Considerations for ERP Consolidation
Manufacturers sometimes find themselves with multiple ERP systems, at times from different vendors. Often the result of mergers and acquisitions, the ramifications can be confounding: complexity, cost, and inflexibility, not to mention a lack of accurate data for decision making.
A recent article in SearchManufacturingERP examined approaches to formulating plans for consolidating ERP systems. The chief requirement: understanding how the consolidation will map to business goals; if it doesn’t map to those goals, the company shouldn’t do the consolidation.
According to Murali Raghavan, vice president and head of horizontal IT services for global consultant iGATE, manufacturers are asking how they can increase responsiveness to create a better experience for their customers. ERP consolidation fills the gaps left by fragmented, disconnected systems.
Rajeev Ranjan, associate vice president of global IT consultant Infosys, suggests that ERP consolidation plans be assessed across four dimensions: business processes, user perspective, technology, and cost.
- Business Processes. Consider the health and productivity of particular business processes. If something is amiss, see if there is a system-based reason for the dysfunction and, if so, how much an ERP consolidation might help the situation. The quantification of benefits from optimizing business processes should go into the consolidation business case, along with other expected benefits.
- User Perspective. Dealing with multiple ERP systems can be difficult for employees; they have to learn more than one interface and feature set. Improving the user experience is often a significant benefit of ERP consolidation, with positive ramifications in terms of employee performance and satisfaction.
- Technology. The technology questions that arise are the same ones associated with an ERP upgrade, plus more. Is the organization running one or more systems that will soon be obsolete? Has it outstripped the system’s capacity? Do the ERP systems interoperate or does it take a lot of custom integration to pass information between them? These factors and more will affect the type of ERP consolidation a company eventually decides to do.
- Cost. From a total cost of ownership standpoint, it is significantly more expensive to keep multiple ERPs running compared to consolidating on one system. Along with licenses and maintenance, the cost of enhancements can be prohibitive, so companies learn to live without the enhancements they need to keep competitive. That is not a good thing.
A Forrester white paper that addresses this issue from a global enterprise perspective concludes that to reconcile potentially conflicting enterprise and business unit requirements, firms should adopt one of three ERP hub-and-spoke deployment models:
- Require all business units to use a single common instance.
- Mandate enterprise hub and business unit spoke applications.
- Allow business units to choose from an approved list of spoke solutions.
According to Forrester, which ERP deployment model is best for your enterprise depends critically on your operating model and the role of business units in your overall enterprise strategy.
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