According to Manju Bansal, there are 2-3 main ways in which companies usually approach such a challenge, depending upon the degree of control the HQ wants to retain over the extended enterprise:

Put everyone on the same single instance of the ERP system that powers the HQ. So no matter where you are, you access the same system. General Mills, the consumer foods giant, has adopted this approach with all its subsidiaries worldwide, no matter how big or small they are. If the business process in a geography is different (e.g. local packaging material needs to be sourced from a local cardboard vendor to package cereal boxes), or there are local regulatory needs to adhere to (e.g. electronic tax deduction at source for employee payroll in India), the company creates templates and rolls them out so they can still fit within the ambit of the global single instance of the ERP running at the HQ. This approach is certainly not cheap but it ensures complete uniformity and central control by folks at the HQ.

Let everyone do whatever they want, as long as they give HQ controlling the 10 (or whatever the precise number is) pieces of information on a periodic basis. This way there is no disruption and the subsidiary can keep doing what it was doing before. Of course, the downside is that there is no global “single version of the truth” and the company can get blindsided by events they did not see coming. This is also an approach that is likely to cause some serious pain after a point e.g. imagine managing and upgrading multiple ERP systems and keeping the employee skill sets current or even trying to manage the various vendors who provide the software and the consulting services and keeping track of all the license-types, the patch details, the support entitlements etc.

Then there is a bit of a hybrid approach, where a company runs only those systems in the subsidiaries and regional sales offices etc which can seamlessly integrate with the main system it runs in the HQ. And this is where the advantages of working with the same single vendor kick in, for e.g. SAP has developed best practice software packages that allows its mothership SAP ERP application to conveniently integrate with its SME-centric solutions like SAP Business All-in-One, SAP Business One or the SaaS focused SAP Business ByDesign. In some sense, this allows a customer with the best of both worlds – they can retain the individual business processes that work best whether at the HQ level, the global level or the individual subsidiary level, the implementation & maintenance footprint of these SME-centric solutions is vastly lower than choosing option 1 above, and is a lot more operationally efficient than option 2 above.

Conclusion

Integration has remained a four-letter word in the ERP lexicon and despite countless efforts to tame that beast it offers a formidable challenge for customers even today. After all, it is hardly uncommon for customers to spend more on integrating their various software pieces than in implementing their core ERP system. And which is why I think SAP may have stumbled upon a market that is rife with opportunity – with its very established base of large enterprise customers, each of whom has hundreds (if not thousands) of entities in their extended enterprise networks, the market is indeed very large. Yes there are multiple integration vendors (like IBM Castiron, Boomi etc), but having access to native integration capabilities provided by the same single vendor is a very attractive proposition for a CIO. For instance SAP provides pre-configured country templates, pre-configured integration scenarios using various integration platforms (e.g. B1iSN, SAP PI), pre-designed intercompany scenarios and is extendable – these are things that make a single vendor consolidation option very attractive. As the old MasterCard commercial might have said: “Integration, check. Single version of truth, check. One throat to choke, priceless”.