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Managing Hybrid ERP: New Challenges for the CIO

Enterprise resource planning (ERP) is back on the CIO agenda requiring a different way of thinking and doing.

Overview

Enterprise resource planning (ERP) is back on the CIO agenda, though with a different emphasis in today’s increasingly on-demand world.

ERP is morphing from a monolithic suite to a modular, multi-sourced and user-driven set of applications at the architecture epicenter of the networked enterprise.

In light of these changes, CIOs should create a strategy to effectively plan for and manage this more complex hybrid ERP environment.

Often referred to as the IT backbone of large organizations, ERP applications have been game-changing technologies since the 1990s.

As the “system of record” for the enterprise, these packaged applications automate and support a range of administrative and operational business processes in finance (record to report), order management (order to cash), distribution and supply chain (purchase to pay) and HR (hire to retire).

ERP is morphing from a monolith to a modular, multi-sourced, user-driven set of applications at the epicenter of the networked enterprise.

Background

Why the renewed focus on ERP? Companies, especially global enterprises, require a robust backbone of business functionality that only an ERP system can provide

One reason for this ongoing centrality of ERP is that, as Accenture notes in its 2014 Technology Vision, “big is the next big thing.”

That is, after a decade of headlines dominated by digital startups, the coming years are expected “to see the emergence of the traditional companies as digital giants.” These large companies are once again using technology as a driving force.

“Backed by their deep resources, enormous scale, and process discipline, these new digerati are about to rewrite much of the digital playbook.”

Another factor is globalization and the need for a common operating model across units and geographies, or after a merger/acquisition—while allowing for sufficient localization—which can support and drive growth faster and more predictably by creating consistency in business processes as well as data management.

After a decade when digital startups dominated the headlines, we’re heading into an era where large, traditional companies will emerge as digital giants.

Analysis

A distinctive feature of today’s ERP is that it is built inherently on a hybrid architecture.

Commonly, such an architecture is referred to as a “Two-Tier Model”—that is, the combination of core ERP capabilities with cloud/Software-as-a-Service (SaaS)-based capabilities on the edge in areas such as sales, CRM and collaboration—all integrated with the ERP system. In reality, however, the architectural environment is more complex than just two tiers.

CIOs today need to manage the legacy environment, ERP systems (sourced either through a public or private cloud), SaaS technologies, as well as various platform as a service, business process as a service or SaaS offerings from vendors and integrators.

And all the while companies need to be thinking about the proper way to incorporate today’s leading technologies including in-memory computing, analytics, mobile and social.

KEY FINDINGS

The move to a hybrid ERP architecture and the increasing presence of digital technologies has evolved the role of IT from a technology provider and caretaker to the role of strategic business service orchestrator. CIOs in the future will be service brokers focused on securing, managing and governing hybrid cloud computing services, as well as the existing on-premises IT footprint.

Accenture believes the winners in this new, more complex ERP environment will focus on a core set of activities:

  • Shoring up their ERP system in terms of stability and open architectures

  • Looking to low cost solutions, such as public clouds, to meet non-critical needs

  • Leveraging Platform-as-a-Service development in the cloud to meet customization needs

  • Implementing SaaS where it makes business sense

  • Creating a long-term integration roadmap and building the architecture as projects they are approved

  • Exploring in-memory computing as an important, viable solution in the near term