When to Consider a Single-Instance Erp Strategy

Reproduction of this publication in any form without prior written permission is forbidden. The Information contained herein has been obtained from sources believed to be reliable. Garner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Garter's research may discuss legal issues related to the information technology business, Garner does not provide legal advice or services and its research should not be construed or used as such.Garner shall have no liability for errors, omissions or inadequacies in the information contained herein or for Interpretations thereof. The opinions expressed herein are subject to change without notice. WHAT you NEED TO KNOW Adopting a single-instance, single-vendor enterprise resource planning strategy can deliver benefits, but it does not make sense for every organization. It should only be undertaken If you have a good business case for the project and it matches most or all of Garter's single-instance success factors.If the challenges balance or outweigh the success factors, then you should address organizational issues before proceeding. If this Is not feasible, then consider Illimitableness consolidation or a tiered business application strategy. ANALYSIS Most large multinational organizations have a heterogeneous application portfolio hat has built up over time. The portfolio often is made more complex by tactical purchasing and merger and acquisition activity.Senior executives in such organizations are attracted to the idea of standardizing on applications from a single enterprise resource planning (ERP) vendor because of potential operational cost savings and reduced complexity of the IT landscape (see Note 1). Vendor consolidation is often a first step toward instance consolidation. ; A single instance of an application can run all operating companies on a common process template, a ingle release AT ten application Ana a giggle copy AT ten applications dataset, using a cons olidated technical infrastructure.A single-instance strategy can drive cost reductions in several areas, including integration, interfaces, training, support and hardware. In addition, potential benefits may be found in process improvements, better data consistency and improved visibility of information. However, adopting a single-instance, single-vendor ERP strategy is not a task to be undertaken lightly, because it can create disruption in enterprise operations and often involves replacing some systems that are favored by users.Even if the business case appears to support the deployment of a single-instance ERP solution, there still may be significant obstacles to overcome. Certain types of organizations will find it more difficult to realize the benefits of a single-instance ERP strategy because of their culture and infrastructure. See Table 1 to determine whether single-system ERP might work for your organization. Rank yourself against each of the categories. If you have mainly (or exclusively) success factors, then a single-instance ERP strategy is more likely to be successful. Table 1 .Single-Instance ERP Success Factors and Challenges Enterprise Profile Business Model Corporate Culture and Policy Definition Geographical Concentration Success Factors Single primary core business with similar business processes Centralized with strong corporate head office; policy dictated at corporate level and globally enforced Company aspires to operate as a single global company, and operations, sales and marketing are concentrated in a single geographical region Stable, unlikely to undergo dramatic growth or downsizing Challenges Diversified group with wide range of business processes Decentralized tit autonomous business units; policy decided at the business-unit level Company operates as a multinational company, and operations, sales and marketing are distributed globally Dynamic, growing rapidly or downsizing significantly Business Environment publication Date: 28 September 2005/AD Number: GO 30366 2005 Garner, Inc. And/or its Affiliates. All Rights Reserved.Page 2 of 6 Merger, Acquisition and Divestiture Status Established ERP Systems Technology Environment Acquiring smaller entities that are easily absorbed into the corporate culture Highly likely to be acquired or merge with a company of a similar size (or larger); vesting encore businesses Diverse, with an even spread from potential single- system suppliers Architecture and technology are decided at the business-unit level Elemental mummer, wilt majority AT systems Trot likely single-system vendor Enterprise-level architecture with similar technologies Source: Garner (September 2005) Note that the scope of this analysis is limited to the processes automated through traditional ERP systems, such as financial, HRS, procurement, inventory management, production planning and order management. Single-instance strategies are typically noninsured first in the ERP domain because these processes are more internally focused and homogeneous, and have less impact on competitive differentiation. Suitability of a single-instance strategy in other domains, such as customer relationship management (CRM), product life cycle management (PLUM) and supply chain management (SCM), should be assessed following a similar process. However, with CRM, PLUM and SCM, organizations are even less likely to meet the criteria in Table 1 and will typically discover that a single-instance strategy doesn't align with the business strategy.By implication, even if a single-instance ERP environment is successfully created, most organizations will have to support multiple instances of peripheral systems. Enterprise Profile Elements ; Business Model: Organizations in service industries such as software or financial services will find adoption of single- system ERP easier than those with a diversified business model, because the ERP adoption will primarily affect their back-office administrative functions. Process changes in these areas will have less impact on revenue-creating activities and, therefore, are lower risk than changes in operational areas such as manufacturing and logistics operations.Corporate Culture and Policy Definition: Organizations that operate in a decentralized manner with highly autonomous business units may find these operations unwilling to release control of local systems to a central IT function. If there is a culture of local decision making, then business-unit executives may not be willing to accept a decision that is mandated from the corporate head office. Geographical Concentration: Companies that aspire to operate as global companies (operate on a common set of business processes across the globe) are well- positioned to achieve a global single instance, because they align the IT strategy with he business strategy.Companies operating as multinationals (have a unique set of business processes for local markets, particularly sales and marketing, and SC M), will have difficulties running their international businesses on a common system. Also, organizations that are physically concentrated in a single geographical region will find it easier to achieve a single instance, because support and operations of the system take place in a narrow range of adjacent time zones. The need to support a single instance around the clock creates issues with available support windows for upgrades and maintenance, and possibly network-related performance and availability issues.Business Environment: A single-instance ERP strategy may not be appropriate for organizations that face significant change. Implementation of a single-instance system may be thrown into disarray if there is a significant change of direction in the business Page 3 of 6 (for example, a manufacturer decides to sell its manufacturing operations and focus instead on design and logistics services). ; Merger, Acquisition and Divestiture Status: This aspect of the general business situ ation can have a major impact on a single- instance strategy. Organizations that are likely to acquire or merge with entities of a similar size may find their investment in a significance strategy compromised if they merge with organizations that use different ERP systems.Established ERP Systems: If the ERP system from a potential single-instance vendor is already used in the majority of the organization, then there may be little resistance to a wider deployment. Many organizations have initially implemented multiple instances of a single ERP system are now considering instance consolidation. However, if there is no nominate provider, then a single-instance strategy will face resistance, because some users are likely to fight to retain their â€Å"much loved† locally implemented systems from â€Å"their† vendors. Technology Environment: Similar challenges may arise if there is no common technology environment and enterprise architecture in place.A single- instance stra tegy requires the adoption of a specific technology environment (operating system, database, middleware and other IT infrastructure), and organizations that already have an enterprise architecture in place will find it easier to implement a single-instance approach. When the technology environment is defined at the business-unit level, local IT functions may resist moving away from their architecture to that which is required to support the single-instance strategy. Determining Who Drives the Initiative Often, instance consolidation initiatives are driven by the IT organization on the basis of simplification of the application landscape, and the IT technical and support infrastructure. Table 1 shows that five out of the seven success factors are within the business domain and entirely outside the control of the IT organization.This underscores the point that instance installation projects should primarily be business-driven projects, with a business case solidly based on business be nefits. Without understanding, sponsorship and commitment at the senior business management level, the project is doomed to fail. The IT organization plays a critical role in educating the business units, and planning and executing the project; however, it does not own the project. What to Do If the generalness outlawed ten success Factors organizations considering giggle-alliance ERP that find the challenges outweigh the success factors have other options: 1 . Consider a limited ERP vendor and infrastructure consolidation strategy, without moving to a single-instance consolidation.This strategy will enable organizations to achieve some efficiency improvements in the IT organization by consolidating some of the operating and support infrastructure of the ERP systems. However, the strategy will not realize the full benefits of a single-instance system. This strategy may be suitable for organizations that are diversified and decentralized in nature, operate in a highly dynamic market environment and consider IT costs to be a significant factor. A common approach is to adopt vendor consolidation with some level of instance consolidation (for example, regional or divisional instances). 2. Adopt a tiered business application strategy (see â€Å"How to Approach Tiered Business Applications†), where specific applications are adopted to address the needs of decentralized business units.Page 4 of 6 3. Address the organizational issues that are creating the challenges prior to implementing the single-instance strategy. There are two main actions that need to be taken to address these organizational issues: ; Involve business-unit executives in alluding and reviewing the business case to create buy-in. Develop a feasibility study that shows how business-unit requirements can be accommodated in a single- instance implementation, and build an instance strategy to support this. Consider getting business-unit executives to develop a business case to Justify why their business unit should not be included in a single-instance solution.Get the executive management team to understand and accept how investing in a single-instance strategy can affect your merger and acquisition strategy. During their due diligence, organizations adopting a single-instance strategy must take account of how ERP systems are used by potential acquisition targets. Similarly, a single-instance strategy may limit downsizing options, because it will be difficult to divest parts of the business on an ongoing basis if they do not have their own business applications. If significant divestiture is likely, then a single-instance ERP project should be deferred until the business environment stabilizes. Key Issues How can more value be gained from an enterprise resource planning investment?Note 1 Definition of Single Instance A single instance of an ERP system is when a single installation of the application is linked to a single database. This significantly sleepless support Ana m alfeasance Decease tenure Is only one set AT application infrastructure to be maintained. This does not necessarily mean that all business units have to use the same business rules, because most ERP systems enable different entities within a single instance to have a degree of uniqueness. However, there will be constraints on the capability of the business units to define their own business rules (compared to separate instances for each business unit).