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Extreme ERP Makeover

Extreme ERP Makeover

For a company to undertake a single-instance project, there has to be a compelling reason. The CIOs interviewed for this story named three: financial reporting, cost control and competitive advantage.

Haven't We Heard All This Before?

Does McDermott's pitch sound familiar? It should. After all, ERP vendors today are singing the same song that got them through the corporate door in the first place: one system for everything (see "Sometimes a Great Notion", page 76). But as almost everyone who tried to do an ERP project in the mid- and late 90s learned firsthand, the melody was off-key.

There are a couple of reasons single instance was almost impossible to achieve. For starters, databases large enough to serve entire enterprises just didn't exist - at least not at prices most could afford. On top of that, connecting to that single database from faraway locations was almost impossible. It was a simple matter of physics, says Cap Gemini Ernst & Young chief technologist for the Americas John Parkinson. There wasn't enough bandwidth to get to the data. "The result was a bottleneck," he says, which forced geographically dispersed companies to install regional ERP systems.

Those uber-ERP projects weren't just victims of immature or inadequate technology; they were also sabotaged by bad timing. The primary driver for the ERP projects of the 90s was Y2K. Companies rushed into the projects so that they could remediate old systems before the date change reduced them to rubble. But as the millennial deadline approached, CIOs had to reduce the scope of their projects to get them done on time. What suffered was process change - getting everyone to work the same way.

"Rather than resolve the ways different operating units worked, they threw in a system in France, one in the UK, and one in North America," says AMR's Swanton. Each of those systems wound up customised, which meant that they couldn't interact without an integration layer, which most people didn't bother with. Consequently, each system ended up a separate instance. The result, according to a 2003 Hackett Group survey, is that the average company now has 2.7 ERP systems. Some have more, such as $US1.1 billion Esselte, an office-supply company, which has 22. (Esselte is currently trying to move to a single instance.)

But a single instance is now more realistic than it was in the past. Storage is much cheaper than it was five years ago and, thanks to the evolution of the Internet, connecting, even across oceans, is no longer a significant problem. Furthermore, there's no longer a Y2K hovering overhead like a sword of Damocles. There have been other advances too. For example, ERP vendors offer modules, such as supply chain or product lifecycle management, that they didn't for most of the 90s, and other modules have been improved.

Of course, it all takes time and money. AMR predicts that moving to a single instance will cost companies $US7 million to $US12 million for every billion of revenue, and that projects will still take from one to three years. But experts, analysts, consultants and CIOs all agree: Single instance is finally doable.

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