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The Failings of Single-Instance ERP

The Failings of Single-Instance ERP

Cost. For a large company, the cost of deploying Oracle or SAP enterprise-wide will run in the millions or tens of millions of dollars.The problem comes when the headquarters installation is finished and the first few major subsidiaries have been brought online.With the core complete, the economics become decreasingly justifiable as you move toward the edges of the organization. At each location there will be hardware and software to be purchased and deployed, an IT team to be dispatched, and a new span on that Golden Gate Bridge needs its own permanent paint crew. Another million dollars just to bring the Singapore subsidiary online? Somehow that cost/benefit doesn’t seem as compelling as it did in the earlier stages of the project.

Time. Single-instance ERP deployments take an enormous amount of time. Global rollouts taking years and years and straddling the tenure of multiple finance and IT personnel are the rule rather than the exception. Again, momentum can fall off significantly the further you get from headquarters or the largest subsidiaries. And each new subsidiary, division, or process added means that the core IT team will be spending a larger and larger portion of its time caring for and feeding the accounting software
systems already installed and have less and less capacity to apply to rolling out to new subsidiaries, divisions, or processes. Then the general manager of one of those far-flung subsidiaries says, “Yes, they’re going to roll it out here as well but I’ve seen the rollout calendar, and I’m scheduled to get it in 2019. I need something now.”

Risk. Cost and time add up to risk. These massive deployments often overshoot on time and cost and subsequently crumple under their own weight. Part of the company may end up live, but that may be where the deployment fizzles and proceeds no further. Because these deployments have been so disruptive, so risky, and simply so much harder than imagined at the outset, companies hesitate to deploy more broadly.

Agility. Worst of all for the single-tier strategy is that, during the years-long global deployment project, neither the world nor the business has stood still. New companies have been acquired or divested, new products and processes have been introduced, and new regulatory and business accounting software requirements have been enacted. Because these systems take so long and cost so much to deploy, they’ve been completely unable to keep pace with the changing environment. The unmanaged change results in patching systems and processes with a variety of point solutions, stand-alone ERP systems, manual processes, and, in general exactly the kind of chaos everyone was trying to avoid with this single-tier strategy in the first place. What does all that mean to the organization? Fundamentally, it’s a failure to achieve those gains that were the original vision of the strategy, namely global visibility, process efficiency, and standardization. The handoffs between those disparate systems also are challenging. Processing orders across subsidiaries, reconciling intercompany charges, and consolidating the books at month-end are complicated when there’s no standardization. Clumsy manual handoffs of information across systems are not only inefficient, but they create opportunities for the introduction of errors and erode confidence in the integrity of the process. Finally, executing change in this environment can be an enormous challenge. More complex changes, such as rolling out a new process because of a change in Generally Accepted Accounting Principles (GAAP), can consume huge amounts of time and resources that are far out of proportion to the real magnitude of the change.

This is the common reality finance faces today. Given the current situation, it makes sense to develop a new strategic approach that will move organizations toward the global standardization and transparency originally envisioned and promised by ERP much more quickly and effectively than the one-system strategy has done. That’s where two-tier ERP comes in.


Stock Management Software For Inventory Tracking

Stock Management Software For Inventory Tracking

One of the top priorities of making sure that your business operations run really smoothly is to make certain that your stock management is done in a systematic and efficient manner.

There is plenty of inventory software available in the market out there for different requirements and business purposes. That is the reason why it gets rather difficult to find the right software which is going to suit your business specifications to a tee. If you happen to have excellent inventory software which can do your stock management for you without too much hassle, you can consider yourself fortunate. That is because it is essential that every single business needs to have an effective way of managing its inventory in a professional manner that it does not interfere with the development of the business.

If one still wants to know what an inventory is, it is the store of raw material which consists of finished or half finished goods present in your warehouse. These goods are going to be utilised by the business, whenever necessary.

If you are lucky enough to have a flourishing business it is going to be quite difficult to keep track with the inventory, especially if the business has diversified into a number of different fields. That is when stock management is going to be a little bit of a headache, and it might be beyond the possibility of human resources to take care of every single aspect of inventory taking and stock management. That is where one needs to have the help of good and efficient inventory software.

Not only is this inventory software going to save you lots of time, and even human resource, but the chances of human error are greatly minimised. Inventory software is going to keep track of all the pertinent details of stock management which include the quantity of the stored goods, maintaining a sales record, showing the exact product description etc. This goes a long way in smoothing out the process of inventory keeping and stock management.

The most ideal inventory software is evidently going to have added on functions like finding ways and means in which the overall costs of warehouse storage is brought down, suggesting extended profits to the people who use it, helping in back order management and giving you the feedback on the goods sold quickly, among others. This definitely comes in the extra bonus category.

Inventory software is definitely not restricted to just larger businesses; small businesses also have need of this useful software for stock management. You can consider this to be an optimal way of profit maximisation. Not only would you never need to stock surplus goods ever again, but you are going to get to know beforehand that your stock is falling short of some raw material, which can be ordered right in time before the stocks get completely depleted. There is going to be a good balance between the demand as well as the supply of all the goods produced by your factory.

Good inventory software is definitely going to reduce all the operational costs thus enhancing profitability while integrating seamlessly with all your business systems and strategies.


What is a Two Tier ERP

What is a Two Tier ERP

We’ve discussed “What is ERP?”, but now its time to take a look at two tier ERPs, and some of the benefits that NetSuite offers for those looking for a two tier approach.

A two tier ERP is a concept or approach that is generally used in larger organizations. Oftentimes, larger organizations have multiple lines of business and / or multiple companies running independent from each other. These companies, most likely, have different target customer segments, different inventory product requirements, and may be serving unique geographical markets. Each line of business, when looked at from their perspective, must be able to take care of their own business requirements. However, this may not serve the interest of a corporate parent who wants to be able to consolidate results of its subsidiaries as well as have some level of governance.

Two tier systems often make sense to the management because they want to be able to act quickly while producing some level of autonomy for each subsidiary. I am a strong believer of a single instance architecture. But I am realistic. It may be next to impossible to achieve this depending on the situation. Here are some criteria where Two Tier may make sense: -The parent ERP is too complex to adopt for a small business unit. -The cost is prohibitive for the smaller business unit to own the parent ERP. -Certain local or regional regulatory requirements can not be met. -Key functionality is missing from the parent ERP.

NetSuite works to have an offer for organizations that face these challenges. In some respects, the NetSuite OneWorld product is seeking to be the Parent ERP. Of course, it is all one system and it works very well if the criteria noted above is met. At the same time, NetSuite is pitching to larger companies to be part of a two tier structure; not as the main ERP but as a sub ERP.

NetSuite has recently won some major clients that are two tiered. For example, see these articles: -Qualcomm -Olympus (video) -Torstar Digital

At the same time, they have a great success story with OneWorld acting as a single instance for GroupOn.

The reality is that as companies grow, so do their demanding requirements. Today, there are very few business management systems that can truly make a Single Instance offer. The choices really open up if you go Two Tier. But make no mistake, you will require a major investment to integrate, train people, and maintain these systems on an ongoing basis. NetSuite’s technical architecture makes it pretty easy to integrate with; but it will require work. Two-tier has become much easier due to integration platforms, such as Boomi or Mulesoft.

Finally, two tier ERP is different from Best of Breed often adopted by smaller organizations who aren’t holding the entire consequence of a fragmented technical architecture. Please see my article, “Best-of-Breed Business Systems: Traps & Lies”. The same considerations apply for two-tier ERP. Ideally, get the entire business, on a single instance. If the boundary is a subsidiary, then so be it.

Copyright © Marty Zigman 2011

Marty Zigman, founder of Prolecto Resources, the leading Southern California consultancy serving Ventura, Los Angeles, and Orange Counties, leads companies to advanced growth through NetSuite based implementations and innovations. Marty’s organization has developed scalable eCommerce systems for companies such as Time Warner and Bank of America which processed over $1.6 billion in order revenue within 12 months. Marty Zigman, a previous CPA and Deloitte & Touche consultant, brings a unique perspective to how business systems can lead to increased enterprise value and competitive advantages. http://blog.prolecto.comTwo Tier ERP is an approach used by management when it is too difficult to get on one single system across multiple business subsidiaries. Learn more about this case..