Aligning Process and Technology Management to Make Two-Tier ERP Pay Off

To generate the benefits companies hope to achieve from hub-and-spoke ERP deployments, they need to ensure that their IT organization and the skills of its team members, business processes, data management practices, and critical integrations align with organizational and technical goals. If companies underestimate the impact of these elements, two-tier ERP may easily become too complex and take too long to produce the right outcomes.

As we discuss in other blog posts, a hub-and-spoke ERP environment that capitalizes on the particular strengths of two leading solutions, SAP and Microsoft Dynamics 365, can yield numerous operational, financial, innovation, and risk mitigation benefits for companies. With both systems on the Azure cloud, deployments can be highly standardized and efficient. Even if SAP remains, for the time being, on-premises and integrates with Dynamics 365 in a hybrid cloud, experienced implementation partners like Sikich will be able to deliver efficient, low-risk, predictable projects, and optimize Dynamics 365 for industry-specific requirements.

A highly streamlined and standardized ERP deployment is still a complex undertaking that requires advanced project and change management, along with deep technical and business expertise. When two ERP solutions need to function together in a hub-and-spoke implementation, implementers must consider some aspects of their assignment differently than they might in a single-tier effort.

Unifying and streamlining operations in two-tier ERP

Two-tier ERP might become overly complicated and needlessly risk-prone when people in different entities or regions think of their domains as practically independent. This could result in unproductive functional silos and fiefdoms that can cause waste. The second-tier ERP solution should accommodate specific processes and operational requirements. Still, the company also needs to maintain an effort to standardize activities and business rules as much as can be done. If that focus weakens, customizations in either ERP solution could eventually become difficult to manage and reconcile with stakeholders’ information needs, especially following significant upgrades.

At Sikich, we keep customization to the minimum that genuinely makes a difference and enables the most common business processes with standard functionality. Doing so becomes even more critical in a hub-and-spoke implementation, because user preferences and solution customizations could by-and-by result in a fragmented, hard-to-manage business environment where collaboration and shared goals take a backseat. If that happens, processes in areas such as procurement or human resources, or the launch of new products and services, can become more expensive and inefficient.

Savings and efficiencies in the ERP cloud

With Dynamics 365 and eventually also SAP ERP in the cloud, infrastructure costs become greatly more predictable than they would be if one or both ERP systems were on-premises. Provisioning servers, storage, and services can happen quickly, scaling up or down as needs change. Even if they deploy two ERP solutions in a cloud-based, hub-and-spoke architecture, companies will likely incur substantial savings, because they don’t need to commit to the same level of purchasing of servers, networking switches, and storage systems. It will still be worth a company’s benefit to project software licensing and hosting costs as accurately as they can and make planning decisions in its best interest. Additional cost savings and efficiencies may come about when both ERP solutions reside on the same cloud platform.

A new day for your IT department

When a cloud-services provider for one or both ERP systems in this architecture takes care of IT management fundamentals, local IT teams can spend their time on other tasks. For instance, they might be able to build solutions with a shorter time-to-market than would have been possible if infrastructure management were their prime concern. The need for specialized proficiency for each ERP solution within the IT organization may not be as critical or basic as it would have been in pre-cloud times.

However, companies will still need to retain expert skills for both systems. IT will still have to assist users with more complex tasks, configure new or changing processes in the ERP solutions, update financial and compliance reporting workflows, and perform other tasks specifically within and for each ERP system. They will also need to develop, test, and validate new software designed specifically for both ERP solutions. Companies choosing to deploy hub-and-spoke ERP, therefore, need to consider these skills requirements in their IT workforce planning and to recruit, and they should be aware of the costs involved.

Effective technology services respond to organizational IT maturity

For some businesses, an effective way to address complex skills requirements—especially at a time of nearly full employment—is engaging with a reliable, proven provider of IT managed services. The right managed-services partner would not just offer the essential technical skills, but also get to know the organization well enough to exercise governance of both ERP solutions to ensure their optimal alignment with corporate strategies, performance metrics, standards, and preferences.

It sometimes happens that significant differences in IT maturity exist between the core company and subsidiary or business group in a hub-and-spoke environment. An experienced managed-services provider will be able to help enterprises manage these discrepancies before they disrupt productivity or cause financial and resource waste, or orient the various entities toward a preferred, shared level of IT maturity. In that situation, IT might focus on SAP, and a managed-services partner like Sikich might support the second-tier ERP and other technologies.

Integrations deliver data to business users

Some executives and managers in a company using hub-and-spoke ERP will need to remain in touch with events and activities across the entire organization, whereas others may just need to be involved with what happens within each of the two realms. In a hub-and-spoke architecture, SAP and Dynamics 365 can have integration points that allow data to become available to analytics and business insight tools, enabling the people who have to plan and make decisions to be fully informed.

Creating and maintaining these integrations become business-critical tasks even more so than in a single-tier ERP environment. It’s important to involve business users in the requirements gathering, planning, and testing of integrations to make sure they will address their needs.

Need for consistent data-management practices

Similar to integrations, master data management becomes a key discipline when companies adopt hub-and-spoke ERP. To ensure that integrations and data flows enable the insight stakeholders need, data structures in either ERP solution should be consistent and in alignment with current user and business requirements. Companies also need to review and cleanse their data before migrating it into an ERP solution, or existing errors and inefficiencies will persist in the new system. Experienced consultants and deployment partners can help companies institute sound data management and implement robust, manageable integrations.

If you want to learn more about implementing Dynamics 365 in a hub-and-spoke architecture or about achieving a great solution fit for your company and industry, please get in touch.