Extreme ERP Makeover

"Rather than resolve the ways different operating units worked, they threw in a system in France, one in the U.K., and one in North America," says AMR's Swanton. Each of those systems wound up customized, which meant that they couldn't interact without an integration layer, which most people didn't bother with. Consequently, each system ended up a separate instance. The result, according to a 2003 Hackett Group survey, is that the average company now has 2.7 ERP systems. Some have more, such as $1.1 billion Esselte, an office-supply company, which has 22. (Esselte is currently trying to move to a single instance.)

But a single instance is now more realistic than it was in the past. Storage is much cheaper than it was five years ago and, thanks to the evolution of the Internet, connecting, even across oceans, is no longer a significant problem. Furthermore, there's no longer a Y2K hovering overhead like a sword of Damocles. There have been other advances too. For example, ERP vendors offer modules, such as supply chain or product lifecycle management, that they didn't for most of the '90s, and other modules have been improved.

Of course, it all takes time and money. AMR predicts that moving to a single instance will cost companies $7 million to $12 million for every billion of revenue, and that projects will still take from one to three years. But experts, analysts, consultants and CIOs all agree: Single instance is finally doable.

Who's Doing What and Why

No one does an IT project just for the sake of doing it, especially not in this economy. For a company to undertake a single-instance project, there has to be a compelling reason. The CIOs interviewed for this story named three: financial reporting, cost control and competitive advantage.

Financial reporting. Esselte has three divisions and operations in 120 countries. It has 22 ERP systems. Until now, the business units were encouraged to be independent even though they sell the same products that, for the most part, come from the same factories. Consequently, it has been impossible to make sense of the information coming from the various systems, says CIO Lani Spund, because they use different terminology for the same things. "We couldn't get consistent information," he says. "It's not that the information wasn't good; it was that we didn't know if it was good or not. We couldn't trust it."