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Hybrid ERP matures as companies develop better strategies

Michael Nadeau | Feb. 23, 2017
Developing new strategies to ensure that cloud and on-premises ERP systems play nice together is just one part of the hybrid challenge.

It’s hard to find a company that does not have some form of a hybrid (cloud and on-premise) ERP system. For most, that happened by accident. Someone in the organization bypassed IT and bought a cloud service to fill a need more quickly than they could with an on-premise solution. Salesforce.com, for example, has often been the start of a company’s march to a hybrid environment.

Cloud applications can be relatively easy, low-cost solutions, but they do introduce new complexities when they need to be integrated with on-premise ERP systems and databases, or with each other. Ensuring that cloud and on-premise systems play nice together is just one part of the hybrid challenge. Making the right decisions about what will be in the cloud and what stays in-house is the other.

To meet those challenges, organizations are now transitioning from an ad hoc approach to building a hybrid ERP system to a more strategic planning process. That process includes best practices for vetting, connecting, deploying, and testing solutions.

The growth of cloud in the enterprise

“Lines of business bought cloud applications without IT, and they soon ran into issues involving transaction volumes and integration back into the core ERP system,” says Mike Guay, research director for enterprise business applications and ERP at Gartner. This thrust IT into an unexpected support role as they struggled to connect cloud solutions to the core systems securely and reliably. And while cloud solution providers took care of updates, IT at customer sites still needed to ensure that those updated solutions worked properly with both on-premise and other cloud applications. “The more frequent the updates, the more frequent the testing required.”

Management was also surprised by unanticipated costs, according to Guay. For example, as sales teams became more dependent on cloud CRM systems like Salesforce, they wanted more up-to-date information on shipments and receivables in the cloud CRM system. This required more frequent integration with customer files and perhaps accounts receivable systems in the ERP system. This created additional activity within the cloud CRM system, in turn raising fees.

Organizations have climbed the learning curve for hybrid ERP, allowing for better planning. The hybrid approach is still not easy, however. “Large organizations are still figuring out how much of their applications to move to the cloud—where the cloud is a fit and how the manage the balance between cloud and on-premise,” Guay says. If an organization understands the value proposition of each part—cloud and on-premise—of the application suite, he added, it will be in a better position to successfully align its needs with the right solutions.

“The state of adoption of much of the new technology available in business applications today is similar to what TV was like in the 1960s. On TV in 1960, you saw someone reading a paper into a microphone – the process of communication hadn’t changed to take advantage of the new technology,” says Guay. New capabilities often available in the cloud can better enable digital transformation efforts, internet of things (IoT) applications, or embedded analytics and machine learning. For example, new technology cloud-based machine learning services are better able to analyze large volumes of data and make recommendations to users of local systems.

 

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