Enterprise Resource Planning (ERP) software applications have come a long way since the glory days of the nineties. Organizations that invested in the ERP systems during that period and in the years following Y2K are now gearing up for ERP consolidation in a big way.

Any guesses why? Well, the reasons are fairly simple, to lower operating costs, increase yield on the existing system and to gain higher return on investment (ROI).

Now, when it comes to ERP consolidation, one of the most popular ideas that have been floating around the scene for a while now is single-instance ERP.

Single instance ERP has multiple benefits
There are several advantages associated with a single instance ERP such as it leads to a standardization of different processes across multiple business units leading to simplified manageability and considerable cost savings.

According to Ray Wang, principle analyst, Forrester Research, "In addition to facilitating process-centric standardizations, single instance ERP installations also make it easier for companies to comply with regulatory norms such as SOX and Basel II because of single software installation. Also when you have all the financial data in one system, reporting becomes considerably easier too."

Technology hindrance no more
In the earlier days, majority of ERP systems were deployed in multiple instances by default, primarily because of technological constraints prevalent at the time. Everything including bandwidth availability, storage, processing capabilities, database costs and several other factors prevented enterprises from owning a single instance ERP set up.

However, that’s not the case anymore. Most of the above mentioned limitations are disappearing very quickly and as a result more and more organizations are beginning to rekindle their long suppressed dreams of running single instance ERP.

"In addition to the technological superiority, several other factors such as the need for process-centric standardizations such as shared services, emergence of regulatory directives like Sarbanes-Oxley (SOX) are encouraging enterprises to adopt single-instance approach," said Wang.

Adopt a cautious phased consolidation strategy
However, the transition from multiple-instance to single-instance is easier said than done. It requires careful planning and meticulous design. Forrester says that business process and applications professionals face a variety of challenges in defining the single instance and identifying an apt consolidation model and hence companies should adopt a cautious, phased consolidation strategy.

Exercise Caution And Choose WiselyÂ
Choosing the right governance models is a crucial factor in instance consolidation and Wang insists that organizations should design a future state integrated operating model around their ideal governance.

"Your governance model will drive how far you consolidate. If you choose to move toward a single-instance path, design intermediate stages of consolidation that mitigates risk to core processes. If you choose to consolidate over time, determine logical areas of consolidation such as shared services or geographies as starting points. Once you complete designs in process integration, then move to data integration to drive instance consolidation," he said.

While doing all this, organizations must also consider their existing number of ERP environments, applications, processes and vendors they are supporting. Once these are taken care of, then organizations can proceed towards charting a holistic migration strategy which encompasses overall project governance mechanisms.

Selecting a vendor is another critical element in instance consolidation according to Wang.

"The key is to choose a vendor who meets an organization’s specific requirements. Some of the parameters that organizations could employ for choosing a vendor include long-term vendor viability, industry specific functionality and its ability to leverage existing investments," he informed.

Test the waters through pilots
And finally in the last leg, when embarking on any instance consolidation project, it’s advisable for organizations to start off with smaller pilot projects. The reason being, pilots can allow companies to refine consolidation glitches and provide much desired practical experience to the IT teams which in turn will allow for smoother deployments.

"Instance consolidation is a highly complex process usually spanning multiple years and one that require the development of an integrated operating model. Integrated operating model designs succeed if they are complemented by executive sponsorship and when business requirements drive consolidation efforts," concludes Wang.