Going global with ERP

Many companies are finding that they can't compete without international enterprise resource planning rollouts. Although these implementations bring many challenges, the benefits add up to unified business operations.
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More and more multinational corporations are taking the global enterprise resource planning (ERP) plunge to unify their worldwide business operations. For these organizations, the payback is clearly worth it. "To be able to work as a total entity and manage your dollars, materials management, people, and information, and to analyze where your market is and what your products are doing--that's the real synergy. You get the big picture," says Tom Pike, CIO of the $1.2 billion electrical-equipment manufacturer MagneTek in Nashville.


"To be able to work as a total entity and manage your dollars, materials, people, and information, and analyze where your market is and what your products are doing--that's the real synergy. You get the big picture." says Tom Pike, CIO of MagneTek.
Photo: William Jackson Goff/Mercury Pictures
MagneTek runs Oracle 10.7 on an HP 9000 UNIX server and an Oracle 7.x relational database in the United States. Within the next year, the company will extend its ERP system to Italy, where it will run Oracle applications on the same infrastructure.

Although the specifics differ, all organizations that choose to standardize their business operations worldwide on complex and expensive ERP systems from vendors that include Baan, J.D. Edwards, Oracle, PeopleSoft, and SAP face huge barriers to success. In rolling out enterprisewide financial, manufacturing, and human resources applications around the world, corporations as diverse as disk-drive makers and car manufacturers have to deal with a unique set of organizational, political, and cultural glitches. Moreover, global rollouts can create technological dilemmas that are unknown in a home country implementation.

Notwithstanding the tribulations of global rollouts, ERP project managers claim that their companies can't compete without them. IBM's San Jose-based Storage Systems division (SSD) was forced to go global. "We had no choice but to implement an international system," says Millie Clarke, SSD's reengineering director. According to Clarke, the company could not grow its SSD business without selling products to non-IBM companies outside the U.S. "It is clearly fundamental to our business," she says, to improve efficiency and remain competitive. The fact that each of its international SAP implementations delivered a 12-month payback on expenditures was an added bonus.

Reach out and touch someone

Although money can solve some problems that arise during a global ERP implementation, more often, companies must discover solutions through hard work and sheer determination. Santa Clara-based Bay Networks is one such company. Bay Networks ran into telecommunications problems when it rolled out SAP AG's R/3 ERP system internationally. For instance, customer service reps in France were in the middle of taking customer orders when their PCs froze. A message saying, "Call your systems administrator for assistance," flashed onto their screens. But while it was noon in France, it was 3:00 A.M. in California where the help desk is located. To avoid this problem in the future, Bay's network managers had to redesign the transcontinental network to eliminate any pause in transmission, which is what had caused the system to disconnect users it believed had logged off the system.

Even the best telecommunications networks can't avoid the multiple connections that overseas transmissions require. "Between France and Santa Clara, [the transmission] may have to go from France to the U.K., to Seattle, to San Jose, to Santa Clara, and each hop adds some delay," says Jorge Taborga, Bay's vice president of global business applications. "To go to Boston, it might go from here to San Francisco to Boston, and the number of hops would be small and insignificant."

AT A GLANCE: MagneTek

The company: Nashville-based MagneTek is a $1.2 billion electrical-equipment manufacturer with 12,000 employees.

The problem: How to implement a global enterprise resource planning solution.

The solution: Two separate instances of Oracle 10.7 financial, manufacturing, and supply chain planning applications, one in the United States and the other in Europe.

The IT infrastructure: HP 9000 UNIX servers, HP desktop 586 clients, an Oracle 7.x database, and an Oracle 10.7 ERP solution.

IBM's SSD team members had to spend considerable time negotiating communications arrangements with government telecommunications officials in Thailand when it wanted to deploy R/3 in that country last year. In Thailand, all incoming and outgoing data transmissions must be routed through the government facilities, because the government owns and controls the communications network, says SSD's Clarke. "You can't just put a satellite dish at your headquarters and just beam everything up." And this is true for the governments of other nations, as well. "We had to work with government officials on how to link into the government's telecommunications lines. That takes time."

One size doesn't fit all

Organizations deploy ERP systems to standardize business practices. But just as there are a number of different ways to address telecommunications issues, there are also many ways to deploy ERP systems. The Toro Co., a $1 billion commercial outdoor environmental-machinery manufacturer headquartered in St. Paul, expects to achieve worldwide consistency by running R/3 version 3.1h from a centralized IBM SP2 server in St. Paul for all of its North American and recently acquired Australian facilities. "We are a tightly, centrally coupled organization, so it makes sense to have a tightly coupled, shared database and uniform presentation of the applications," says Steve Hansen, Toro's vice president of corporate IS.

Running ERP applications from one location makes sense for companies that operate as centralized organizations. But while it would appear to be a systems manager's nirvana to have to deal with boxes in only one building rather than spread throughout the world, backup and other systems maintenance becomes a scheduling nightmare.

When IBM SSD first rolled R/3 out in Europe and Singapore, network administrators found that running systems backups and reports at midnight in California caused "terrible" system response times in Singapore, where it was 9:00 A.M., says SSD's Clarke. Other nonpeak hours in San Jose conflicted with prime time in London. After "painful" experimenting, the support staff found times to run reports and backups that would cause minimal disruptions worldwide. But making sure these maintenance chores don't interrupt crucial business operations requires constant vigilance. Because workloads vary, IBM monitors site workloads on a daily basis, then adjusts its backup schedule accordingly. "With an international system, it's always prime shift [somewhere]," Clarke says.

"The scheduling of different time zones is a major thing and not to be taken lightly," says MagneTek's Pike, who is applying lessons he learned from deploying BaanERP at a previous employer's U.S. and Ireland locations to the current MagneTek project. In the previous project, he says, "we wanted to run datacenter backups on the East Coast [of the U.S.], but they were ready to start working at that time in Ireland." To sidestep this problem, MagneTek will implement two separate instances of Oracle 10.7 financial, manufacturing, and supply chain planning applications in the U.S. and Europe, primarily because it's so difficult to manage worldwide networks.

Key global ERP costs

Global ERP implementations incur additional expenses compared with domestic rollouts in the following areas:

Travel
Training
Documentation translations
Purchase of additional ERP modules to accommodate local tax laws
Upgraded telecommunications infrastructures
Additional consultants, who will command higher fees in some less-developed countries

Not all companies operate in the same centralized way. St. Paul-based Pentair, a $1.8 billion diversified manufacturer of water and fluid treatment control and professional tools, runs a mix of J.D. Edwards' WorldView 7.3x host-based and OneWorld 7.x client/server applications on AS/400 servers in seven countries, largely in order to take advantage of existing infrastructure. "It makes no economic sense to tear out what we have," says Pat Warner, vice president of IT with Pentair.

For General Motors, it's a matter of capacity. One central server simply can't accommodate 650,000 potential R/3 users in 50 countries. So GM has between one and three HP V-class servers in each of four regional server processing centers in Europe, North America, South America, and Asia Pacific. "If we get to the point where the network and servers can handle the volume of transactions a company our size would generate, we'd reconsider moving to a global central instance for easier maintenance and consolidation of information," says Al Stolpe, enterprise applications director with GM in Detroit. An instance is an installation of R/3. Depending on the context, global instance might mean that the customer is using one R/3 database worldwide.

It's not about technology; it's about change

Regardless of the kind of implementation a company has, technology is not the only concern. "ERP is not a technological implementation. It's change management, which is about people, processes, procedures, and new ways of doing things, which are always more taxing," says Anil Gupta, VP of marketing for supply chain solutions with Baan in Santa Clara. "Such things are difficult within a geography. When you go outside, communication is more difficult, and for change management to succeed quickly, communication is key."

Effective communication begins with language. MagneTek's Pike remembers his experience with a previous employer that expanded its German BaanERP implementation to France, and he had to assure his French counterparts that training documentation would be in their language. "The French made it clear that if they saw one word of German, they'd throw the whole thing out," he says. A French-speaking member of Pike's implementation team "spent hundreds of hours making sure no German words would appear."

Communication remains the primary obstacle to successful global ERP efforts. More than anything, it takes time to comprehend different languages and cultures. "You may think that people understand what others are saying, but they don't really," says David Johns, VP and CIO of Owens Corning, a $5 billion building-materials manufacturer headquartered in Toledo, Ohio. "The only way to bridge those gaps is to continue to communicate." At Owens Corning, all R/3 modules except payroll and human resources are in production in more than 80 sites worldwide, mostly in North America, with some in Europe and Asia. The company will finish deployment to other business units by first quarter 1999.

When Pentair began deploying J.D. Edwards' ERP applications in seven countries simultaneously, it had many communication obstacles to hurdle. "Everyone has the 'not invented here,' 'we've always done it this way' [mind-set]," says Pentair's Warner. "Overcoming those natural instincts and getting people to work together for a common process" ranks as a primary challenge for any company, he notes.

"Technology is not the issue at all," Warner continues. Fear, lack of understanding, and "some real honest-to-God cultural differences" make global ERP rollouts "purely a people problem." Indeed, during Pentair's European ERP rollout in 1996, the J.D. Edwards project team discerned many disparities in the ways American, French, and German businesspeople approach problems. Americans tend to be more apt to try something new, while Germans "want all contingencies in place before they start," says Warner. Germans can sound too "pedantic" to Americans, and Germans sometimes perceive Americans as "frivolous."


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