Seven Integration Questions to Ask Before Adding a Second ERP

Loraine Lawson
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12 Tips for a Successful ERP Launch

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More companies, particularly those with global operations, are opting to install two ERP systems - usually one large ERP system such as SAP or Oracle and one smaller, local ERP system. A two-tier system can cost less and yield better results, say practitioners, but this trend does raise questions about integration challenges.

 

Ray Wang, principal analyst and CEO at Constellation Research Group, has been watching this issue since 2009. This year, he surveyed 235 organizations and found 48 percent were considering a two-tier ERP strategy, compared to 21 percent in 2009.

 

There are a number of factors behind this shift in thinking, with the most obvious being cost savings. It's expensive to standardize on one vendor, particularly when ERP vendors roll out expensive upgrades, notes IT Jungle:

It's no coincidence that the rise in two-tier ERP deployments coincides with the economic recession that began in late 2008. As IT budgets were slashed, IT departments were forced to make do with less. In many cases, big ERP migration plans were delayed or axed entirely. Instead of moving to new systems, companies focused their resources on improving their existing systems, including all those legacy ERP applications and the underlying hardware and personnel that make them work.

But Wang and others point out it's also a great way to implement a less complex, easier and potentially more business-appropriate solution at the local level while using the more robust ERP systems at headquarters.


 

"Two-tier ERP has emerged as a strategy to enable legacy optimization while reinvigorating the organization's existing ERP systems," Wang wrote.

 

Right now, these local solutions are on-premise, but Wang anticipates cloud-based ERP solutions will become a favorite in the next two years, thanks to quick deployments, innovative features and, of course, subscription prices.

 

But there's no ignoring the fact this is a reversal of the "standardize on one vendor" approach large enterprises previously embraced because ERP systems were so incompatible and difficult to integration ... which brings us back to the original question: What are the integration implications of a two-tier ERP strategy?

 

ERP integration isn't as intimidating as it once was, according to a recent TechTarget article published on SearchManufacturingERP. But get it wrong, and it could cost more than you gain, Josh Greenbaum, principal of Enterprise Applications Consulting, told TechTarget. And a two-tier system requires paying closer attention to the potential for potholes, he said.

 

That means you need to weigh the integration and data management challenges before you commit to the two-tier approach. Here are seven issues the experts interviewed by TechTarget suggest you consider first:

 

  1. Where will the data reside - in the local system, the main ERP system or a bit of both?
  2. If you centralize the data, how often will you update it?
  3. How will you handle data governance?
  4. How will this impact master data management? One potential hot spot for trouble: agreeing on the customer field a customer record.
  5. How will you ensure data consistency across the two systems? If data's inconsistent or outdated, your sales people will start recording data in Excel spreadsheets and other "shadow" data sources, warns Mark Ginestro, a consultant and partner with Clarkston Consulting.
  6. To what extent will you integrate business processes - for instance, finances or purchasing?
  7. What will integrating these systems and processes cost and how does that impact the cost savings of a two-tier ERP strategy?


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