Hub & Spoke Deployment

The simplest definition of “hub and spoke” is that it is a model for integrating the business management software solution used at a company’s headquarters with the systems used by its subsidiaries and branch offices.

 

Hub & Spoke Implementation Approach

The Hub and Spoke concept refers to a parent or holding company that uses one business software system (the hub), which is integrated with another systems used by its subsidiaries, smaller initiatives, divisions or country operations (the spokes) in a decentralized application and strategic landscape.

Subsidiaries or divisions tend to have very different needs than the parent company due to their size, location or type of business, and therefore need a different system which is in line with the overall IT and business strategy roadmap of the organization as an entity.

Enabling enterprises to consolidate financial data, share master data/reference data, the Hub and Spoke Model facilitates in:

  • Gaining business insight
  • Sharing responsibility for services
  • Enabling interdivision transaction
  • Responding proactively to business events

Together, the hub and spokes form an integrated system that can progress forward as one unit.

 

 

Common Hub and Spoke Scenarios

CENTRALIZED FINANCIALS
In this scenario, financial transactions such as general ledger journal entries are created by the spoke systems and transmitted to the hub.
CENTRALIZED PROCUREMENT
In a typical implementation of centralized purchasing , requisitions (or purchase requests) are submitted by the spokes to a centralized purchasing department at the hub. The hub places the purchase orders with the vendor and communicates status back to the spokes. Receiving can be performed either at the hub or the spokes. Invoice matching is performed at the hub.
DISTRIBUTED FULFILLMENT
In this scenario, customer orders are captured by a centralized order processing department, however, they are fulfilled by shipping from one or more spoke warehouses. Shipping information is communicated back to the hub for invoicing. Availability information is also regularly communicated from the spokes to the hub.

What are the Benefits?

  • Designed-to-Fit Solutions  Spokes can run the software that best meets their specific needs, rather than software designed to satisfy the more expansive requirements of the enterprise hub
  • Local Control & Accountability  Some companies find it easier to do most of the administration and support locally because it minimizes language and time zone barriers.  Increased local control can also improve accountability
  • Lower Cost  Implementation costs are reduced because the spokes run simpler software which is quicker and easier to implement. Upgrades are easier and less painful when spokes can be upgraded one at a time
  • Existing Application Maintenance  As companies grow, “hub and spoke” can be an effective way to organize and expand IT resources without replacing existing software. Collecting and consolidating information at the hub provides management with adequate visibility into divisional operations, but without the pain and distraction of replacing core applications
  • Better Performance  Local applications running on local servers with smaller user counts generally yield significant performance benefits