Why should companies consider ERP consolidation?

Many companies use a mix of disconnected ERP systems and poorly integrated third-party applications that block efficiency and increase costs. An expert explains how to start consolidating ERP.

When a company first implements an ERP system, it typically brings together the majority of the company’s information into the unified platform -- if the implementation is done correctly, that is. However, despite best intentions, many companies end up diluting the effectiveness of the unified platform by adding third-party applications to address information management needs that fall outside their ERP system's capabilities. Integrating these third-party tools with the ERP backbone is typically difficult and expensive to implement and maintain. Integration is often incomplete and seldom allows real-time access to all data.

Companies often end up with multiple, poorly integrated systems and a less-than-effective IT infrastructure that limits growth and efficiency. Other companies might have an array of ERPs and other applications as a result of mergers and acquisitions. In either case, consolidation onto a comprehensive and unified platform would certainly provide a more effective and likely more cost-effective option for enterprise information management.

The first step is to determine if the consolidation can be done on the existing ERP platform. In most cases, the answer is probably "no" because the outside systems were introduced to compensate for missing or ineffective functionality in the existing ERP system. That is not always the case, however. The installed ERP package may be “down level,” which means the user company has rejected updates and expansions from the developer because it is hard to implement upgrades when the package has been modified. Overcoming this Catch-22 may require a re-implementation, almost as if the company were installing a completely new system. However, re-implementing the incumbent package is easier because there should be less need to convert data and provide user training.

If the latest version of the existing package still does not provide the functionality needed, there is little choice but to find another package that does. Assuming that a new, better package is found, then a well-planned and managed ERP system implementation project will provide a new start. A consolidated enterprise system can eliminate all (or most) of the third-party and custom applications that are so expensive to maintain and limit the company’s ability to carry out its mission.

For companies dealing with multiple ERPs, consolidation also promises new efficiencies and cost savings. In some instances, the company's various facilities can be consolidated onto a single instance (one installation of the software shared among the facilities) or, more often, nearly identical versions of the same package are installed at different facilities. But this only makes sense if all of the facilities have similar needs. Forcing a process manufacturing plant to use a system designed for industrial equipment manufacturing -- just because that’s what the other plants (or headquarters) use -- will create problems for the process manufacturing plant.

If facilities differ significantly in their needs, consolidation onto a single ERP system does not make sense. Companies may still consolidate each facility onto its own modern, comprehensive ERP if they are suffering from the effects of multiple disconnected systems, but there will likely be several different ERPs involved across the enterprise.

Next Steps

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