Hybrid ERP System: When Does it Make Sense?

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Hybrid ERP System: When Does it Make Sense?
by Richard Barker

It is conventional wisdom that a diversified stock portfolio is a very effective hedge against investment risk. For the same reason, companies that are not comfortable with the risk and/or loss of control associated with moving wholesale into ERP cloud computing, but still want to explore this evolving infrastructure, might find a hybrid ERP approach to be the perfect answer. By “hybrid ERP approach”, we mean mostly on site, but with some carefully selected hosted applications.

So what might qualify as some “carefully selected applications”?

1. A bolt-on to your on-site ERP application. Perhaps the practicality of this application only became apparent after your successful ERP implementation, and while you wouldn’t be comfortable going back and requesting additional capital spending to purchase the bolt-on, the financial payback on monthly subscription costs makes it attractive.

2. Not all data is created equal. While there may be very legitimate discomfort about putting confidential financial or human resource data out on the cloud, there are also other datasets which, even if breeched, would not likely be of long term value to anyone. Think “inventory” or “quality control” data.

3. An application that is on the perimeter of your operations, and perhaps has never been automated. These are processes that will never be core competencies, but could still improve operations. Examples might be supply chain collaboration with vendors, or project lead management, or freight invoice auditing. Typically, these are problems that do not merit a big solution.

Hopefully, the commonality of the above stands out: applications which are almost stand alone, except for basic input/output interfaces, with minimal security risk and conservative financial outlay.

Real World Experience
The benefit of this hybrid ERP system is unlikely to be a high-payback financial return, rather it is a low risk – but thorough – education in cloud computing. You can read all the case studies you want, but until you actually immerse yourself in the real world ramifications of the terms you negotiated, experience the elements of cloud computing that improve an ERP implementation, and those that are disappointments, you will never truly know what all of the hubbub is about. It is very possible that identical service experiences could be perceived with totally opposite levels of satisfaction, depending on the historical expectations an organization has about its existing IT function.

The most important point though, is that the real world is a very messy place. Just as it is impossible to foresee and avoid every ERP problem prior to go-live, there is no way you can understand the advantages and disadvantages of cloud computing without doing it. A hybrid ERP approach lets you avoid having to bet the farm in order to try.

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