Hybrid ERP matures as companies develop better strategies

Developing new strategies to ensure that cloud and on-premises ERP systems play nice together is just one part of the hybrid challenge.

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“One of the benefits of leveraging SaaS providers is that you are not patching systems, buying new hardware, doing capacity management, database structure changes and upgrades—you don’t have to manage the entire stack,” says Strout. “Operationally we spend significantly less time focused on infrastructure and instead are focused on how we drive value out of the application layer.” That value is done through configuration rather than custom code or user exits, which allows more time for value-added activities.

The planning process

Cox says that Oracle encourages its customers to begin its hybrid ERP planning by evaluating what it has and then doing an infrastructure assessment to learn what’s needed. “How does that assessment marry with their definition of their new business requirements? Then, what business functions does it make sense to move to the cloud and in what timeframe?,” he asks.

A company that’s seeing a lot of disruption in its industry will make different decisions about what to move to the cloud than one in a stable industry. “We’re seeing two primary patterns: complete transformation and then innovating at the edge,” says Cox.

“If business transformation is the immediate imperative, then organizations will be looking to make fundamental changes in their IT infrastructure, which includes moving to cloud ERP. But if you’re in an environment that recognizes there’s disruption coming your way in the future, then it’s possible to 'innovate at the edge’ by beginning the transformation through the adoption of cloud applications for planning and budgeting or procurement. Then it’s a strategic question of what do we do next,” he says. “But it’s important to bear in mind that today’s ‘next’ is different: Many organizations adopting cloud by innovating at the edge will manage multiple parallel implementations to speed the transformations required.”

Denecken sees three distinct requirements that are essential to evaluating these hybrid ERP considerations and creating a roadmap. Most important, you need the people who run the business to actively participate. “Without those guys, you shouldn’t even start to define a hybrid strategy,” he says. Next are the enterprise architects because they understand the vendor and solution landscape. Third, you need to know the status of the preconfigured cloud-based approach in respect to functionality and integration scenarios.

“You shouldn’t go back to the drawing board and come up with waterfall approach and say ‘This is what we can do with a hybrid scenario,” says Denecken. “You should right away start with a pre-packaged cloud-based best practice approach.”

Flexibility vs. complexity

A hybrid environment provides a far greater amount of flexibility for companies when they need to scale up the business or move into new areas. That flexibility comes at a cost in terms of integration requirements and managing that integration through solution updates.

Denecken stresses the importance of balancing the agility and flexibility that hybrid ERP provides with the complexity. “In a pure on-premise environment, the solutions are considered along the status quo. On the opposite side, if you use a pre-configured cloud solution, you adopt your business processes to a standard because you want to simplify your approach.”

With a hybrid ERP, Denecken says you don’t have the extremes at both ends. The balance is in being able to use the cloud to redefine your processes to enable fast innovation while preserving the knowledge that depends on your in-house systems.

Cox sees greater use of the cloud simplifying ERP support and management overall. He cited four principles of transformation: simplify, standardize (so there’s one definition of a given process across the organization), centralize and automate. “All simplify the management of systems,” he says. “One of the prime reasons for adopting the cloud is to avoid infrastructure and the time and effort of on-premise upgrades.”

Looking ahead

While the end game for many companies could be a pure cloud solution, the industry consensus is that it will not happen on a large scale anytime soon. Where it’s happening now is with companies that are implementing an ERP system for the first time. In fact, Hasan says that most of its Dynamics 365 for Operations customers are opting for a cloud-only solution.

ERP vendors are taking a cloud-first approach to development, but expect to develop and maintain their on-premise options indefinitely. With Microsoft Dynamics 365 for Operations, for example, customers can run their entire business operations on-premise locally or through distributed systems.

“To give organizations a single view of the business and the ability to capitalize on synergies between the sites, it is essential to aggregate data in the Microsoft cloud to report and process financials and manage enterprise data centrally,” says Hasan. “The elastic compute power, artificial intelligence, and speed of innovation of the cloud enriches the on-premises systems in a way that would be very difficult to realize in a totally disconnected system.”

“I haven’t spoken to a single customer who doesn’t understand the need to embrace the cloud. There’s a new vision for organizations that’s come out of the environment that we’re in. Digital transformation, disruption in every industry, the global talent shortage, the rise of robots, the radical changes in many traditional professions [due to software-enabled automation], and ever increasing customer expectations produce volatility in the business model. And there’s a new vision for the IT infrastructure to support the new organization. You can only achieve the innovation required to meet changing customer expectations by leveraging the cloud,” says Cox.

Strout sees Sabre being able to react better to market conditions because of its hybrid system. “It’s about what we need to focus on in the future. What we need more information on. What skills do we match to a product,” he says.“We can do those things within the environment. Want to get to a place where we are continuously learning and adapting the platform.”

This story, "Hybrid ERP matures as companies develop better strategies" was originally published by CIO.

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