The Hurdles Nestlé Overcame to Deploy a Common Global SystemBy David F. Carr | Posted 2006-01-14 Email Print
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Consolidating databases and application servers can be technically and organizationally challenging.
An international company like Nestlé can achieve technology infrastructure savings, along with improved business intelligence and control over global operations, with a "single global instance" of its enterprise resource planning system. But the required consolidation of databases and application servers can be technically and organizationally challenging.
PROBLEM: Some modules of an enterprise planning system prove more difficult to centralize than others.
RESOLUTION: Tackle first the centralization of back-office functions such as financials and human-resources management.
For any company, tasks such as producing consolidated reports on global operations become easier when the data is centralized in one database. For that reason, it may make sense to consolidate the back-office functions of an enterprise planning system, even if other parts of the suite don't lend themselves to running in a single instance.
"A shared services model for the back office, things like finance and procurement, lends itself very well to a single instance," says Gartner analyst Erik Dorr. These functions are often more centrally managed to begin with, which makes their technical consolidations easier. On the other hand, applications such as supply chain and customer relationship management may be more challenging because of differences in how logistics, sales and customer service are handled in different regionsand sometimes these differences are viewed as essential to how the organization competes in those areas, Dorr says.
PROBLEM: The scale and transaction volume of a large business may exceed the capacity of some packaged enterprise applications.
RESOLUTION: Get proof that your enterprise system is equal to the task before pursuing a single-instance strategy.
Oracle and SAP are likely candidates for most large firms. "Anyone trying to do this on any kind of scale is doing it on SAP," Dorr points out.
Oracle, however, has aggressively promoted a single-instance strategy, using itself as a prominent test case. Oracle's transition from 52 financial management systems worldwide to a single global instance produced real benefits, as validated by Gartner and others. Oracle cited the consolidation as a factor in improving operating margin from 20% in 1998 to 34% in 2005.
But Oracle's business is relatively homogeneous, and the internal systems consolidation project focused mostly on back-office functions, Dorr notes.
PROBLEM: Geographically distant locations may experience poor performance when accessing a centralized application because of issues with network bandwidth or latency.
RESOLUTION: Make sure you can deliver acceptable performance to each location before making it dependent on the central system. Centralization may not be appropriate if you must support locations whose bandwidth is limited by poor local telecommunications infrastructure. Even with adequate bandwidth, performance can be hampered by latencythe delay caused by round-trip transmission of signals over the network.
PROBLEM: A single global instance forces much greater standardization of business processes, which may clash with the distinct processes of particular divisions and locations.
RESOLUTION: Assess the diversity of your business processes and be willing to make compromises.
Ultimately, business processes for a multinational corporation cannot be entirely homogeneous because of the inherent differences in operations in each country. But as a rule of thumb, figure that business processes will need to be 80% standardizedthat is, if individual locations will require more than 20% customization, a single-instance strategy may not make sense.
Of course, the larger and more complex the organization, the harder standardization becomes. "Moving systems, moving the data and changing it, often very significantly, to the standard the mother ship is adhering to can be a real issue," says Joshua Greenbaum, a principal at Enterprise Applications Consulting. Story Guide:
Player Roster: Who's Who Among Nestlé Project Planners
Roadblock: Regional Managers
Hurdles Overcome: Deploying a Common Global System
Base Technologies: Nestlé
SAP: Not Pretty, But It Did the Job