Simplifying ERP

When companies began implementing enterprise resource planning (ERP) systems in the latter half of the 1990s, the vision was to reach a single ERP instance. Yet bandwidth availability, telecom costs and enterprise database costs proved to be limiting factors. Those factors have now been mitigated, and new internal and external drivers are influencing enterprises to reassess consolidation efforts. A confluence of forces, including process-centric standardisations like shared services, regulatory requirements like Sarbanes-Oxley and Basel II, and cost-cutting initiatives like consolidating IT spending, is driving enterprises toward the goal of single-instance ERP. But single instance is not for everyone. The advantages of cost reductions, standardised business processes and analytical insight must be weighed against challenges to business unit independence, process standardisation and existing data model rigidity. For large multinational enterprises, consolidation from many instances to a handful is the more realistic option to achieve compliance and cost goals without handicapping the business.

Begin with the end in mind

Rationalisation of instances is a complex process that will span multiple years and require the development of an integrated operating model. Because most enterprises already own software from one of the major vendors, the IT goal is to leverage existing investments in consolidation plans. Integrated operating model designs succeed if business requirements drive the consolidation efforts, executive sponsorship involves the highest levels and includes business unit leaders, and global processes are designed and agreed upon before consolidation. Once the future state integrated operating model is designed, think about consolidation projects in phases:

Defining your future state

Design a future state integrated operating model around your ideal governance. Your governance model will drive how far you consolidate. If you choose to move toward a single-instance path, design intermediate stages of consolidation that mitigates risk to core processes. If you choose to consolidate over time, determine logical areas of consolidation such as shared services or geographies as starting points. Once you complete designs in process integration, move to data integration to drive instance consolidation.

Assessing your current environment

Determine the number of ERP environments, applications and vendors you are supporting. Catalogue the applications, versions, and licensing agreements in place. Identify the key processes that are currently being supported.

Creating a migration strategy

Map future state business processes to your current state environment to identify deltas and logical groupings. Groupings can be designed around geographies, functionalities or processes. The migration strategy should include overall project governance mechanisms that involve key stakeholders in the executive team, business unit leaders and IT. Large projects should rely on a program management office (PMO) for coordination and leadership. As part of the PMO, focus on building internal competency centres that will provide a strong mechanism for post-go-live support. Good governance will provide the enablers required to overcome political resistance and enable business units and IT to design the right migration strategy.

Selecting a vendor

With the proper design in place, you are now ready to begin a vendor selection process that is unbiased and tailored to your organisation's specific requirements. Take into account long-term vendor viability and the ability to leverage existing investments. If your specific industry functionality is not available among your vendors, take advantage of vendor willingness to create partnerships in designing new industry micro-verticals and leveraging basic industry-level templates. First mover efforts by industry leaders who partner closely with a vendor may lead to industry standardisation of a vendor or platform. Conversely, vendors that are not selected by an industry leader may be more flexible in meeting your business requirements in order to prevent industry standardisation.

Starting small with pilots

Start consolidation projects with small pilots. Pilots can be implemented by geography, functional area or process. A collection of small issues, such as integration challenges with new vendors, undocumented functionality from legacy systems and a shortage of qualified impl-ementation staffing, will snowball into larger issues in large consolidation efforts. Pilots allow you to refine these hiccups early in implementation and allow for smoother deployments. You'll benefit with a better ROI and gain the confidence of the business and IT teams.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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