Who's Doing What and Why
No one does an IT project just for the sake of doing it, especially not in the current spending clampdown. 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."
Currently, it takes weeks for Esselte to close its books. It also takes an army of expensive accountants, climbing mountains of spreadsheets, to reconcile all the different terms. In order to get things under control, Spund is in the process of replacing 18 of the 22 systems with a single instance, Microsoft's Axapta (the remaining four have been consolidated into a single SAP system, which Esselte will retain for the foreseeable future). In four years, when all the old systems have been replaced, says Spund, Esselte will be able to record transactions in the general ledger as they happen. It will, he predicts, let them close their books within days at the end of a quarter.
Total cost of ownership. Multiple ERP instances and multiple data stores require multiple support teams. Each best-of-breed point application also has to have its own support group, user training and, in most cases, hardware. Getting rid of those costs was the primary reason that ViewSonic, a $US1 billion manufacturer of plasma TVs and LCD computer monitors, replaced its three ERP instances with one.
In 1997, ViewSonic deployed Oracle ERP systems in the Asia-Pacific region; Europe, the Middle East and Africa; and the Americas. Each had its own data store and used different operating systems, says vice president for information services Robert Moon. There were more than 500 customisations among them. In other words, while they were all Oracle, they functioned as three entirely independent systems.
"It was causing huge problems," says Moon, not the least of which was that ViewSonic was writing three separate and large support cheques. In May 2001, the company began replacing the old systems with a new single instance of Oracle (it was cheaper to stay with Oracle since Moon was already paying for the licences, which never expire).
To date, Moon reports that he has decommissioned a million dollars' worth of hardware and cut his annual maintenance fees by $US150,000. He's also reduced his Oracle support staff from 26 full-time employees to nine. None of these savings, he says, would have been possible without consolidating on one system, and ViewSonic has become an Oracle reference customer.
Competitive advantage. Up until last year, Ensco International, a $US700 million offshore oil drilling company with 56 rigs and offices around the globe, had separate best-of-breed applications for each functional area, like finance and purchasing. And each rig had its own customised parts and maintenance databases.
"If we were notified by a vendor that there was a problem with a particular type of valve," says Tom Chapman, Ensco's director of IT, "we would have to e-mail each rig and ask: 'Do you have this valve? And, oh, by the way, have you had a problem with it?'" The information was out there, but it was trapped in each rig's system, and in each rig's proprietary data format.
Ensco's single instance of PeopleSoft went live in the first quarter of 2003 for all its offices and rigs, and now all its inventory information is in one place. If a rig off Venezuela needs a particular piece of equipment, instead of buying it from a supplier, Ensco can check to see if another rig has it sitting in inventory. The single instance allows Ensco to visualise its purchasing habits and hence maximise its purchasing power. In fact, the company can now run reports on anything it likes.
One area that is particularly useful, says Chapman, is analysing maintenance trends. Each rig is essentially just millions of pieces of equipment thrown together. "The amount our customers pay us on a daily basis doesn't allow for too many failures," says Chapman. By doing a detailed analysis of all of its equipment, Ensco can figure out the optimal time for preventative maintenance, reducing both downtime and equipment failures. Chapman believes that this translates into a competitive advantage.