Is a single instance of ERP better?
An "instance" refers to the number of discreet versions of ERP software you have in your company. The original vision of ERP was that companies should have a single instance—that is, a single implementation of the software running on a single database—that serves the entire company. It would mean no duplication of information in different departments or in different geographic divisions and thus better integration and information quality across the company. Upgrading the software would also be easier than with multiple customized instances of ERP across the company.
But few companies installed ERP that way. First, there were the technology limitations: databases, networks and storage systems couldn’t handle the load, and bandwidth was still expensive enough that linking globally based divisions together on a single database was expensive. Worse, different business units often had unique processes or resisted the ones that came in the ERP box. All these factors combined caused many big, global corporations to install dozens—even hundreds—of instances of software from a single ERP vendor.
Today, many of those early barriers have come down. So does it make sense to create a single (or a significantly reduced number) of instances—while also getting rid of outdated or feature-poor systems from other vendors? Like most complex technology issues, it depends.
There are some compelling reasons to undertake such a project now. For starters, the Sarbanes-Oxley Act, the government’s post-Enron accounting legislation requires that financial reports have a verifiable audit trail. With a single instance, all of a company’s financial data will live in one application and will originate from one source, eliminating consolidation errors and greatly reducing the time it takes to close the books. Having a single data source could also create new revenue opportunities and cut costs. Companies would be able to run reports that show cross-promotion opportunities, places where they could reuse equipment or leverage purchasing power. Also, AMR estimates that companies should budget $4.3 million for a single-instance order management module versus $7.1 million for multiple instances.
But despite these benefits, rip-and-replace is a difficult pill for CIOs to swallow, many of whom are just shaking off the multiyear, multimillion-dollar hangover of their first ERP project. And they’re wondering if there isn’t another cure for their integration headaches: Web services and the promise of service-oriented architecture (SOA). Web services could—with the emphasis on could—allow CIOs who have invested in best-of-breed solutions to integrate their standalone systems without either shelling out millions for single instance or tying their company’s future to a single vendor. Trouble is, Web services and SOA are still immature and require complex planning and a long list of programming and architectural talents inside the IT department—and don’t forget implementation time and cost.
Most pundits believe some form of standard, simple, vendor-independent integration will emerge over the long term, but that doesn’t help CIOs today. Most experts recommend waiting for better integration standards if the costs of operating your systems as-is don’t outweigh the costs and benefits of ripping and replacing with a single instance and the business is not missing out on important revenue opportunities because of problems with the current system.
Essentially, single instance and Web services/SOA are two ways to get to the same place, and CIOs will need to choose which path to lead their company down. For much more detail on this choice, see Ben Worthen’s piece "Extreme ERP Makeover" www.cio.com/archive/111503/erp.html Here are some very basic guidelines:
You should consider single instance if you...
* Have fairly commonplace business processes that extend across all divisions
* Have older systems that need to be replaced
* Have multiple ERP instances from a single vendor
You should consider an integration layer if you...
* Have divisions with unique business processes that can’t be changed
* Consider an existing investment in best-of-breed solutions a competitive advantage
* Want an environment in which it is easy to integrate new applications