Group-wide consolidation of ERP systems.
8 Nov

Group-wide consolidation of ERP systems

When a company is taken over by another company, usually a larger one, there is often a call for the ERP systems consolidate newly affiliated companies. Normally, the smaller partner should take over the system of the larger one. By consolidating ERP systems, parent companies want to establish consistent processes and have reliable key figures in their central systems in good time. However, it is not always the best idea to impose a group-wide uniform system on a subsidiary.

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Group-wide consolidation of ERP systems - a favourite goal of bosses

If a new subsidiary is to take over a group-wide ERP system, a new client is created as an autonomous environment for the new addition. However, the ERP processes within this environment are usually based on those of the central system.

Of course, such an approach has great advantages. It saves time and effort in many places to coordinate the ERP system and often expensive and complex interfaces are superfluous. The competence of the IT or ERP department only has to operate one system. Of course, this also means that each expansion is associated with less effort. Maintenance, updates and rollouts can be handled by homogeneous organisations. Consolidation of ERP systems naturally also saves costs.

Few proven providers

If you analyse the ERP market to see which systems are at all suitable for a uniform integration of group subsidiaries, you will quickly come to an insight: Many are not. What at first appears to be a malus also has its advantages. The corresponding software from SAP, Oracle, JD Edwards etc. is mostly mature and correspondingly internationalised. The manufacturers behind them are the top dogs on the market and can therefore be considered safe investments.

Group-wide consolidation of ERP systems - the sufferers

For the performance of a group, there are therefore some good reasons for wanting to go with a consolidated ERP system. For the individual subsidiary, however, such an approach may also have some disadvantages.
If a company is to be taken over by a group, a certain attractiveness of the takeover candidate lies in the fact that it can do something that the group does not have in its portfolio. In other words, the "otherness" is exactly what is wanted. In addition to other products, competences, processes and knowledge, this includes a tried and tested infrastructure that has grown over time. An often highly specialised ERP system is not uncommon. Sometimes the know-how of many years and employees is contained in such ERP software, which was not infrequently developed along precisely such customers.
Often there is a well-coordinated team and/or service providers behind it who can quickly and efficiently adapt the integrated systems if necessary.
A group-wide uniform system, on the other hand, is rarely flexible enough to keep pace. At the same time, the reason for a consolidated system would be reduced to absurdity if it were to be adapted to meet all the special requirements of a subsidiary.
Declining performance and frustration on all sides is often the result of standardisation.

Partial consolidation of ERP systems - double-edged

As an alternative to the all-same consolidation of ERP systems, one can of course use the integration of the ERP software of the subsidiary company via interfaces. The operational business is mapped with the specialised system, which then only feeds the financial accounting of the parent system with the resulting bookings.
Clearly, the focus here is on the advantage of the corporate subsidiary. Special and industry solutions can continue to play out all their advantages. Changes in the market or organisation can also be implemented quickly and flexibly in the ERP system. The employees and management of the subsidiary are at home in their specialised system and thus more productive.

Of course, such an approach has a number of disadvantages. These include, of course, an insularity in terms of both technology and knowledge, which central organisations normally avoid like the devil avoids holy water. And either way, the effort required to maintain such a structure increases.

The silver bullet - it does not exist

So how do you deal with the often contentious goals of consolidating ERP systems and the use of specialised ERP software by subsidiaries? As so often in life: It depends.
It may make sense to forego some of the benefits of unification. Economic and strategic goals may speak for this. It also becomes clear that a decision on the right ERP strategy is not an IT decision, or at least not only.

Long-term strategies are also possible to replace the ERP solution of the subsidiary with a central system in a longer, regulated process. This can be achieved by slowly adapting processes.

What is also required, however, is consistency. For example, although the hymn of the uniform ERP landscape is often sung, it is not necessarily lived. Deviating from the propagated template, from which there should be no deviation at all, leads to special paths and shadow IT systems that are even more difficult to control than individual ERP systems.

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