November 30, 2016

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Two Tier ERP: The Adoption of Hub and Spoke with Microsoft Dynamics 365

The emerging landscape

Across the board, enterprises are striving to action widespread innovation that improves customer engagement and empowers sustainable growth. Large companies, at the same time, continue to globalize their operations in a bid to reduce costs and capture new markets.

Additionally, mergers and acquisitions are some of the other ways new business units are being added to existing companies.

In this dynamic environment, it’s important for firms to deploy business software that can drive profitability while enabling compliance and regulatory requirements.

The above, is of course, not beyond several key impediments.

The dissonance and the absence of unification

Typically, most companies implement tier one ERP programs at their headquarters. This might pose some basic difficulties –

  • Manage integration of outlying business units into the ERP system
  • Maintain standards and governance
  • Unify data for financial reporting purposes
  • Increase efficiency
  • Reduce costs across the company

Moreover, business units that have been acquired through mergers and acquisitions come with their own ERP programs, creating complexities when firms attempt to merge these disparate systems. The efforts required to intersect such heterogeneous systems is time-consuming and expensive. Similarly, subsidiary divestitures is also cost-intensive.

Finally, enterprise agility could be deeply impacted, affecting important growth opportunities.

The three solutions at hand

Enterprises can address these issues by adopting three possible options:

  • Enterprises can apply the existing ERP program to their business units. This, however, is an exorbitant and long-term possibility – and could take years to roll out.
  • Enterprises can develop their own solutions to support their business units. This is probably the most difficult since it is more feasible to purchase an ERP integration suite than undertaking development.
  • Enterprises can also choose to adopt a hub-and-spoke approach. At HCL, we believe this ‘two-tier approach’ to ERP integration is the most effective alternative.

In the hub-and-spoke approach to ERP (or two-tier ERP), the corporate enterprise remains on the tier one ERP system. For business units, the firm selects an appropriate tier two solution, allowing for rapid implementation and a lower cost of ownership.

The key elements for consideration

While considering possible options for tier two ERP programs, enterprises must ensure the following:

  • Capabilities: The right solution in-sync with the business unit’s requirements is essential.
  • Integration: Generally, companies need to roll financial information up and down between ERP systems for streamlined reporting and planning, often extended to other operational information. It's therefore imperative to standardize various end-to-end processes in order to maximize efficiency and compliance. 
  • Manageability: A complex solution can overwhelm a small business unit - organizations must monitor timelines and effort estimations for ERP integration.
  • Ease of use: Complex solutions could also prompt employee resistance, driving the need for simplicity in usage and adoption.
  • Flexibility: With an evolving business landscape the solution must be accommodative and flexible.
  • Internationalization: In a multi-geographic business blueprint, several countries, languages, tax regimes, and country-specific regulations must be supported.

Why we recommend Microsoft Dynamics 365 Operations

HCL recommends Microsoft Dynamics 365 Operations as the most effective solution for ERP integration for organizations looking to adopt a hub-and-spoke approach.

It scores highly on all of the above factors:

  • Capabilities: Microsoft Dynamics 365 Operations has all the capabilities of a tier one solution and can be tailored for use in a number of industries.
  • Integration: A number of tools can be used to manage data across a variety of formats. Additionally, several proven, generic APIs are also in operation.
  • Manageability: Microsoft Dynamics 365 Operations is available as a cloud or on-premise solution. Business units can choose a deployment option most appropriate for their requirements.
  • Ease of use: Microsoft Dynamics 365 Operations offers ease of adoption since its interface is akin to Microsoft Office.
  • Flexibility: Microsoft Dynamics 365 Operations is designed for quick customization. There is a large community of ISVs offering specific industry and sector solutions. New extensions are added regularly, ensuring that the solution suite is continuously upgraded to meet new business requirements.
  • Internationalization: Microsoft Dynamics 365 Operations is localized for more than 40 countries and languages.

The way forward – Microsoft Dynamics 365 Operations and its future-proof impact

Given this dynamic environment, organizations must take into account the range of business unit needs – from speed of deployment and agility to features and functions.

At HCL, we believe that a hub-and-spoke approach to two-tier ERP gives enterprises the flexibility necessary for optimized performances.

As a full-featured solution, Microsoft Dynamics 365 Operations delivers faster time to market and reduced cost of ownership. It is also scalable and can be recalibrated according to evolving business models.