Going global with ERP: Page 2

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To span the communications chasm, Pentair's HR department ran a cultural dynamics class. As part of a meeting that spans several days, the management teams from each country track their everyday expressions, like "go for the gusto" or "my two cents' worth" Americanisms. Such sayings are "absolutely meaningless in other languages and can't be translated," says Warner. Projecting each country's clichés onto a screen made the discussion more enjoyable, a technique that fostered cooperation, he notes.

Key global ERP challenges

Overcoming cultural, language, and operational differences
Mastering communications
Adhering to local legal and tax requirements
Supporting systems across different time zones

But even with goodwill, different languages still present an unresolved problem. "Its difficult to support French users from a German-speaking help desk," Warner says. "We haven't figured out yet how to do that."

Cooperate for consistency

Convincing people who work across the globe to cooperate with one another is the first step toward successfully implementing a standard set of business applications. Achieving such consistency is hardly a slam-dunk proposition, however, especially if the global entities started as separate businesses.

Toro hopes to go live in Australia this July with a smaller version of the R/3 manufacturing, sales, general administrative, and accounting packages that it runs at corporate headquarters. When Toro acquired the Australian company two years ago, the two operations didn't jibe. For one thing, each facility analyzes and reports sales and profits differently. So adopting consistent financial systems will let managers in both companies match results uniformly, which will enable quicker responses to customer queries, says Toro's Hansen. "We had to communicate that to [the Australian shop], persuade them it's a usable model, and get them to go along with it," he says. "It's difficult for them to understand the Toro model to begin with, and the SAP model is set up to support Toro's business model."

Lessons learned

Reengineer business processes before implementing the software. To do otherwise presents too many moving parts and adds layers of complexity, says David Johns, VP and CIO of Owens Corning.
Be prepared to work hard. "Anyone who attempts [a global ERP rollout] has to appreciate that," says Steve Hansen, VP of corporate IS with The Toro Co.
Establish adequate communications and issue-resolution processes to manage disagreements. Compared with their "energetic, highly results-oriented" manner, says Toro's Steve Hansen, "Australia finds our pace glacial in nature."
Obtain top executive support. When IBM SSD hired an experienced local manager for its Singapore plant, the manager "was used to running his own systems and wanted local control [of the system]" says IBM's Millie Clarke. SSD's president persuaded the plant manager to try the centralized approach for one year, with the entire system in California.
Relocate team members to a central location. ERP project managers agree that bringing people together from around the world is critical in order to achieve cooperation and development of consistent business processes.
Don't underestimate training. "Intensive pre- and post-implementation training and support are required for about three months before and after. Then, ongoing training is required," says IBM's Millie Clarke. "Procedures and processes can fall by the wayside, especially with the high workforce turnover in some developing countries."
Deal with language differences. Tom Pike, CIO of MagneTek, has bilingual trainers on his Oracle project team for the company's rollouts in Italy and Hungary. "When we train overseas, we want to do it in the local language," he explains.
IBM SSD encountered similar problems when it was coordinating development efforts among three locations in the U.S., Singapore, and England. English managers had definite ideas about how customer orders should look, while Singapore coordinators had strong views about manufacturing issues. After project leaders brought the teams together to illustrate how a change to one component affects every other part of the system, everyone agreed that central development made sense.

Adding up the costs

Costs accrue in global ERP rollouts that are absent from domestic implementations. MagneTek's Pike says an international implementation costs about 5% more, with cost items including travel and translations for training material. IBM's Clarke estimates that it may cost 20% more for a single international implementation than for a domestic project, due to higher international networking costs and travel.

Kyle Pond, research analyst with Gartner Group, doesn't necessarily agree. "Most companies who implement globally have global support. Costs are relative on a regional basis, so saying one is more expensive is not necessarily true," he says.

It may be better to say that costs will depend on the company doing the implementation. "It's difficult to put a percentage on incremental costs. It's more a question of how [companies] approach it. Domestic [implementations] can be more expensive if you don't address the real issues and don't have the support from the business die," says Thomas Schober, vice president of Boston-based Plaut Consulting. "From my view, the key is to have the company lined up before you go there, and the support of different business executives to make sure in their division, their country, or their site, what the goals to accomplish and functions needed to execute are."

Toro's Australian company used to send financial results to the corporate office at the end of each month and quarter. Using R/3 enables it to send real-time transmissions, but that requires replacing dial-up communications with leased lines that will cost about ,000 more per month. With few employees in Australia having enough R/3 experience, Toro had to hire one implementation consultant for every three employees there, compared with one consultant for every nine or 10 workers in the U.S. Even with such expenses, ,000 for additional software licenses is Toro's big-ticket item, says Hansen.

Travel expenses add up quickly for many companies. Consider Bay Networks, which spent about ,000 to send some nine business analysts and developers to Ireland for two months. "A month before cutover, people were doing training," Taborga says. "Then they stayed there for a couple of months to ensure that everyone was assimilated and knowledgeable. Travel costs alone were high compared with a local implementation."

The benefits outweigh the challenges

Despite the incremental costs, many ERP project managers believe they actually save money through international rollouts. GM and Pentair both saved a bundle by negotiating global contracts rather than individual regional deals with SAP and J.D. Edwards, respectively. Applying the experience gained through a domestic implementation to an international deployment also saves money through faster deployment cycles. "You avoid a lot of rework in different regions of the world because you can jump start those implementations," says GM's Stolpe.

With help from Deloitte & Touche consultants, Pentair is developing a template of a J.D. Edwards installation, which will enable the company to institute best-practice processes in all facilities without reinventing the wheel every time. Each country's laws require specific financial reporting structures, but Pentair can apply cookie-cutter methods for processing orders, paying bills, and other business applications. "This should make us more efficient and enable us to integrate new acquisitions more efficiently in the future," says Warner.

To deploy ERP systems globally means project team members must put in long hours of hard work, often far from home, with people who approach business challenges in dramatically different ways. "It's not only a geographic [challenge], but [it's also] a cultural challenge to get synergy within your team," says MagneTek's Pike.

Standardized ERP systems that result in greater customer satisfaction through smaller inventory backlogs and faster product deliveries can also translate into huge financial benefits. That's certainly true for Dallas-based Texas Instruments, a semiconductor maker that will run one global instance of R/3 on Sun Enterprise 10000 Servers for several sites in the U.S., Europe, and the Far East. The first half of TI's solution, which will be a global implementation of financials and procurement, will be up and running in January 1999. The second half, slated to go live in August 1999, will involve sales, distribution, and logistics. "We're talking about hundreds of millions of dollars of profit impact per year from both revenue and cost improvements," says Phil Coup, TI's CIO. //

Emily Kay writes about technology as a principal with Choice Communications, an editorial consulting firm in Chelmsford, Mass.

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