Enterprise Resource Planning (ERP) systems are typically designed to centralize business processes into a unified information system integrating various business operations. The goal is to create a single source of truth for organizational data and processes.
However, many organizations operate multiple ERP systems simultaneously, a structure sometimes called two-tier ERP. In this architecture, a company may run one ERP at the corporate level and separate ERP systems in subsidiaries or divisions, allowing local units to maintain independent processes or specialized workflows.
Especially considering big organizations with international reach and multiple branches, it sometimes becomes necessary to use multi-ERP systems to integrate business functions that operate in different contexts.
This approach contradicts the ideal of a fully centralized ERP architecture, but in practice it is very common in large enterprises. This leads me to question whether ERP systems follow their own premise in large enterprises or if they become counterintuitive in their practical implementation, potentially creating more silos than unity.
Outside of regional differences, there are also other reasons why multi-ERP systems coexist within a company. One of the main reasons for this is corporate mergers and acquisitions. When companies merge or acquire other companies, it is not always cost-effective to dismantle an existing ERP system to form a single centralized one. This leads to a business decision to keep both systems operating at the same time.
Example (taken from source cited below):
"Case Study: Kraft Heinz
The 2015 merger between Kraft Foods and H.J. Heinz Company created a $46 billion food and beverage giant operating in over 40 countries. Pre-merger, Kraft ran primarily on SAP, while Heinz operated a complex mixture of Oracle, SAP, and legacy systems across different geographies. Five years post-merger, the company was still running multiple ERP instances, with integration costs exceeding initial estimates by 300%. The complexity stemmed from different product portfolios, regional regulatory requirements, and deeply embedded business processes that could not simply be overlaid onto a single system.
A 2019 internal assessment revealed that forcing immediate ERP consolidation would have cost an estimated $800 million and taken four to five years, during which business disruption risks were deemed unacceptable. The company instead opted for a phased approach focused on integrating financial reporting while maintaining operational systems, a pragmatic decision that left multiple ERPs running indefinitely."
In conclusion these systems promote flexibility for business units by providing systems tailored to their operations rather than forcing a one-size-fits-all ERP, there are concerns about data fragmentation. Even though it may support operational flexibility, it can risk data integrity. It may make it difficult to obtain a single view of business operations and reduce organizational visibility. These situations are exactly what original ERP systems try to mitigate. Separate ERP systems may maintain different structures, causing inconsistencies across the organization, which can contribute to a poor user experience, increased costs, and a loss of efficiency.
Source:
https://www.linkedin.com/pulse/why-global-enterprises-end-up-5-erpsand-one-can-shut-andre-jerqe/
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