Chief Research Officer Michel Janssen and Global IT Advisory Program Leader John Reeves of The Hackett Group explained the integration challenges in building a global, “borderless business.” This week, the conversation continues as IT Business Edge’s Loraine Lawson asked them if, in their research and conversations at the recent Hackett Group’s Best Practices North America conference, best and worst practices emerged and how companies can “internalize” ongoing integration.
Lawson: Are there some companies you found that were managing integration better than others? And what did you see going on there? What are the best practices that have emerged?
Reeves: Consolidation is still the primary means of simplifying the environment to keep integration requirements down. As a matter of fact, we refer to it as complexity, because with every new asset or every new data source for an entity that you add, that expands the number of connections significantly because you have to connect it to 10 other systems or what have you. So consistently we see people driving down the numbers of the types of systems that they have.
For example, ERP consolidation is still very, very hot and the top performers in our database consistently have very low ERP counts. A lot of our clients are continuing to move to a consolidated base, not necessarily to get all the way to one, but getting down to an optimized footprint, which is usually one or a very small number of ERPs.
That doesn’t mean you move all of your assets over to one ERP. You may not begin to manage your customer base, for example, and try to force that into an SAP system. But in terms of minimizing the number of duplicate systems that you have performing the same routine functions, you just have different ones to serve local needs. Maybe it isn’t necessary in different regions. That’s the kind of stuff that is continuing to be pulled back.
Janssen: The cost difference can be huge. As an example, he was talking about fewer applications, the cost difference on that is like a 15 times difference, like half the cost of finance for those organizations that have done the standardization of their applications. That doesn’t necessarily mean it’s the technology only, but it’s taking the time to rationalize their processes, rationalize their systems and then rationalize the way they execute against them.
Reeves: What Michel says is very true. It should be noted that the primary benefit of this consolidation is sometimes thought of as being the technology savings but to Michel’s point, it has more to do with the efficiency of the operation because it eliminates redundancies around duplicate systems.
Janssen: So you're getting rid of massive numbers of people. I’m looking at some research that we did a little earlier that said for number of finance FTs (full time) per billion for the bottom third of our database for those who had the most applications, it was 118. But if you compare that against the best third, they only have 54.
It’s a big difference. We’re not talking about 10 percent or 20 percent, we’re talking about less than half.
Lawson: So integration through consolidation?
Janssen: Well, that’s one aspect of it, yes. I don’t know what the IT cost would have been for the different use of that, but the finance cost we can definitely see it’s much, much lower.