International ERP: Do You Know Your Instances?

A multinational ERP implementation creates several new dimensions of complexity.

The first big decision is whether you want to try to run your company from one common system, or to let different regions run independent ERP solutions. Running only one version (known as instances) eliminates some problems and creates others.

The regional systems of most international organizations evolve independently, with each country running a legacy system of some kind. Clearly, if an organization’s ambition is to have one common set of policies, data, information and business processes world-wide, a single-instance ERP implementation is a necessity. A single instance also reduces redundant costs in managing hardware infrastructure, technical support, and implementation resources over a multiple instance ERP environment.

However, while a single instance eliminates a lot of strategic complexity, it creates a lot of design complexity, as the core ERP solution is constantly tweaked to allow for regional differences, both legal and traditional. The solution for handling bonded materials in China is not one that will naturally emerge from a US or UK-centric design. Tax requirements can require local customization, local consulting, specialized configuration, or any combination thereof. Units of measure become a big issue, as metric and English conversions collide. It may be common practice to bill freight as a separate invoice line in the home country, but to always include freight in the price in another country.

If possible, the C-office (usually the CFO) needs to be involved in making the call on the instance strategy for the ERP roll out. Running multiple instances generally increases the complexity of closing the fiscal period, and decreases the ROI from consolidated business information.

If you do choose a single instance ERP strategy, you should be prepared for thinking and discussion around issues you likely have never managed before, such as:

1. IT scheduling: as obvious as it sounds, most IT organizations run required infrastructure jobs – backup, database loads, transports – in the middle of the night, when impact from problems affects the fewest people. With a single instance, and an international ERP implementation, it is always the middle of the business day somewhere.

2. Data definitions: do not assume that since you sell the same products, that the data defining them is the same from country to country. Everything from the technical description of the specifications to the marketing names for product groups and collections is liable to be different.

3. Data governance: – will on-going master data be administered centrally, or dispersed? If centrally, how do you ensure rapid response and accuracy; if dispersed, how do you ensure the integrity of the data?

For most organizations, this is the first time the issues associated with a single instance have needed to be addressed. Do your research diligently, and know why you chose what you chose. You will be defending your decisions for a while.