An ERP implementation can be daunting for any organization, but it is especially challenging on a global scale. Global organizations typically want to standardize business processes across international operations, but they also need the flexibility to serve diverse customers, employees, economies and regulatory bodies.
The decision to globalize or localize isn’t black and white. Every organization has different operational, organizational, cultural, regulatory and financial considerations. Let’s discuss some of the pros and cons of standardization and differentiation. We’ll also provide tips on how to balance globalization with localization.
Benefits of Global Standardization
International organizations, particularly those that acquire other companies, often have non-standardized business processes. Standardization allows these organization to scale for growth by consolidating business processes. Consistent processes drive operational efficiency and enable global visibility into operations. Financial reporting, for example, is faster and easier when processes are standardized.
While standardization can require a large investment in business process reengineering, you’ll ensure that all processes at all locations are designed to bring you competitive advantage. Global organizations lean toward standardization when they want to deliver quality goods or services with a high degree of predictability.
Benefits of Localization
Balancing Globalization With Localization
A balance between globalization and localization becomes even more important when you consider organizational change management. The need for organizational change management at global locations typically increases the more you standardize your processes. While standardization may save money in the long term, you’ll need to invest in extensive organizational change management in the short term. This means more than end-user training. It also involves communicating change impacts and project status updates.
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How Much Organizational Change Management?
The most challenging aspect of a global digital transformation might be aligning corporate culture around a singular goal. You must account for cultural differences and language differences.
Executive support is especially important during global ERP projects as local entities may be extremely resistant to globalized processes. People can’t embrace what they don’t understand, so you must communicate the reasons for transformation and how it will benefit employees and the organization as a whole.
Organizational readiness assessments are also critical to global projects. You can assess risk by analyzing your organizational attributes as well as the characteristics of proposed changes.
How Much Software Customization?
Does globalizing your business processes reduce the amount of ERP software customization you’ll need? Sometimes, but not always.
While you may be standardizing your processes based on a global standard, you’re not necessarily standardizing your processes based on software functionality. However, there is typically an overlap between globalized processes and processes that are standardized based on software functionality, as they both mostly involve non-value add processes. It’s probably safe to say that more globalization usually equals less customization (but more organizational change management).
Another strategy for reducing customization is to allow flexibility in each location’s choice of software and ERP vendor. This can make globalization more difficult than usual but not impossible.
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Final Piece of Advice
This may be your first global ERP implementation, but it’s not ours. Our ERP consultants understand the challenges of both globalization and localization and how to find the right balance based your organization’s unique objectives.