Executive Summary
In the past decade, companies have increasingly been opening factories and offices in China, India and other countries in an endless chase for lowest-cost, high quality labor and to enter new markets. The result has been mergers, acquisitions, consolidations and new subsidiaries. In the midst of this global expansion, enterprises have turned their focus to global efficiency, cost reduction and regulatory compliance, pursuing uniform and consistent process strategies including shared services. While doing all this and more, enterprises want to be flexible, agile andswift to respond to today’s ever-changing, unpredictable and hyper competitive business environment. They want to be able to achieve all this and still focus on their core competencies.
Almost all major companies rely on ERP systems to manage just about every business process in every part of the enterprise, mostly legacy on-premise systems. These legacy ERP vendors claim that a single ERP instance spanning the enterprise and subsidiaries is the best solution. Among their rationale is the contention that a single instance allows companies to reconcile business processes and data, providing significant value in improved integration and decision making. There is also a presumption that any unique requirements met by third-party solutions will be significantly outweighed by the value of integrated processes and data. Those arguments are compelling, but caveat emptor! The pain and expense of legacy and on-premise ERP implementations are well known but often underestimated until the deployment is well underway. Take the recent decision by leading global beauty company Avon to halt the rollout of SAP’s new Order Management system, with the cosmetics giant having to take up to a $125 million charge for the failed project. In another recent example, a newly released audit report has found that the price tag for troubled SAP project will skyrocket to nearly $1 billion. There are many more such examples of large projects that not only fail more often but also deliver less.
That brings us to the million dollar question—if an enterprise is stuck with on-premise ERP at the corporate level but does not want to go through the painful experience and costs at the subsidiary level, what are its options? What is stopping it from pushing the on-premise ERP system at the corporate level out to its subsidiaries? From harsh experience, enterprises know that such a step would require enormous resources in servers, software and network infrastructure, IT personnel, training and maintenance costs, just to manage local ERP systems. Implementing the system and integrating it with the corporate office could take months if not years. Equally undesirable is letting each new subsidiary keep their own legacy systems or allowing them to choose their own solutions—a certain recipe for operational chaos, disintegration, inconsistent governance, and lack of visibility and control into finances and key
performance indicators—requiring more resources to patch and maintain the hairball of systems. The answer? Deploy a cloud-based ERP system at the subsidiary level, which can sidestep the proverbial Morton’s Fork…Click HERE to read a full whitepaper
