The enterprise resource planning (ERP) industry has experienced its fair share of advancements over the years, but perhaps none as significant as the one at the hands of cloud computing. Today, more companies are opting for a cloud-based ERP implementation, thanks to the added flexibility and affordability of the hosted environments compared to on-site deployments.

The hybrid cloud specifically is expected to greatly influence the ERP market for years to come, according to Smart Data Collective's Robert Kugel. Kugel noted that internal research has found that 55 percent of organizations are already using the cloud in some capacity, with another 34 percent expecting to do so in the near future.

However, cloud-based ERP has not taken off like it could. Kugel added that this is due to three reasons. The first is that multi-tenant ERP includes only limited functionality.

"The second reason has been data integration, which until recently could be complicated and difficult to manage. The third reason is that finance departments have been more conservative than most in embracing the Web, especially for ERP systems, because the information in them is sensitive and they fear security breaches," Kugel wrote.

The use of hybrid clouds is expected to pick up in the next decade, especially as security concerns lessen and more businesses leverage the cloud to achieve certain benefits, according to Kugel.

"On-premises ERP software vendors and their partners can diminish their vulnerability to cloud-based software vendors by creating offerings that improve the economics and affordability of single-tenant ownership and facilitate using their software in a hybrid cloud environment," he concluded.

Enterprises embracing hybrid clouds
Hybrid cloud computing is just scratching the surface of its potential. A Gartner report indicated that nearly half of large enterprises will have deployed hybrid clouds by 2017. Thomas Bittman, vice president and distinguished analyst at Gartner, said more vendors are promoting the technology as the "next thing" for their customers' operations.

In terms of ERP, the cloud has opened new possibilities regarding employee productivity and collaboration. For example, staff members, regardless of their physical location, can access enterprise applications from anywhere at any time, completing tasks without always being in the office. This is especially a boon for personnel who are constantly on the go and at job sites.

As more businesses realize that the old ways of performing mission-critical functions are fading, firms will likely embrace the cloud with added vigor. Organizations planning an ERP deployment should make sure they select software from a reputable vendor, one that understands that cloud computing will be a mainstay in the ERP space moving forward. Companies that fail to do so will be stuck with software that needs heavy customization, resulting in more time, money and effort being spent to address these shortcomings.

A worst-case scenario may be that a business has to replace the ERP solution completely, which can be avoided with a leading vendor and the right software fit.