IT Briefcase Exclusive Interview: The Value of a Two-tier Application Strategy

As enterprises evaluate their existing application stack in the face of a growing number of cloud-based services, many enterprises are seeking ways to adopt new Software as a Service (SaaS) models while minimizing disruption to business critical processes. What once was the realm of early adopters, cloud services are now becoming table stakes for enterprises with maturing cloud strategies.

SaaS applications can offer a variety of benefits for enterprises, including lower total cost of ownership, reduced IT staff and seamless, automatic updates in real-time. For enterprises looking to get the best of both worlds – take advantage of new services in a cloud-based model while keeping their core systems in place – a two-tier strategy may offer a stepping stone solution, especially for large enterprises that require a lengthy due diligence process and internal testing before committing to a new solution.

In this interview, Rahul Asthana, Senior Director of Product Marketing at Kenandy, speaks with IT Briefcase about why some enterprises pursue a two-tier application strategy and how they transition fully to new systems.

• Q. Why do enterprises opt for a two-tier application strategy?

A. For large, global enterprises in particular, core systems, like ERP, are heavily customized for the operations of that business. The investment into implementing any new application is significant, as is the thought of decommissioning software and making a transition without interrupting business processes. For these organizations, the “rip and replace” model is not realistic. However, when expanding their global subsidiaries, making an acquisition or otherwise creating a new business unit, a two-tier strategy becomes attractive.

For example, for a business that’s expanding operations to a new geography, there may not be a desire to set up a data center in that region, making a cloud solution an attractive option. The new system links back to the legacy software at the business’ headquarters, but does not require the IT management and upkeep that on-premises systems do, simplifying rollout.

• Q. Why have two-tier strategies been popular among enterprises with ERP, specifically?

A. Enterprise resource planning (ERP) is a quintessential back-office application that is critical to the proper function of the business, but is extremely customized and ingrained with large enterprises. The ability to extend the main instance of the software is important for the business to take advantage of new opportunities – say expanding to a new country – but with on-premises applications, this becomes a challenge given the time it takes to implement and configure an on-premises ERP solution. Instead, a two-tier strategy where the subsidiary is placed on a cloud ERP solution can provide the speed required by shortening the time it takes to deploy from years to a matter of months.

At Kenandy, we faced just this challenge with Big Heart Pet Brands (formerly Del Monte, and now a division of the JM Smucker Co.), a $2.3 billion consumer goods business. The company was acquiring Natural Balance Pet Foods in 2012, and wanted an ERP system deployed and connected back with their legacy system by the time that the acquisition went live – in just a few months. Because Big Heart’s ERP encompassed corporate financials, five manufacturing facilities, 11 warehouse operations and 20 co-packer facilities, the team needed a complete end-to-end, cloud-based ERP system. The answer was Kenandy. By implementing a two-tier approach, Big Heart was able to quickly get a solution in place that got the entire business up and running much faster than if they had opted for a traditional on premise approach.

• Q. Is it necessary for the two-tier ERP solutions to be from the same vendor?

A. No – The reason is each tier of the two-tier systems has a purpose that’s unique, and different ERP solutions are better suited for each purpose.  In particular, one part of a two-tier application typically acts as the corporate system of record. Consequently, having a large ERP system like SAP or Oracle makes sense for some large enterprises.  On the other hand, the second tier typically must be more agile so that it can be quickly and cost-effectively deployed to capture new business opportunities (e.g. new geographies).  Consequently, placing this tier on the cloud using a smaller footprint ERP system is the best choice.

• Q. What are the best practices for implementing a two-tier ERP system?

A. Whether starting with a proof of concept or a two-tier strategy, it’s critical that enterprises start with identifying their core needs for an application to be successful. These needs should be tested individually to ensure that all requirements are met. Also key is the implementation or trial team’s review of existing business processes to identify potential opportunities to streamline. Just because one process is traditional for the business, does not mean that it’s the most efficient one to pursue in the future. Can the new system support not only the needs of today, but also where the business is headed?

For example, as Big Heart started the process of deploying Kenandy across its enterprise, business leaders identified a need for a “touchless order system” that would automate the order process unless specific criteria were not met – i.e. anomalies. Only those orders would be pushed to a team member for reconciliation. This was not a capability that Big Heart had scoped for in selecting an ERP system, but it was one they realized they needed to improve efficiency in the future.

Another best practice, especially when transitioning to a new two-tier ERP system, is to ensure full input and collaboration across all impacted departments. Operations, finance, sales, etc., must play a role in defining the processes and parameters that will make the ERP system effective for their purposes.

In the rollout of Kenandy for Big Heart, the team worked in sprints focusing on one set of key functionality at a time, working closely with departments and individual leaders. During each sprint, conference room pilots would engage larger groups in training and identifying alterations to the functionality and processes. This iterative process allowed the Kenandy team to focus on one set of functionality at a time, while engaging a large number of people to participate in defining success. After four sprints that lasted several weeks each, the new instance of Kenandy went live in early 2015. The result to date: approximately 45 percent total IT savings and the consolidation of some 90 applications on the Kenandy ERP cloud and the Salesforce1 Platform.

The takeaway? Involve key decision makers from across the enterprise to ensure that feedback comes at the right time – namely, before the implementation is complete. Break down the project into multiple segments to help the internal and external team focus on separate sections of the work at a time. And iterate, iterate, iterate. The more collaborative the process is to implement a new application, the more likely it is to meet the needs of stakeholders across the enterprise.

Rahul Asthana is senior director of product marketing at Kenandy, the intelligent cloud ERP platform for business transformation. He has more than 20 years of experience in product strategy, marketing and management, with expertise in the entire product and marketing life cycle from product concept to demand generation. He has spent his career with leading technologies in the data science, machine learning, enterprise software, ERP, CRM, cloud computing and supply chain management space. Prior to Kenandy, Rahul served at VMware, SAP, Risk Management Solutions (RMS), FICO and IBM, among others.