Two-Tier ERP Strategy: First Steps

Transcription

1 Cognizant Insights Two-Tier ERP Strategy: First Steps Monolithic ERP solutions are often too complex, slow and expensive to manage in perpetuity; hybrid solutions that combine on-premises/ cloud-hosted capabilities can offer improved operational flexibility and functional consistency across distributed enterprises. Executive Summary Most multinational manufacturing companies use monolithic ERP systems such as SAP as their standard ERP solution. For many sites, these systems typically cover most business processes and fulfill the requirements to a high degree. For dynamic sites such as geographically distributed locations, smaller offices for sales and service and temporary offices or joint ventures the defined standard solution is often too complex, slow and expensive. Multinational manufacturing companies are beginning to evaluate the possibility of using a two-tier ERP approach to enable significant reductions in cost and time-to-implement. These two-tier ERP systems are often more lightweight and hosted in a private or public cloud, with sufficient functionality to cover remote offices. We support our clients in evaluating whether a two-tier ERP strategy is beneficial and feasible and how a future ERP strategy would look, from process coverage and business case to architecture design and vendor selection or implementation support. The Rest of the World When entering new markets, gaining market share and delivering products often has to happen within a few weeks. Support through an ERP system in this phase is the basis for sustainable success. The same is true for existing smaller sales and service offices in remote geographies. Companies facing new-market issues often need a lightweight, fast and reliable ERP support for small subsidiaries. Setting up the defined standard solution is often too complex, slow and expensive. Too complex, because the standard solution is built for established organizations, not for start-up crews; too slow, because it often lacks features allowing additional SMEs to enter all parameters needed in this new market. From our experience, many established companies are using some form of homegrown ERP tools, ranging from spreadsheets to entire applications, with questionable reliability of the figures calculated. The consequence is typically a loss of control and loss of credibility in more severe cases. Two-Tier ERP Strategy Between rolling out the corporate ERP template to all locations and taking a laissez-faire approach for remote sites, there is a third way of cognizant insights march 2014

2 providing your organization with everything it needs. Instead of providing small subsidiaries with the standard ERP, one could start with a lightweight ERP, probably located in the cloud as a software as a service (SaaS) solution. Such solutions are especially successful when they are used without major customizations for each country. Companies' key expectations towards a two-tier solution can include the following: Low cost and agility. Enabling of quick integration and rollout for existing subsidiaries. Rapid deployment for start-up subsidiaries. Standard and simple processes, easy to use and learn. Progressive adaptability to business needs. Support for efficient finance consolidation. Efficient reporting capabilities. Web-based applicability with mobility. To leverage the full advantages of this technology, companies need a strategy to define when and how to use the two-tier ERP application. This strategy needs to reflect the companies approach to managing their subsidiaries and to integration from a process and technology perspective. Solution We can support the task of transitioning to two-tier ERP with a unique framework of consulting services starting with the assessment of business requirements, towards the description of ERP scenarios and business cases to the RFP content and the proof of concept. The framework includes a set of deliverables that support the necessary decision on a two-tier ERP strategy by providing all required documents (see Figure 1). Roadmap, Activities and Deliverables for Two-Tier ERP Adoption Two-Tier ERP Strategy Kickoff Process and ERP Systems Assessment Analysis & Two-Tier ERP Scenarios Two-Tier ERP Strategy Definition Activities Reconfirmation on scope and objectives. Workshop and interview planning. Introduction to our approach and project planning. Executive sponsor support. Project organization. Define high-level requirements. Confirm two-tier process model. Assess the current application & integration Develop vendor long list. Identify and analyze two-tier options. Develop two-tier ERP scenarios. Define evaluation criteria for scenarios and models. Determine high-level target model. Analyze benefits. Vendor short-listing (top four). Finalization of the two-tier ERP model incl. application and integration architecture (RFP content document). Vendor selection criteria. High-level business case. Develop deployment methodology & support model. Deliverables Detailed project plan. ILLUSTRATIVE High-level requirements documentation. High-level two-tier process model. Current application and integration Vendor long list. Two-tier options. Evaluation matrix for two-tier ERP deployment. Two-tier ERP scenarios. High-level target model. High-level benefits. Vendor short list (top four). Two-tier ERP model incl. application and integration Vendor selection criteria. High-level business case. Deployment methodology & support model. RFP content documentation. Figure 1 cognizant insights 2

3 At the beginning of the process, we will assess a company s ERP requirements as well as its minimum high-level business requirements. Based on this two-pronged assessment, we will develop several two-tier ERP options, a target scenario and an evaluation matrix for further appraisal of all feasible options. Dependencies Between Deliverables for Two-Tier ERP Deployment B2 High-Level Two-Tier Process Model C1 Two-Tier Options C3 - ERP Scenarios C5 High-Level Benefits D1 HL Target Model incl App & Int Arch B3 Current Application and Integration Arch C2 Evaluation Matrix C4 Target Model D3 Business Case B4 Vendor Long List C6 Vendor Short List D4 Deployment & Support Model B1 High-Level Requirements D2 Vendor Evaluation Criteria D5 RFP Content Figure 2 A vendor long list will be set up in parallel, to serve as the basis for the vendor short list, the vendor evaluation criteria and the RFP content together with the two-tier process model and the high-level business requirements. Based on the evaluation matrix, the target model will be developed, the high-level benefits identified and the vendor short list created. Finally, the business case can be calculated and presented. Some Examples of Two-Tier ERP Deliverables 5 Year TCO for Deployments Overall Additional users per year 50 Low complexity sites deployments per year 3 Medium complexity sites deployments per year 0 High complexity sites deployments per year 0 In this scenario, TCO per site per year averages to 50K per year Higher number of deployments lower the TCO per site per year Initial setup costs One-off A B User independent license costs Recurring User dependent license costs Recurring Low complexity site deployment costs One-off Medium complexity deployment costs One-off 0 0 High complexity deployment costs One-off 0 0 cognizant insights 3

4 A B Infra maintenance costs Recurring IS internal support costs Recurring Vendor support costs Recurring Upgrade costs One-off Total 5 Year TCO Average TCO per site, per year In this scenario, savings can add up to 40% If medium complexity sites are included, savings can be as high as 60% Deployment Roadmap (D4) Start with Business Scenarios Deployed User Base Business Scenarios: Sales Office Maintenance Contract Engineering Contract Timeline indication: 6-8 weeks 1 st Site Sales, Financials, Inventory, Procurement and Maximo, Global Fore Integration 2 nd New Site 3 rd New Site N th New Site Deployment timeline indication 1-3 weeks Time Figure 3 Solution Benefits With a typical project duration of six weeks and the work of two or three experienced consultants, we can answer the following questions: Would a two-tier ERP strategy solve the ERP issues in small subsidiaries? What kind of business scenarios can be supported by a two-tier ERP solution? How would a solution integrate the management of existing subsidiaries, from a process and technology perspective? How long would it take to set up a subsidiary with a two-tier ERP solution? What does the business case look like? Summary Every company is different, and we have seen vast differences in business cases for two-tier ERPs. A solid strategy and plan is the foundation for a successful project. We have successfully delivered two-tier ERP strategies for European manufacturing clients, helping CIOs to better serve their companies global business models. What would a feasible technical solution encompass? cognizant insights 4

5 About the Authors Peter Tresselt is a Senior Manager within Cognizant Business Consulting. He has more than 15 years of experience in business consulting for CXO clients in various industries. Peter has an M.C.Sc. from TU Berlin. He can be reached at [email protected]. Benjamin Hippler is a Consulting Manager within Cognizant Business Consulting. He has seven years of experience in consulting CIOs on IT strategy, operating models, sourcing and cost optimization. Before moving into consulting, Benjamin was leading IT operations in the Middle East for an international industrial conglomerate. He can be reached at [email protected]. About Cognizant Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 171,400 employees as of December 31, 2013, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at or follow us on Twitter: Cognizant. World Headquarters 500 Frank W. Burr Blvd. Teaneck, NJ USA Phone: Fax: Toll Free: [email protected] European Headquarters 1 Kingdom Street Paddington Central London W2 6BD Phone: +44 (0) Fax: +44 (0) [email protected] India Operations Headquarters #5/535, Old Mahabalipuram Road Okkiyam Pettai, Thoraipakkam Chennai, India Phone: +91 (0) Fax: +91 (0) [email protected] Copyright 2014, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is subject to change without notice. All other trademarks mentioned herein are the property of their respective owners.