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Don't rule out the cloud for on-premises ERP

Companies mapping out on-premises ERP architecture need to account for the cloud as part of a long-term strategic roadmap.

Before mapping out infrastructure or finalizing specs on servers and storage, experts say that companies embarking on an enterprise resource planning (ERP) deployment need to start their journey with an eye toward the cloud, even if they intend to utilize on-premises ERP.

For many companies, the cloud presents an opportunity to forgo a significant investment in hardware infrastructure altogether. Others will blend cloud capabilities with a traditional on-premises ERP environment as part of a hybrid approach that offers higher levels of scalability and flexibility.

In either case, companies building a modern-day ERP infrastructure need to account for the cloud in some fashion -- whether it's for their immediate needs or part of a future, strategic ERP roadmap, noted Joshua Greenbaum, Principal at the Enterprise Applications Consulting firm.

"Without a doubt, anyone looking at putting ERP on premises today really needs to be looking at building a hybrid environment," Greenbaum said. "You can't upgrade any modern-day IT system without some sort of cloud interaction."

Consideration of the cloud has broad impact on everything from the actual specifications of the physical storage, server and networking hardware to how companies deal with procurement and licensing terms, Greenbaum added.

With the traditional on-premises ERP approach, companies often built out a monolithic environment that could handle peak loads, even if it was just for temporary, seasonal spikes. With that model, IT would sit down with the large hardware vendors and negotiate multi-decade leases that would have very specific targets for what would be in use and what the maintenance costs would be, he explained.

"It was a very fixed model and not designed to change as your needs changed," said Greenbaum. "Today, hardware contracts need to reflect a different window that is the reality of the new environment. It's crazy to buy a monster machine [for Oracle Exadata or SAP HANA] on a 20-year lease -- by then, it's pretty much guaranteed to be a dinosaur."

The minimalist approach

While larger companies typically err on the side of over-investing in hardware, small and midsize companies take the opposite route and under-spec their ERP environments as a way to save on total project costs, experts say. This is by far the classic error, as the move will undercut the performance of the ERP solution.

"The biggest mistake companies make is that they undersize their hardware infrastructure and they do it because they're spending a lot of money on ERP," said Ken Klika, director, network solutions for BCG Systems, an ERP systems integrator. "They take a minimalist approach as opposed to looking at realistic requirements. Their ERP environment will run, but they won't like the way it runs."

Too often, companies try to do too much with inadequate hardware -- for example, attempt to run business reporting and analytics on the same server that runs the ERP transactions, according to Malcolm Fox, vice president of product marketing for Epicor Software. By doing so, they inevitably erode ERP performance and impede overall satisfaction with the ERP deployment at a time when research shows that getting the expected benefits from ERP is still a struggle.

According to the 2014 ERP Report issued by Panorama Consulting Solutions, an independent ERP consulting firm, 66% of companies interviewed realized less than half of the anticipated benefits of their ERP solution, compared to 60% in 2013.

"When you try to run MRP once a month, everything will grind to a halt," Fox explained. "Someone will be trying to ship something and someone else will be running complex reporting algorithms and everyone will be equally impacted by the performance slowdown."

To avoid such performance issues, companies should scale up the ERP manufacturers' minimum requirements by at least 10%, advised Mark Engleman, president of Engleman Associates, an ERP consulting firm. "ERP vendors make a suggestion, but they don't go to the next level and think through the future demands on the system or the value of not having any latency," he said. "Spending a little bit more money might make the difference in the strength and speed of the system."

Keep hardware in mind

There are also a variety of different hardware considerations today that didn't exist just a few years ago. In-memory options like SAP HANA have increased the need for more flash memory disk arrays, and there are different requirements for bus infrastructures. In addition, in the world of hybrid ERP, the data center or server infrastructure becomes less of a place for providing all the processing power and storage to more of a centralized middleware infrastructure that takes care of managing all the assets, Greenbaum said

With this very different vision of ERP come even more challenges related to scoping what the real usage patterns and demand curve for system will look like. "It was always hard, but it's harder now," Greenbaum explained. "It's hard to know in five years what the systems will look like. It's more art than science and it's never been done as well as it could be."

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