On-Premise and SaaS Coexistence – Adopting a Hybrid ERP Strategy

September 24, 2019

Gartner predicts that by 2019, 80% of organizations will use a combination of on-premises and cloud-based business applications.

Many organizations already tactically leverage cloud capabilities for business processes such as sales, human capital management, or supply chain. As CIOs decide which business functions can be delivered through the cloud and which ones will remain on-premises, a complete shift to the cloud will take time, paving the way for on-premise and SaaS coexistence. As organizations adopt a hybrid ERP system, SaaS applications existing alongside on-premises applications are creating new challenges for traditional IT teams. It’s important for SaaS and on-premise applications to work together because it’s vital that there is a free flow of the data underlying important business processes.

When Does On-Premise and SaaS Coexistence Make Sense?

Try SaaS

SaaS coexistence allows businesses to test cloud functionality and usability by adopting it for individual modules of their ERP systems, such as Financials or HCM. They can take advantage of the flexibility that the cloud offers without disrupting the entire IT environment.

Retain Customizations

Many organizations have complex customizations built into their on-premise applications that may not be suitable for the cloud, or would require major modifications and change management for migration. SaaS coexistence allows businesses to leverage modern features and functionalities available in the cloud while maintaining legacy systems and customizations for other business processes.

Add New Functionality

Often, legacy ERP implementations didn’t include all the modules of the suite due to budget constraints. ERP systems were implemented with the hope of adding functionality later but took a back seat due to various challenges like budget, time, lack of internal skills, etc. Adopting a SaaS coexistence strategy enables organizations to add missing functionality by moving specific applications to the cloud while keeping the rest on-premises.

Reduce Costs

If your organization is not yet prepared to make the financial investment required for an all-in SaaS implementation, you can move some functions to the cloud instead of struggling with the outdated functionality of your legacy, on-premise system. You can gain cloud capabilities like mobile and social, while still getting value from your initial investment.

What are the Considerations for Implementing a Hybrid ERP System?


The complexity of managing customizations increases as organizations adopt hybrid ERP strategies. While SaaS applications have superior configuration flexibility compared to on-premises applications (reducing the need for customization), on-premises systems still offer more capabilities for modification and extension. However, despite the technical differences in implementing changes for SaaS applications, the basic customization management tasks are the same as in on-premises applications – any customizations still need to be monitored throughout the life cycle of the application. Select the SaaS application that offers the closest fit to your business requirements and if there is a need to modify, favor configuration over customization.


Traditional approaches often used for on-premises-to-on-premises application integration are not agile enough for hybrid ERP scenarios. Organizations require a more agile integration strategy to manage the diverse data and integration of multiple applications that may be deployed on-premises or delivered via cloud (SaaS, IaaS, or PaaS). A hybrid ERP system usually results in complex environments with multiple architectures, multiple upgrade cycles, different integration tools, complex application support and increased vendor management. Review your existing integrations and develop a comprehensive plan to address the rapidly changing requirements in a hybrid ERP scenario. There’s no question that hybrid ERP integration is a work in progress but it’s getting easier, and the benefits far outweigh any potential integration challenges.

Data Management

Ensuring data integrity is a major concern when data exists across SaaS and on-premises applications. It is a challenge to define and communicate data responsibilities across a diverse and complex application environment. Ensure that your application integration strategy addresses data integrity and synchronization across multiple solutions and delivery models including SaaS, on-premise and outsourced business processes. As is the case with customizations, SaaS applications might have more limitations in terms of configuring and extending data models. SaaS applications might also have higher data quality thresholds to prevent errors, requiring more effort to prepare and cleanse data.


SaaS applications undergo more frequent changes applied to them by the vendor, which requires more testing. It is your responsibility to ensure that these applications are working correctly and in compliance with internal and external policies. Testing takes place in a more complex environment, where testing teams have less control over ERP components than before and often less time to complete the testing, as many SaaS vendors have shorter upgrade cycles. Though these changes require continuous testing efforts, one benefit is that SaaS applications are upgraded automatically and regularly.

Ultimately, while SaaS coexistence comes with its own set of challenges, a well-planned hybrid ERP strategy that combines the advantages of both SaaS and on-premises applications is one of the best ways to leverage cloud technologies, increase agility, and improve customer experience. A good first step on the path to coexistence is to identify opportunities to enhance the agility of your existing on-premise applications.

Modernizing your Oracle E-Business Suite to drive innovation and deliver business value is a journey that should be custom-tailored to your unique IT and business needs. 

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