other SaaS models mature, the fact remains that co-existence with on-premises software, not its end, will be the dominant model for some time to come.

What I do grant Tzuo is that the definition of a customer and what the customer's relationship is with the enterprise will never again be the sole purview of an ERP system, if it ever was. Too much is changing in the product and customer lifecycle to think that ERP will evolve at its core to take on these new responsibilities. This is one of the fundamental phenomena that Tzuo refers to in postulating ERP software's end, and I agree wholeheartedly that ERP won't be the software that crosses that chasm.

But while many SaaS companies can look to purebred SaaS-based business models for much of their early growth, this dependence on net-new processes masks an even greater opportunity in hybrid business models. A good example comes from the ability to take the best of the new SaaS customer interaction models and use that data to create a vastly improved and nuanced demand model for the enterprise.

This improved demand signal feeds directly into the very ERP and supply-chain management systems that are supposedly on their deathbeds. While much can be done in the cloud to improve that analysis--just ask Demand Solutions, Kinaxis, and E2Open, among others--the results of those cloud-based analyses will not only add value to existing on-premises systems but will extend their life spans.

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User Rank: Apprentice
3/2/2012 | 8:23:00 AM
re: The Rise Of The Hybrid Enterprise
On-premise ERP is no where near its death. I was just speaking with a company that is bringing their entire ERP OnDemand infrastructure back in house to save costs. SaaS is still really expensive.
User Rank: Apprentice
2/29/2012 | 4:03:27 PM
re: The Rise Of The Hybrid Enterprise
This article really just strikes me as common sense: some things are better than other things for specific purposes and there isn't one end-all-be-all. With that said, it is sometimes amazing to me how little common sense there is in this industry (at least among commentators and commenters). Many people will have you believe that "the cloud" or browser-based solutions are the inevitable future, but at least with regards to mobile devices no one wants a "cloud" app or a browser-based app. They want an app running on the device for the same reason businesses want on premise ERP: at least for the moment it's just better. The real issue right now is accessibility in my opinion, which is why virtualization technologies are exciting to me.

Great article, thanks.
User Rank: Apprentice
2/29/2012 | 10:03:48 AM
re: The Rise Of The Hybrid Enterprise
Josh - from our experience at UNIT4, youG«÷re right in thinking a 'one-size-fits-all' cloud offering will not wash with all customers, many of whom may be used to sophisticated, highly configurable on-premise systems. But at the same time, we agree that the old ERP model was designed for manufacturing businesses, as you point out. New approaches to ERP have already moved it in favour of the services-centric organisation. Flexible systems that change as the business changes without code-level programming and intimidating upgrades can provide these organisations with the independence they need while providing flexible delivery options, be that cloud, on-premise or a combination.

The stories of legacy-ERP implementation failures are frightening, and a move towards services-centric, subscription-based ERP is inevitable. ERP will continue but I think we can agree that the tide is turning away from legacy vendors to those providing more agile, change-friendly solutions.
User Rank: Apprentice
2/28/2012 | 10:23:48 PM
re: The Rise Of The Hybrid Enterprise
Hybrid delivery is the reality of today's enterprise because, in decline or not, there will always be a component, no matter how many private or public cloud solutions are deployed, that can't be ripped and replaced. But the challenge with hybrid cloud is managing it. Cloud platforms are still maturing. Now we're talking added complexity. But in an environment demanding Instant-On access, the cloud will increasingly be the enabler ... just not the only enabler, hence the hybrid cloud. --Paul Calento
Sam Bayer
Sam Bayer,
User Rank: Apprentice
2/28/2012 | 7:13:53 PM
re: The Rise Of The Hybrid Enterprise
You are definitely 100% correct about the hybrid organization. That's the real solution in the Enterprise.

So what's holding things up?

It has now been 26 days since I began the journey of trying to get access to a Swiss multinationals SAP system. It will take us less time to integrate and configure our software so that the US subsidiary's can place and track orders over the web than it did to get access to SAP in the first place.

That's going to have to change before organizations can harvest the latent value in their ERP (SAP) investments.

Sam Bayer
8 Steps to Modern Service Management
8 Steps to Modern Service Management
ITSM as we know it is dead. SaaS helped kill it, and CIOs should be thankful. Hereís what comes next.
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