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Integrating All Information Assets Part Two: Why is integration an issue?

Written By: Cindy Jutras
Published On: April 15 2004

Integrating All Information Assets

As we continue to explore the extension of ERP for the express purpose of maximizing profits in the world of e-business, we seem to come back again and again to the topic of integration. More and more companies today face a significant challenge in integrating multiple business applications. This is the natural result of fewer companies running a single, all encompassing business application, either in a lone facility or across multiple sites of a multinational, multi-organizational enterprise. The inability to integrate leaves an incomplete or disjointed view of your enterprise.

In addition we have seen the growing need to effectively inter-operate within an integrated business community. The inability to integrate can prevent you from actively participating with the most successful value chains. In our definition of full e-business integration we uncovered the need for new business models that involve multiple companies working cooperatively and collaboratively together, in a seemingly seamless manner, as if they were a single, virtually vertical enterprise. All these factors only increase the importance of integrating all your information assets. And successful integration paves the way for profits.

This chapter will examine this growing need for enterprise application integration, and as we do so, we uncover the magic number three. There seem to be three general reasons why this becomes a critical issue, three levels of integration that need to be considered, and three alternative approaches to the problem.

This is Part Two of four-part excerpt from the book ERP Optimization (Subtitle: Using Your Existing System to Support Profitable E-Business Initiatives) and is available through www.crcpress.com.

Parts One and Two present the reasons integration is an issue.

Part Three covers what constitutes integration.

Part Four discusses what approach you should take.

Why is integration an issue? Reason 2

The second reason for this growing challenge has resulted from the merger and acquisition frenzy of the past decade. Many companies have grown predominantly by acquisition. And with the acquisition of a company, comes all the software that was installed and implemented at that company. In some instances these companies were fully integrated into the acquiring company, in which case migrations and re-implementations were the name of the game. This was the case for Belden Brick. Belden, is a quality leader in architectural brick. In an effort to strengthen its position in a consolidating market, Belden acquired Redland Brick in order to gain added economies of scale and maintain its leadership position. Belden valued Redland's brand identity in its separate markets, yet needed to leverage information within both companies in order to take full advantage of the synergism between the two. At the time of the acquisition, Redland Brick had just completed a successful implementation of an ERP system, but Belden Brick was still struggling with a partially complete, and not entirely successful implementation of a different ERP system.

In this case the ERP strategy for the newly merged enterprises proved to be the replacement of the partial implementation of the acquiring company's ERP system with the same ERP system its acquisition had successfully up and running. Which ERP system was kept and which was discarded proved to be far less significant than the approach. The fact that Belden Brick recognized the need for executive commitment and objectivity in the selection process is a tribute to their management.

This was exactly opposite to the case of a valve manufacturer who will remain nameless. This company embarked on an ERP implementation without any kind of commitment to change, and therefore it unnaturally and unnecessarily constrained its new system to behave like its old, ineffective system. Before it completed its implementation of this new system, its was faced with a new challenge. Its parent company decided to consolidate business units and therefore the company was merged with another division. Being the larger of the two operating units, this company was favored with the status of being the acquiring division. The business unit that was acquired had successfully implemented an early version of an ERP system, and had been productively running it for many years. Yet, contrary to the objectivity demonstrated by the management of Belden Brick, the decision here was to discard the successful implementation of the inherited system for the new, unproven, and unsuccessful implementation of the acquiring division.

I wish I could say that my experience has proven that this kind of decision is typically reached with the objectivity and due diligence exhibited by Belden Brick. However, more often than not, in a contest between "your ERP or mine?" the acquiring enterprise is typically the winner, for better or for worse.

When Acquisition Does Not Include Integration

But mergers and acquisitions do not always result in this kind of operational integration. In many instances these acquisitions remained as separate and autonomous operating units, in which case the inherited systems may have survived. And now corporate management has a problem in gaining a unified view of all their operating units and inter-operability between divisions is a challenge, to say the least.

This is the situation in which we discovered Myers Industries, its CEO, Steve Myers, and its CIO, Andrew Winer. Myers Industries has grown by acquisition. Today Myers and Winer operate twenty-five manufacturing facilities in North America and Europe, forty-two distribution locations in over thirty-one states, resulting in the operation of many different ERP and other related business information systems.

Because each operating unit or division of Myers was allowed a degree of autonomy, both in plant operations and information management, the result was a proliferation of business systems, which was preventing Steve Myers from gaining a consolidated and unified view of his business. It was also creating a roadblock to fully leveraging the business strategy of acquiring companies with complementary products. Without that consolidated view of customers it was impossible to exploit all sales opportunities across the combined divisions' base of customers.

Why is integration an issue? Reason 3

And finally, the third reason behind this challenge is the emergence of e-business, and the changing paradigms that this emergence brings. This evolutionary process bring us through the generations of e-information, e-commerce and finally full e-business integration. Among the conclusions we can draw is the observation that no company today can operate in isolation or even at arm's length from customers, suppliers, and partners. Boundaries between businesses are blurred.

Successful e-businesses of the future will be those who treat e-business as the collection of processes, which allow multiple companies to work cooperatively and collaboratively to produce a seemingly seamless integration of businesses operating as a virtually vertical enterprise. And with this integration of business processes comes the requirement to integrate disparate business applications.

So, whether the need for integration arises from the proliferation of business applications within your own enterprise, the results of mergers and acquisitions, or from the demands of e-business, integration emerges as a significant challenge in responding to the demands of business today. What then constitutes integration and how to you go about meeting these challenges?

This concludes Part Two of four-part excerpt from the book ERP Optimization (Subtitle: Using Your Existing System to Support Profitable E-Business Initiatives). This book is available through www.crcpress.com.

Parts One and Two present the reasons integration is an issue.

Part Three covers what constitutes integration.

Part Four discusses what approach you should take.

About the Author

Cindy Jutras has over twenty-nine years of experience in applying software solutions to business problems. Experienced in a wide range of functions related to the software industry, including sales, marketing, product development, customer support and product management, she is also an industry observer and trend-setter in business and business applications. Having worked with manufacturing companies for the full extent of that time, she is both a visionary and a pragmatist.

She is currently the Director of Solutions Management for SSA Global, since their acquisition of interBiz, previously a division of Computer Associates. At Computer Associates she was the divisional Vice President of Product Strategy and was instrumental in defining and guiding the product direction of ERP systems as well as advanced technology products.

Ms. Jutras' work has been published and she is frequently quoted in industry publications on a variety of topics including manufacturing, ERP, e-commerce and e-business management, and CRM. She is the original author of the concept of "Virtually Vertical Manufacturing" and speaks at industry events on this and other topics.

 
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