Many companies have been standardising their operations using Enterprise Resource Planning (ERP) such as SAP in order to improve efficiency and strengthen governance across their local and offshore operations. By unifying core business processes through systems and enabling visualisation and control of each site, it is certain that integrated management of the entire company has been accelerated.

While these achievements are significant, they are only part of the story. Once the initial benefits settle in, new and often unexpected challenges can surface. To navigate global ERP implementation successfully, it’s essential to recognise both the strengths and the potential pitfalls.

The Upside: Stronger Governance and Faster Decisions

The first benefit of implementing ERP is the realisation of information visualisation from the headquarters’ perspective, and the acceleration of decision-making. By having teams in Australia or New Zealand, along with key offshore locations, operate on the same system, real-time data collection has become possible, making governance by headquarters more efficient. It can be said that the establishment of such a global standard system has contributed to strengthening the management foundation of the entire corporate group.

The 3 Hidden Traps That Can Derail ERP Success

However, behind this standardisation, various issues have come to light at local bases. If these challenges are left unaddressed, they can undermine the very goals that drove ERP adoption.

1. Mismatch of Cost and Returns

There are many who say, “We are being charged high system usage fees, but we don’t feel that the benefits are commensurate with the scale of our business or the actual usage situation.” Even though advanced analysis tools such as Business Intelligence (BI) are provided, there is a lack of know-how and training on how to use them, and there are many cases where they are not being used to their full potential in the field.

For instance, an Australian manufacturing business with offshore suppliers might pay for advanced reporting and compliance features, but they’ll see limited value if local teams are not trained to use dashboards for supplier performance, lead times or quality trends.

2. Local Businesses are not Covered

As a result of headquarters leading the consolidation of functions into standardised systems, there are cases where the needs of local or regional operations are not given sufficient consideration.

This is a common predicament for companies operating across multiple locations. Such companies might find that applying head office standards for credit decisions and credit management slows decision-making and risk responses, potentially leading to missed business opportunities. In this scenario, teams may also struggle to access detailed customer transaction histories, and sales staff responsiveness can decline if they are required to enter data that is not relevant to their local operations.

3. Stagnation And Rigidity of On-Site Improvements

Standardisation has led to an increasing number of improvement proposals being rejected as being outside the scope of the standard system, leading to a growing sense of resignation on the grounds that no improvements will be made anyway. The speed of improvement is also quite slow. Furthermore, even when the same system errors occur repeatedly, the headquarters does not provide sufficient explanations or responses, which leads to further frustrations on-site.

In such a situation, it becomes difficult to generate original ideas and improvement proposals from the field, and there is a risk that the flexibility and responsiveness of the entire organisation will gradually be impaired.

Future-Proofing Global IT Operations: Balancing Control and Local Flexibility

In the future, the key to a company’s sustainable growth will hinge on balancing strong head office governance with the freedom for local teams to optimise how they work, including in offshore operations that support supply chains, service delivery and shared functions.

Recommendations for “Hybrid” IT Operations

• In core areas (e.g. accounting and finance), we thoroughly implement ERP standards that enable global control.
• For non-core areas (e.g. sales and marketing) and local-specific operations, we flexibly introduce light solutions such as SaaS that meet local needs.

With the trend towards lighter business areas where ERP is being introduced and the rise of SaaS solutions, this type of “hybrid” operation is effective.

Key Points for System Development

• Clarifying the division of roles and governance between headquarters and local offices
• Establish a system to accept improvement proposals from the field
• Facilitate locally led solution implementation and testing

It is important to establish a system that benefits both the head and local offices, such as a Business Relationship Management (BRM) function, or the establishment of a Centre of Excellence (CoE).

Conclusion: Moving Beyond Standardisation

Standardising business processes with ERP at its core has achieved some success in the globalisation of companies, but going forward, this alone will no longer be enough.

What is needed is a next step that not only increases control from headquarters but also increases flexibility and responsiveness at the workplace. How a company builds a flexible and sustainable global management system based on standardisation will be a turning point that will determine the future of the company.

Note: This article is based on content originally written by Ryota Ichida and published by NRI Australia Holdings, and has been adapted for an ANZ audience.