One of the top factors driving the deployment of the most popular Software-as-a-Service (SaaS) applications -- CRM and HCM -- is that they don't have to be integrated into ERP systems.
Applications like HCM performance management work well without any direct integration into on-premise ERP software, and were in fact developed to run this way, according to Gartner analyst Ben Pring.
But there still needs to be some level of integration to keep data between the solutions in sync. Since the ERP system is the central nervous system of the IT business processes, all on-demand solutions need to be eventually integrated if they cover relevant business processes that have any influence on the company's resources or financials. And keeping data in sync is a big challenge when running hybrid on-premise and on-demand solutions.
"Some level of integration between on-demand and existing on-premise solutions is always necessary as the business processes are integrated as well," said Hogler Kisker, senior analyst, Forrester Research. However, the level of the depth of integration can vary.
However, depending on the need of the business process and IT landscape, different levels of integration are possible, and in some cases, necessary.
In CRM, for example, some SaaS integration is possible by simply feeding new orders back into the ERP system for logistic and financial execution. At a higher level of integration, the CRM on-demand solution might do availability checks or price updates, which would be pushed out to the CRM on-demand solutions.
Common challenges in integrating on-demand apps
The challenges with SaaS integration start with the initial upload of existing master data into the on-demand solution. It's important to keep both in sync over time. Human interaction can only help for the most simple business processes and very lightly integrated on-demand applications. In most cases, good master data solutions and a strong integration via standard interface are required.
Companies planning to integrate a third-party on-demand app with SAP should determine:
- What business process runs in the on-demand application and which common master data is required for this business process?
- How can they upload initial existing master data into the on-demand application? Which application is the leading application to hold the master data; and what's the best way to keep both systems in sync?
- Which transactional data needs to be exchanged between the on-demand and on-premise solutions?
- Are there existing interfaces to easily exchange such data?
- What standards/formats are used for the data exchange?
- How often does the data need to be updated?
- What level of user authorization is needed?
- If there is a disconnect, how does the backup and recovery work?
"There is a lot to consider and certainly there is a benefit to receive hybrid solutions for on-demand and on-premise solutions from one single vendor, which is a strong value proposition for SAP," he said.
SAP's on-demand strategy
SAP's trying to tackle just that challenge with a line on on-demand applications for line-of-business functions.
Future on-demand solutions for SAP Business Suite extensions will be built on the Frictionless Commerce platform, which SAP acquired in 2006, according to Kisker. SAP faces the challenge of integrating these different platforms with a hybrid on-demand/on-premise option.
SAP is making some strides. The latest release of SAP e-Sourcing on-demand provided a much better integration with SAP ERP than previous versions, Kisker said.
But even running SAP's on-demand software along with SAP on-premise solutions does not guarantee the highest possible integration between those applications.
"Customers that are interested in leveraging an SAP on-demand solution with SAP ERP need to understand the existing level of integration and planned future roadmap to see if the hybrid model can satisfy their needs," Kisker said.