No doubt about it: Cloud ERP adoption is on the rise. But that doesn't mean manufacturers are migrating their key on-premises back-office and production systems exclusively to a single software-as-a-service application in the cloud. Many are adopting a hybrid cloud architecture to enjoy the best of both worlds.
According to the 2017 RightScale State of the Cloud survey, 58% of large enterprise respondents have a hybrid cloud architecture strategy that blends cloud functionality from one or more providers with on-premises systems. An IDC study came to a similar conclusion: More than 70% of "heavy" cloud users are considering a hybrid cloud architecture.
Here's the basic idea: Select one provider to be your primary cloud provider of computing power and enterprise software, which often means ERP. Then, either fill in discrete tasks such as logistics and fulfillment, warehouse management and payroll with other cloud applications or let them stay on premises.
What does that mean for manufacturers? Lots of integration will be needed for sharing data between core systems. Integration can be an intimidating prospect. But in today's world of web services and service-oriented architecture, the task is eased considerably -- if you do the right planning upfront.
"You'll need to map out your integration points and get a picture of what kind of connections are required," said Michael Hughes, senior director at consultancy West Monroe Partners. "[Manufacturers] are right to be cautious about integration. It can be one of the things that can bring an implementation to its knees."
Struggles integrating hybrid cloud
Ryan Newman, vice president of IT at Traeger Grills, learned this lesson the hard way. The 250-employee Salt Lake City company manufactures grills and wood pellets in the United States and offshore. In 2015, it moved from an on-premises Sage ERP system to Epicor, which runs in a private cloud.
Meanwhile, the company's office applications, email server, supply chain fulfillment and e-commerce systems run on public cloud with a different provider. Having almost all of its systems in the cloud provides Traeger with flexibility and a reduced need for IT maintenance. But the cloud migrations mean Newman's 10-person IT staff is now in the integration business.
"Seventy-five percent of my staff's time is spent integrating platforms," he said. The small manufacturer has more than 30 integration points, and when the connections don't work as they should, business users get frustrated.
"Our architecture around integration was ad hoc and reactive," Newman said. "We didn't start with a sound integration strategy." Now, Traeger has settled on an integration platform from yet another cloud provider to reduce the work needed to ensure that everything works cohesively.
Any manufacturer considering a hybrid cloud architecture for its ERP system should not take vendors' claims of easy interoperability at face value, Newman warned. "The cloud provider isn't just going to handle making all the systems work together," he noted.
Hybrid cloud on the rise
Despite these struggles, it's no surprise that hybrid cloud architecture is used by more manufacturers, according to Stephen Moss, senior vice president of managed technologies at PCM, an IT services provider. "It's all an integration puzzle," Moss explained. "You can go and buy cloud ERP, but you will likely still have attributes that will be need to be on-premises." Internet of things applications, for example, will usually run on the shop floor or in the field.
It's rare, even among the smallest companies, for a manufacturer to obtain every capability it needs from a single cloud provider. "There are massive catalogs of capabilities from third parties," Moss said. "Integration is nothing to be afraid of, but you should go into it with your eyes wide open."
Map the data, identify the connection points and get the right partners and integration technology in place before you implement. That will significantly lighten problems down the road. Just ask Traeger's Newman.
Learn more about implementing hybrid ERP
Decide which business processes to run in the cloud
Understand the benefits of hybrid ERP