Migrating to a single ERP system for Finance can reduce the costs of financial operations by as much as 23 per cent, a new report suggests.
The Book of Numbers research study – released this week – was done by Atlanta-based business process advisory firm The Hackett Group.
It says a company can realize significant savings when – besides moving to a single ERP system – it implements consistent data and technology standards.
These three initiatives should be executed simultaneously, the report said. Doing any of them independently may lead to little to no savings, or even a slight increase in financial operations costs.
According to Hackett, the IT architecture of “world-class” finance organizations is based on a uniform and centrally maintained environment 98 per cent of the time.
However, only 82 per cent of all typical organizations can make the same claim.
The median cost of finance for companies with common applications and high standards was .99 per cent of revenue – 23 percent less than that incurred by companies that did not meet either or both of these criteria. This 23 per cent would translate into annual savings of US$2.9 million for a $1 billion company, according to the report.
The issue of having a single instance of ERP within the enterprise seems to crop up from time to time.
While it seems a no-brainer, some companies believe a single ERP system may be far too generic to meet varied or specific business needs. Also, with Web services and a seemingly renewed interest by firms in the application service provider (ASP) model, it may be in a enterprise’s best interest to shift away from centralized solutions and adopt on-demand and hosted applications.
According to Stamford, Conn. IT research firm IDC, roughly 80 per cent of software today is still sold via a perpetual license. By 2008, however, IDC predicts that 34 per cent of worldwide software licenses will be sold as subscriptions.
Ultimately, enterprises will have to determine what is right for them. When going the centralized ERP route, firms can get started by first assessing the systems they’re using said Mark Krueger, finance practice leader, The Hackett Group, in a statement.
“How many are there? How standardized are they? Are differences being driven by real business need, or by some combination of happenstance and perhaps practices established before parts of the company were joined in a merger?” Krueger said.
Careful planning and the consideration of options such as outsourcing and shared services are also critical, as is strong support from senior management, he added.
“Reducing complexity and creating a centralized system for finance can be exceptionally challenging. But the potential rewards are significant.”