The Myth of Enterprise System Consolidation
Many government executives are “sold” on the idea of enterprise system consolidation, thinking it will save their organization money. These initiatives may include an Enterprise Resource Planning (ERP) implementation, which could eliminate the need for multiple “legacy” systems that serve various business functions. Or, the initiatives may include the consolidation of multiple systems that serve similar business functions across different business entities into one enterprise system. In a few rare instances, these initiatives may actually save money. For the majority, though, the organization ends up spending significantly more money operating, enhancing, maintaining and supporting the new “enterprise” system than they did their old legacy systems.
From the “seller’s” perspective, this approach makes sense (though I don’t support the approach). Very few governing bodies would approve a massively expensive enterprise system consolidation project if the only outcome they are made aware of is spending more money than on the old systems. In those cases, “the ends justifies the means” in the seller’s mind. They communicate a project budget that is well below what they know will actually be spent, savings from the resulting improvements after implementation that will never materialize, or both. I’ve been involved in four ERP implementations and several more enterprise system consolidation projects. I have yet to see one reduce the overall spend on system and support costs or generate savings that offset the project costs within the first few years. However, there are valid reasons for implementing an enterprise system consolidation project, which I will address later.
The myth of enterprise system consolidation projects in complex organizations includes:
- There are “one size fits all” solutions for enterprise systems.
- The new system will cost less to operate and maintain.
- The new system will result in savings due to process improvements within the first few years.
Addressing the components of this myth:
- There are no “one size fits all” solutions, especially for complex organizations such as government enterprises. These enterprises consist of dozens of agencies and hundreds of individual business models, most with different business requirements, processes, funding methods, and statutory requirements. If a single solution can meet 70-80% of the enterprise business needs, that’s fantastic.
- Legacy systems are legacy for a reason – they’re much less expensive to operate and maintain than any replacement system. Otherwise, it would have been replaced long ago. The new systems, by design, are more expensive to operate and maintain because they offer more functionality and flexibility and are more challenging to support.
- When implementing a new, more complex and flexible enterprise system, many process changes will be required. This usually results in a reduction inefficiency and productivity, at least initially. It takes time for staff to get used to the process changes and to optimize the processes and system. There should be many improvements, though, because the new system will enable processes and outcomes that were not possible with the legacy systems.
There are no “one size fits all” solutions, especially for complex organizations such as government enterprises.
An enterprise system consolidation project is a strategic decision short and mid-term, and a financial decision long-term. For example, an organization may need to move to an ERP just to continue to operate. Other drivers for enterprise system consolidation projects include system modernization, increased functionality, and improvements in flexibility, transparency, security, reliability, analytics and reporting. Establishing standards and improving collaboration are also drivers. Lastly, the enterprise system consolidation project may be required to lay the foundation for future strategic opportunities. For these projects to be successful, though, it’s critical to reserve adequate time for planning and enterprise analysis; plan for an 80% solution; include a hybrid solution approach; understand and communicate all the costs; include all the right people; and implement rigorous and effective project and operational governance functions to ensure expectations are set, managed and met.
A consolidated enterprise system does make sense for many situations including when an organization has a common strategy and business model across entities or when the same system is being used for the same purpose by multiple entities. For the latter case, consolidation could reduce license and support costs. However, most government organizations are not structured that straightforwardly.
Many of the most successful and progressive complex, distributed organizations, both public and private sector, are embracing strategies, technologies and business process changes that are moving away from centralization of technology services and the “one size fits all” solutions. These strategies could include an agile, adaptable enterprise architecture; hybrid cloud; hybrid enterprise systems; service oriented architecture; modular systems; low-code development structures; system interface and integration architecture; use of artificial intelligence and machine learning; comprehensive data management and governance structures; big data exploitation; and aggressive utilization of the Pareto Principle (80/20 rule).
Some critical components of these agile architectures include standardization of technologies, data and processes; a comprehensive and adaptable system interface and integration strategy; user and customer experience strategies; incorporation of security into all aspects of system design and development; and rigorous governance processes for projects, operational processes, and data. I do apologize for the overuse of buzz words and, at times, statements of the obvious. But, these strategies and components all need to be considered to cost-effectively sustain operations, stay current with technology, and continue to move forward
I know there are situations that will contradict my position. To the people that participated in those situations I say “Congratulations and well done! We can all learn from your success!” However, look at the numbers. Of the thousands of implementations, what percentage have actually done this? How many implementations failed completely? How many failed to meet their criteria for success? How many actually had criteria for success defined? I don’t have the data because a comprehensive data set does not exist. No government entity will want to admit they misrepresented, failed, or are spending more than expected. That’s political suicide. So, the message going forward is to be realistic and transparent and actively manage expectations. Government executives, legislators and constituents need to understand that what you’re doing is not only in the best interest of your enterprise but, more importantly, in their best interest strategically, operationally and financially. If you can’t demonstrate that, I recommend taking a different approach.