How to Understand Single Versus Multiple Software Instances
Executive Summary
- The flaw in the single instance concept generally.
- Making decisions based on narrow IT objectives.
The Flaw in the Single Instance Concept Generally
In fact, “a single instance” is not only frequently fool’s gold in ERP but other enterprise software categories as well. For instance, in supply chain planning, one of the worst things a consultant can do is get staffed on a global “single instance” project. This is because it leads to seemingly endless debates with the other region as to how the system will be configured, and each region believes that the configuration settings that work for them should be the ones to be used. Typically, the region where the company is headquartered gets its way – and the other areas must deal with a system, which is poorly configured for their needs. On one project, the region that first implemented the software deliberately misled the other regions regarding what functionality was available. The system would only be configured the way it wanted it to be. This is IT colonialism. Regions care about themselves first and foremost, and one region cannot trust other regions to perform solution design for them. As the site Brightwork Research & Analysis where single and multiple instances are costed, we have placed this disclaimer on the instance selection.
“An instance is an installation of the application. For instance, most companies will have multiple ERP instances if they are global — each country requires its financial system. Multiple instances can be quite positive as it allows the application to be customized for a particular environment. This factor, while related to user number, is treated in this analysis is independent of it.”
In the vast majority of cases, single instances serve IT’s interests, but not the business.
Making Decision Based on Narrow IT Objectives
Narrow IT objectives are responsible for a host of ills that plague systems implementations. It is often forgotten that purchasing enterprise software applications is to gain functionality that is capable of meeting business requirements. It is undoubtedly desirable to keep IT costs low, but that can never be the primary driver of IT strategy decisions. Furthermore, it is strange to see companies, which purchase software from the tier 1 ERP vendors and then turn around and claim that they will need to save money in other ways. “Saving money” does not begin by purchasing the highest TCO applications and then attempting to cut corners in critical areas. The following are examples of narrow IT objective decisions:
- Outsourcing IT: Here, to save money, IT is outsourced to a low-cost country.
- Interestingly companies will pay top dollar to a major consulting company but will not spend domestic employees to support the application. I work in many companies as a consultant; I have yet to see any business users happy with outsourced support. It is sad to say that CIOs will often not care much if they find their IT support incredibly unhelpful. The CIO is measured on how they can keep costs down. For many CIOs, the business’s problems are their problems.
- Single Instance Applications: While there are many requirements in companies, which differ significantly based upon the region, IT will attempt to generalize the requirements to lower its costs. However, are its costs lower? This very much depends. There are a few applications that can make a lot of sense to be a single instance. One of these is bill of material management software. This software is used to allow multiple departments within companies to collaborate on the bill of material – it also will enable suppliers and contract manufacturers to collaborate. However, this software does not need to be configured explicitly for different regions – and having a single universal system happens to be a great advantage.[1] However, few applications are of this type. It is far more common that applications require configuration specific to a region, division, etc. It is also exceedingly rare for this a bill of material management application like Arena Solutions to require customization. The more configuration and customization (custom code) that any application needs, the more difficult it is to make those applications be a single instance. Of course, ERP applications are some of the most intensively customized applications in any software category.
Conclusion
It is not true that single instances applications save money. CIOs tend to present simplistic platitudes on this topic, but in truth, they don’t know. Many of them rely upon consulting companies or major monopolist software vendors for advice, both of which are financially biased. Neither of them spends time or effort-investigating cost versus benefits. Let us remember, both of these entities are attempting to maximize their profits, not the profits of their clients.
They have no fiduciary responsibility to place their client’s interests ahead of their own. CIOs and large consulting companies, and monopolistic software vendors also do not consider the broader implications of the overall software purchase – such as the business’s ability to gain value from the application. CIO’s have their incentives, and they would not be above engaging in some rhetoric to make a point.
At Brightwork Research & Analysis, we estimate the cost components to single versus multiple instance implementations. The following costs behave the following way as a company moves from a single instance to multiple instances:
- Maintenance Costs: Increase
- Hardware Costs: Increase (although hardware costs are such a low percentage of the total cost of ownership of any enterprise software application that this is not a deciding factor)
- Implementation Costs: Decrease. Single instances – for most applications (those that require more specific configuration) mean more effort in driving to compromise on how the software will be configured. This is because the configuration will serve the needs of some regions, subsidiaries, etc.. but not others.
- Software: Neutral
However, as I stated earlier, costs cannot be the determining factor in an IT strategy. Any concept, which reduces the fit of the application to the business, reduces the probability of success of that application. Up to this point, we have primarily restricted the discussion to implementing the same application in one or multiple distinct areas of the business. However, what if one distinct area prefers an application from one software vendor while another prefers another software vendor? Obviously, in this case, a single instance is not even possible. So what is the resolution – should one region sacrifice and choose to use the other region’s application? If so, which region will have its way? As I have said, it is not at all difficult to predict. However, the region with more political power will get its way is that the right way to make decisions.
[1] This topic is explained in detail in the book Bill of Materials in Excel, ERP, Planning and PLM/BMMS Software