There is a litany of questions and concerns manufacturers have when considering the purchase of a new ERP system. One of the most critical is how the solution should be deployed.
Manufacturers can take solace in knowing there are a few different options, but the proper choice isn’t always readily obvious. Whether they ultimately opt for on-premise, cloud, or some sort of hybrid approach to deployment, the thought process behind the choice must be a reasoned one.
The stakes are high. A recent IDC survey reported 34% of manufacturing respondents ranked ineffective or inadequate IT systems as the top barrier to achieving operational excellence. Simply stated, making the wrong choice isn’t an option for companies looking to facilitate or maintain long-term success.
According to Mark Humphlett, a director for enterprising software solutions provider Infor, a number of factors contribute to a decision on a proper ERP deployment, not the least of which is the size and overall effectiveness of a company’s IT staff.
“We’ve got some of our customers that are multinational organizations supporting their operations with an IT staff of five,” said Humphlett. “But on the flip side, I’ve seen some companies of the exact same size using a different ERP that have an IT staff of 50.”
The complexity of a manufacturer’s operations and the maintenance required for keeping the ERP system up and running plays a significant role, as does the date of the last ERP implementation or upgrade. How well does the current ERP iteration support other critical business systems? How will the new ERP system be integrated with those other systems? These are not insignificant questions, and a decision on a deployment will affect the relationship between systems.
Then there’s the matter of cost. Obviously, this entails more than the initial purchase price that covers hardware, software, training, and support. Companies must consider the total cost of ownership, which refers to both the expense of the implementation effort and the cost over the life of the system. In addition to what’s covered in the initial purchase price, total cost of ownership also includes integration costs, support costs, and investment in other resources to support the ERP system.
Furthermore, manufacturers must determine what deployment option will be the best fit to ensure quick and easy access to business data and metrics, as well as allow them to make upgrades. Other critical factors include functionality, ease of use, business fit, and industry fit. All of these vary based on deployment option and provide and must be accounted for in a company’s IT strategy.
There are three main deployment options: on-premise, cloud, and hybrid.
An on-premise deployment puts the onus on the company’s IT staff to implement and support the system, while a cloud offering is often a desirable choice for smaller outfits that don’t have the requisite IT manpower to embrace such an undertaking and would rather quickly and easily access the system via the internet.
However, according to Humphlett, some manufacturers are finding a hybrid ERP model fits best with organizational needs and future goals, projects, and objectives. These include streamlining and organizing business processes, increasing visibility across the enterprise, and improving process flow.
“A lot of organizations today use more than just the ERP,” said Humphlett. “So if you take a look at a complete industry suite for an organization, you’ll have your classic core ERP system, but they may need an asset management solution, a product lifecycle solution, or a supply chain or transportation solution, or an expense management solution”
Certain companies may look at using some via the cloud and others on-premise. They’ll take a look at supporting a hybrid model and they’ll determine if they have the staffing, budget, and expertise to support one of these types of projects.
Another critical question centers on security. Do companies want the data up in the cloud? While there is less concern regarding security than in years past, some companies simply would rather host the data themselves in spite of the potential for higher cost of ownership and a longer implementation timetable.
“A lot of companies will look at (cloud) because it typically is a faster implementation and lower cost of ownership,” said Humphlett. “But a lot of companies just like having the flexibility of knowing that the software is on-premise. They can go in, play with it, make changes, do whatever they want with it in real time with the on-premise model.
It really just comes down to a personal preference,” he added.