Infosys-Oracle Blog

Large corporations gain a lot by embarking upon process standardization initiatives. Process Standardization in the longer run results in overall cost reduction for deployment and maintenance of ERP systems.

It's not always a bad idea to relook at the standardization from a fresh perspective when going for a packaged ERP deployment. It may mean heartburn for a few of those "oldies" in the organization to get rid of the so called "business practice" that they have been following for years but it does help in having a complete re-look at process standardization. Also in large organizations, standardization does not mean everything is the same accross the board - it may just mean a framework that has been laid out for individual companies or sites to follow so as to ensure uniformity accross the organization.
Organizations that ignore standardization initiatives pay a heavy price at a later date in terms of high maintenance costs.

While implementing a standardization initiative, one needs to carefully plan if this requires an ERP initiative. Sometimes process standardization can be driven by bench marking processes with industry standards (Process driven approach) and sometimes organization makes a call to adopt the package embedded best practices as their business processes (package driven approach). Both have their own advantages and disadvantages and while choosing the methodology, the decision maker needs to tie this with the overall deployment approach- top down vs bottom up. By experience, a package driven standardization is better handled through a Top down approach where senior management first accepts that the ERP processes are capable of meeting their long term business goals and objectives and then it is pushed down the organization for larger acceptability and implementation. In a process driven standardization, Bottom up approach may work better as business process needs to be collated from line level transactions and then bench marked- while doing this, it may make sense to keep back some of the existing processes as they are unique to business and are already optimized. Lot of companies (which are multi divisional) also approach process standardization in a 2 step process- first they compare processes of a particular function among the divisions and pick up the most optimal process for that function which is accepted and implemented in all divisions. This brings all the divisions into one standard set of processes for that function. In the next step, they compare this with industry practices or an ERP embedded process and adopt the bench marked process. The time to standardization in this approach is more, but it gives the organization some time for change management. In this case, a two pronged strategy will work better.

In an era of mass customization and constant change, companies need to ensure that while they continue to strive for standardization, focus on innovation should not be diluted. Stakeholders (internal or external) should have the capability to provide new ideas through feedback mechanism for continuous improvement which can then be further standardized across the organization.

There are few more considerations to standardization approach.Implementation of enterprise software has led to the motto “Common…and Global”. As a result companies are adopting standards in definitions and processes for global implementation. A Standard Implementation refers to a set of guidelines which is better known as a template or a blueprint allowing minimal deviations during rollouts. At times, these monolithic implementations indirectly lead to a situation, where established and efficient local practices are abandoned or compromised to make way for standardization. This in turn has the potential to create large scale organizational change issues and productivity loss in the short term.

Hence, the dilemma in establishing standardization in a global implementation is that a high degree of standardization – at the cost of limiting variations, could compromise effectiveness, acceptability and usability of the implemented system. On the other hand, a high degree of customization to accommodate a predominant local touch in a global implementation, could limit maintainability of the system. It is therefore critical to achieve the balance between Global and Local requirements while establishing the areas for process standardization, defining standard processes and monitoring the application of standards. It is extremely important to critically examine the current business processes and then evolve the right ‘standard’ process. There is one more factor that one needs to consider- the uniqueness of business processes that the company wants to retain to maintain its leading position. It may not make sense to standardize those processes which are unique and helps to give the business an edge in the market.

While identifying areas for standardization during implementation is relatively easier to achieve, it is difficult to define and implement acceptable standards for identified business processes. The degree of differentiation in the business process - identified for standardization, across the entities implementing the process could vary. This calls for an assessment to determine the approach to standardization. A high degree of differentiation will require a phased approach to standardization. This phased approach involves defining the standard process, acceptable limits for differentiation from the standard and a plan to converge from the variants of the standard to the standard process over a period of time.

In some cases as detailed above it may not be possible to converge to a common process due to statutory and legal requirements and the company may choose to continue with the differentiated process. A low degree of differentiation will lead to a quicker (in timeline) convergence to a standard process during implementation.

A Package Enabled Business Transformation exercise is suggested to derive the Ist iteration of the To Be Process enabling maximum utilization of the underlying package processes. Multiple iterations for the To Be process are carried out over a period of time within the limits of acceptable change to ensure the balance between common and global processes. This can be very well managed by highly sophisticated ERP packages- most of them now support integration of best of breed software for each area through robust middle ware integration like BPEL in Oracle and Netweaver in SAP.

A commitment to process standardization need not always be achieved at the cost of customization. It is important to accept the inevitability of customization in a global implementation to account for regional and legal requirements. As stated earlier, a compromise on customization for the purpose of standardization will surely affect the acceptance and usage of the implemented system. It is extremely important to analyze the impact of the customizations since it has a onetime impact during the implementation but has a continuous impact in terms of maintainability.

For some organizations the instilling discipline into the process has posed to be a greater challenge than standardizing the process itself. It has been observed that individuals who knew how to beat the system have been most effective in the legacy environment. This is a near impossible task with ERP Implementation. On analysis of several post implementation scenarios and looked into the complaints raised by users about the additional time taken to process transactions and the ERP implementations not living up to the commitment of improving cycle time, closing time and fulfillment time. In order to effectively reap the benefits of a standardization, the top down approach helps where all employees need to be in line with future objectives for which the standardization was done.