3 Insights Every Business Leader Should Know About ERP Consolidation

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Enterprise Resource Planning (ERP) consolidation, such as SAP consolidation, is a recurring hot topic that’s in focus again due to the ongoing volatility in supply chains, as recently reported by GEP. In our new normal, anticipating resource needs through ERPs and supply chain management systems (SCMs) has become ever more challenging, and aligning SCM with ERP is even more difficult. Those enterprises with multiple, poorly integrated SCMs and ERPs are unable to optimize their business. There are risks associated with ERP consolidation, however, that cause IT and business leadership to refocus. Instead of consolidation, leading enterprises are emphasizing ERP transformation.

ERP Transformation Versus ERP Consolidation

Interest in ERP consolidation perennially arises because it seems sensible to reduce the number of SAP, Oracle, or other ERP running instances across an enterprise. Executive leadership wants to accelerate their ability to manage resources across the enterprise while simplifying their IT portfolio, but “big bang” ERP consolidation can cause delays in improving outcomes when improvements are needed most. While the promise of simplicity and savings through consolidation is tempting, there are three things every business leader should know and discuss with IT leadership before embarking on that journey.

  1. Consolidation can put your time-to-market at risk. Unless your organization has no business-critical, long-lived back-office systems—possibly true for new start-ups, highly unlikely for enterprises and those that have grown through mergers and acquisitions—consolidation will require the deep discovery of legacy processes and software. Meanwhile, other enterprise modernization efforts to reduce time-to-market will likely be deprioritized or even paused.
  2. There’s a scalability Achilles heel waiting with open-source solutions. Open source can be a powerful ingredient in enterprise modernization, but ERP systems require connectivity and integration with multiple SCMs, CRMs, and similar business-critical systems of record at a massive scale. The need for integration—often through hundreds, if not thousands, of interfaces—will mean custom connectors need to be developed, and those will require maintenance with every software update. Many enterprises have tried open source for ERP consolidation and have found the costs and time needed to build and maintain connectivity to be a deal-breaker.
  3. Cloud is only part of the answer. Business leadership has become much more aware of the advantages cloud computing can provide, such as greater business agility, scalability, and accelerated business transformation. However, a hybrid approach may be best for ERP systems. The data that flows through ERP systems may be subject to regional or local sovereignty regulatory compliance. In addition, the “extra hop” from one region to another via a cloud may add latency—the time it takes data to travel through systems. Your IT leadership will understand when data sovereignty is a factor and when added latency will impact business agility and customer experience. 

In contrast to ERP consolidation, ERP transformation is centered on optimizing business outcomes more than merely optimizing IT spending. By reframing the challenge of ERP sprawl from an IT systems issue to a business reality—given that much sprawl will continue through mergers and acquisitions—IT leadership can focus on iterative, adaptive approaches that support broader business goals. These adaptive approaches are based on robust and scalable messaging, integration, and data management—and have been proven over time. 

Real-world Success Through ERP Transformation, Not Consolidation

One example is that of a global athleticwear manufacturer based in Europe, which has chosen the agility and adaptability of ERP transformation. This enterprise needed to optimize a seamless order-to-fulfillment experience for its customers and trading partners and determined that a “big bang” consolidation would not support its business goals. Through TIBCO’s platform approach to connectivity, messaging, and integration, the company can manage thousands of application interfaces, passing nearly 100 million messages per day to and from regionally distributed on-premises and cloud data warehouses. 

“We have been working with this customer since the early days of their vision for business optimization through ERP transformation,” said Ulrich Hatzinger, Director of Technical Presales, TIBCO, “and the speed with which they’ve been able to effect a transformation of this size is a testament to their thoughtful approach throughout our partnership.”

Another example is that of Edwards Lifesciences. Edwards Lifesciences is using TIBCO technology to integrate more than 30 business-critical applications on Amazon Web Services (AWS) for systems that exchange more than 300,000 messages a day. 

“The TIBCO platform covers pretty much every critical business application—a product lifecycle management system, an ERP system, a manufacturing execution system. A lot of business-critical systems are integrated through TIBCO,” says Rajeev Bhardwaj, senior director of enterprise technology at Edwards Lifesciences.

How to Improve ERP and SCM Outcomes, Without the Risks of ERP Consolidation 

To create a single source of business truth in your organization, all business systems need to be kept automatically in sync with ERPs. Through adaptable, scalable integration, you can greatly reduce information silos to yield complete, accurate, and timely ERP data throughout your enterprise. With the TIBCO platform, you can also uncover superior customer insights by integrating your CRM platforms, such as Salesforce or Microsoft Dynamics CRM, with your ERP systems. Through an integrated customer system of record, your enterprise can optimize business based on these insights and further automate customer-centric processes. This adaptive approach also streamlines onboarding new ERPs from mergers and acquisitions, minimizing business disruptions.

The best path forward will require stakeholder input on integration prioritization. If your organization doesn’t yet have a Center of Excellence for ERP transformation or SCM improvement, a necessary first step would be to pilot a working group or steering committee to ensure IT is aligned with the business. 

Business leaders must support IT in changing the conversation from merely cutting costs to true business optimization and can help IT avoid the risks of ERP consolidation while getting the business benefits of ERP transformation. And even non-technical leadership should know there are prebuilt solutions available specifically for accelerating SCM system insights that may be worth discussion as priorities align.

Read more about how Edwards Lifesciences moved to TIBCO on AWS to support a seamless flow of data.