All for one and one for all saves money

By Ann Bednarz, Network World
April 28, 2003 12:05 AM ET

Getting rid of a $4.5 million ERP system gone awry was supposed to be the first problem Robert Moon solved when he joined display products manufacturer ViewSonic as vice president of information service. But instead of replacing the company's troubled ERP system, Moon revived it.

Moon arrived at ViewSonic in early 2001 to find an array of heavily customized Oracle applications. The Walnut, Calif., company was running separate "instances," or versions, of Oracle's financial software in each of its three regional offices: one on Version 10.7 and two on Version 11.0.3.

Each office also had distinct procedures for managing accounts. Different offices had different methods of budgeting, recording and reporting financial transactions.

Reconciling these systems to produce quarterly and annual corporate reports was a manual chore that often took weeks to accomplish. It was enough of a nightmare to prompt ViewSonic executives to consider scrapping the company's Oracle investment altogether. Until Moon came along.

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"I pointed out it was not the software, it was the implementation that had been done incorrectly," Moon says. So the company spent $750,000 to migrate its ERP systems to a single, customization-free instance of Oracle 11i - a move that now is saving ViewSonic millions of dollars per year in personnel and systems costs.

ERP instance-consolidation projects such as the one ViewSonic tackled are getting attention as companies try to squeeze inefficiencies out of their existing ERP systems, says Bill Swanton, vice president at AMR Research.

Over the years companies have deployed multiple versions of their ERP software, in part because ERP in its early days was a site-specific effort and the software was difficult to scale to very large organizations, Swanton says. Products were limited in the number of different languages, character sets and country-specific regulations they could support on the same instance.

ERP consolidation
Companies considering consolidating their ERP systems should first weigh the advantages of centralized vs. decentralized systems, according to Gartner.

Why centralized ERP?

•	It’s more expensive to build, operate and maintain multiple production systems.
•	Application functionality across multiple systems diverges over time, making it difficult to get consistent views of vital business data. This causes duplication of master data describing customers, materials and products, and it increases the number of reports and the need for reconciliation across systems.
•	Globalization requires standardized business processes whenever possible. It’s simpler to harmonize and standardize business processes on a smaller number of production systems.

Why decentralized ERP?

•	Various business units already have a number of separate ERP systems and are happy with those solutions.
•	Corporations prefers a highly autonomous approach to running its various business units, which would make it difficult to recentralize.
•	Companies will achieve minimal business value from standardized ERP business processes –— for example, if corporate reporting for separate divisions is not a priority.

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So companies deployed separate applications for different regional offices or business units, each of which made configuration decisions according to local practices - a division in Europe might compute the cost of goods sold differently from a division in Asia, for example. Heavy customization was common.

"Companies didn't want to go through the hassle of trying to get everyone to agree on how to do stuff, so each group grabbed their licenses and ran and did their own thing," Swanton says.

It's particularly common among Oracle users to have rolled out multiple ERP versions - but it's not limited to Oracle customers, Swanton says. Users of other ERP software face many of the same implementation complications.

Cleanup time

"Your ERP system should be something you don't even think about," ViewSonic's Moon says. "Do you think about your refrigerator running? No. Are you worried your car is going to start in the morning? No. Your ERP system should be the same way. Companies that have to worry about their ERP systems are doing something wrong."

One advantage of migrating to a single, global ERP instance is greater visibility into a company's worldwide operations. A timely view of global inventory statistics, for example, could eliminate the common paradox wherein a company has one of its factories paying a supplier certain prices to get a part that's in oversupply in another factory, Swanton says.

Another draw for multinational companies is the ability to implement shared services organizations for financial functions, instead of supporting duplicate departments, such as accounts receivable and accounts payable, in dozens of countries. Consolidating financial functions could let companies reduce their financial staff by 40% to 60%, Swanton says. "Those are big, permanent savings," he says.