ERP Consolidation Special Today: Two-For-One

Two for the price of one: No, the vendors haven’t changed their pricing, but the scope of an ERP consolidation project can cover two very different sets of needs.

The Bottom Line: Since an ERP consolidation project requires widespread support, the more benefits for the more stakeholders mean a higher likelihood of success (see the AMR Research Report “Justifying ERP Instance Consolidation Requires a Strategic Business Goal”).

What It Means: Our ongoing consolidation research has uncovered how you can get two benefits for the price of one consolidation project:

• ERP consolidation aids Sarbanes-Oxley compliance--Meeting the requirements of the Sarbanes-Oxley Act, the federal regulations regarding corporate financial reporting and business tracking, is forcing many companies to reassess their internal controls system for managing business risk and detecting fraud. A large part of the effort required is documenting and testing their existing controls. Depending on how deeply your auditor has tested controls in the past, this could increase audit costs by 50% or more, and remediation may be required to close gaps in the controls. The added cost increases linearly with the number of different ERP and manual systems used for the same reporting functions that must be tested. The Takeaway: An ERP consolidation project requires the same documentation effort, can simplify yearly audits, and cover the needed remediation work.
• Lower operation costs counter high project costs--The benefits of an ERP consolidation project come from making use globally of information about common customers, suppliers, and materials. But this requires harmonizing these master records to eliminate redundancy and can consume as much as 15% of the project budget. One company embarking on a very large consolidation project is planning to use Ascential Software’s suite of data integration and data quality tools in this process. The manufacturing company’s business intelligence group got involved in the consolidation project because it had already analyzed the many data sources for an earlier data warehouse project. The original estimate for hand coding one-time ERP conversions was 5 to 10 times the estimate for using Ascential’s tools to support the conversions. In addition, the project will combine data from the consolidated ERP and systems outside the project into the data warehouse. The Takeaway: The organization will get the benefits of its consolidated system sooner by making the data warehouse more useful and reduce its ongoing operations costs.

Conclusion: Projects are too expensive to only deliver one benefit. Combining several related goals and doing the work once delivers more benefits sooner and avoids having several groups competing for resources and mindshare.

AMR Research originally published this article on 2 September 2003.