The painful truth (and good news) behind ERP consolidation

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Software systems of any kind are prone to spiralling sprawl and hard-to-maintain spaghetti coded custom integrations. As enterprise organizations of every kind grow through development and expansion, or via mergers and acquisitions, it’s natural to find software stacks that seem bloated.

In an era when we are now so focused on optimizing supply chains and readying ourselves for some unknown next major disruptive force, organizations struggling with ERP system sprawl are not best placed for innovation. These firms very quickly get to a point where aligning Supply Chain Management systems (SCMs) with their ERP installation becomes a significant challenge.

What is ERP consolidation?

Any enterprise with a modicum of sense that sees these scenarios arise will want to act and remediate the situation developing. There has been a groundswell of companies looking to improve their ERP deployments in this vein and streamline them. A common, first-thought approach to this is ERP consolidation i.e. the process of combining multiple instances of ERP systems into one.

Organizations know that keeping multiple, often quite poorly integrated SCMs and ERPs running is a business risk. It can result in slow decision-making, poor predictive insights and wasteful business processes. But consolidating many ERP systems is not for the faint of heart. There are significant risks associated with reducing the number of instances of SAP, IFS, Infor, Oracle (other ERP systems are also available) etc. that a firm has running – risks such as taking on a project that can never be completed (what happens with the next acquisition? Or the next rearchitechting?)

So, what’s the answer? It would be to rethink ERP consolidation and embrace a more realistic, and effective, approach called ERP transformation

As we have suggested, any kind of big bang ERP consolidation process inevitably results in unknown and unplanned disruptive ripple effects that directly impact operational outcomes and the business bottom line. The reason ERP consolidation was considered in the first place was because the C-suite wants to improve and optimize their organization’s IT portfolio resource management and optimization, but a big bang is not the answer.

Let’s consider three core principles and guiding beacons for any enterprise on the point of ERP consolidation, as we take a more considered approach to ERP transformation.

#1 Time-to-market factors

Consolidating ERP requires deep analyses of the current state. Most enterprises have long established mission-critical back-office systems in place that require discovery through process mining and other deep analytics processes. This operation in and of itself is likely to reduce any firm’s time-to-market capability. As the organization also looks to execute other IT modernization initiatives, they too will experience time-to-market delays. This entire process means the success of ERP consolidation is already at risk before it gets out of the starting gate.

#2 The open source scalability factor

It’s not unreasonable for us to suggest that scalability is something of an Achilles’ heel when it comes to ERP consolidation efforts, especially those that seek to embrace open source platforms, solutions and tools. Because ERP consolidation involves extensive integration and network connectivity tasks, performing these functions at scale with open source is almost always exponentially more troublesome.

The pain factor here comes about because open source platforms typically require many hundreds of thousands of interfaces, involving application dependencies and custom connectors; all of which (perhaps obviously) makes breakage so much more likely to occur. And even when these connectors are established, with every open source update, these interfaces will also need to be maintained and updated. Although it’s sad to say it, open source technologies at scale may hurt rather than help in ERP transformation.

#3 Cloud is not a panacea

Although the major Cloud Service Provider (CSP) hyperscalers might like us to believe cloud is always the answer, cloud – or more specifically, “pure” public cloud – is not always the promised land when it comes to ERP consolidation best. A more transformative approach (we called it ERP transformation remember?) is to seek a “best fit”, which might look like a hybrid model combining both public cloud, private cloud, and even no-cloud on-premises, as the enterprise needs, for compute, analytics, storage and other services. It’s just sensible to take a “best fit” approach to reduce latency for extreme computing tasks where the time sensitivity factor is paramount. And, because the data held in and used by ERP systems often have to meet regional compliance and other regulatory stipulations, the “best fit” will almost always need to support some regional data sovereignty.

ERP transformation vs ERP consolidation

So where have we gotten ourselves to at this point? We’ve been trying to avoid the risks inherent in a rip-and-replace big bang ERP consolidation, and move towards a more strategic type of ERP transformation. This latter approach is designed to optimize business outcomes as opposed to simply or merely optimizing our IT spend.

ERP transformation enables every part of the enterprise to concentrate on adaptive and iterative actions designed to be perennially flexible, changeable and malleable.

We can say that ERP transformation aims to bring the dream of ERP consolidation into a practical reality, and to do so all stakeholders should be involved, with IT in partnership from the start with business stakeholders. Salespeople, call center workers and accountants usually don’t know much about JavaScript, but they do know about business goal prioritization and – in the world of ERP transformation – that’s a key skill and competitive advantage.

To create a single source of business truth in your organization, all business systems need to be kept automatically in sync with ERPs. Through adaptable, scalable integration, you can greatly reduce information silos to yield complete, accurate, and timely ERP data throughout your enterprise.

Through an integrated customer system of record, your enterprise can optimize business based on these insights and further automate customer-centric processes. This adaptive approach also streamlines onboarding new ERPs from mergers and acquisitions, minimizing business disruptions.