Traditional ERP systems, built in an age before the advent of pervasive digital technologies, were not designed to manage the vast volumes of data created by digital businesses. Implementations of these conventional systems could take years. At a time when organizations now need to respond to customer demand that changes in months, if not weeks, these systems are being challenged by cloud-based solutions that allow companies to make rapid changes to their business models and deliver customer service improvements at speed. They also offer the financial appeal of reducing CapEx and freeing up resources that can be used for innovation.
Cloud is a key part of the digital enterprise since it provides a platform that is more geared to innovation, simulation and prototyping.
Given the range of cloud infrastructure solutions available – Software as a Service (SaaS), private cloud, and public cloud – the best solution for many organizations is a hybrid model. Identifying the right hybrid model – the optimal mix of public and private cloud alongside customized on-premise ERP apps and on-demand software – is a complex task. The blend of specialized and non-core versus core and non-specialized will vary between companies and a cloud strategy will take these factors and the company's size into consideration. Managing the interface and interoperability of data has become a matter of 'bridging the gap'.
Some general principles can be applied. It makes sense to move non-critical business systems, ones that deliver no strategic advantage, to the cloud first. Business critical systems, or ones that differentiate and give a competitive edge, may be better kept in house.
A media company that has differentiated subscription models and bundles its products and services according to a unique strategy will want to retain these. Its HR data will move to the cloud quickly since it offers no strategic advantage. A consumer packaged goods company with a supply chain that differentiates it will be keen to maintain its edge but more willing to let its CRM migrate early in the process.
Successful transitions to the cloud will take advantage of the benefits it offers in speedier testing, iteration during development and openness to automation. Gone are the days where an ERP system could be built in isolation and unveiled to much fanfare without intervention from the business.
The starting point in finding the right hybrid solution will be the requirements process. Traditionally this is done by gathering customer requirements and mapping them to the on-premises product with all the associated customization. The cloud's product-led approach where companies choose best-of-breed business processes saves a ton of customization. Using pre-configured tools and automation tools will speed the configuration process though the effort of moving data from the existing system to the cloud should not be underestimated.
By migrating non-core applications while retaining sensitive processes on-premises an organization can have the best of both worlds.You can read more about the benefits of hybrid solutions in the latest edition of our consulting journal Perspectives here.