The Subsidiary Ecosystem: Some are more equal than others
When defining a strategy to manage your global subsidiary ecosystem more effectively, critical to this process is considering the different kinds of subsidiaries. As George Orwell might have said, all are equal, but some are more equal than others.
Basic Sales Office
On the simple end of the spectrum, you have your basic sales office. Here you are managing customer relationships, coordinating the delivery of products or services, and, if in a different country from Corporate, managing local financials and delivering these to Corporate on a routine basis. SAP internal surveys of customers indicate that these kinds of subsidiaries are about 25% of the total.
Service Delivery Organizations
Moving up the complexity scale you might find a couple of different types of service delivery organizations, from subsidiaries that do repair and maintenance of Corporate products, to sophisticated organizations that provide professional services or engineering services. (I would put outsourced R&D teams into this bucket.) While a subsidiary that is doing maintenance, support, and repair will probably only want CRM capabilities, and maybe Financials; more sophisticated service organizations will also need to manage projects, resources, employee utilization, and profit and loss for the business. These teams are going to need a complete business solution. We believe that this kind of subsidiary comprises about 35% of the total subsidiaries.
Continuing our move up the complexity spectrum, you get to Distribution organizations. These subsidiaries will need to manage all the process associated with managing customers, taking orders, managing supply chains, optimizing supply-demand match, and ultimately delivering products to customers on time. Not every distribution operation will be as complex as some of the service subsidiaries, but in general, more is happening in distribution. This kind of subsidiary makes up about 25% of the total mix.
Lastly, you have manufacturing subsidiaries. These are typically the most complex and need the most application capabilities. They have to do everything distributors do, but also manage and produce high quality goods, which adds a lot of complexity. Manufacturing subsidiaries are typically about 15% of total subsidiaries.
So I may be sounding like the voice of doom about now. You have many different kinds of subsidiaries, most are complicated to manage, they all have different needs, they are spread out all over the place, and they are all running different applications. Pretty much mass chaos. But it does not have to be this way.
What many companies are doing is taking a cloud-based, 2-tier ERP approach to manage their subsidiary ecosystem.
Because cloud solutions allow you to implement only what each subsidiary needs, you can standardize on the same ERP solution across your entire portfolio of subsidiaries. All your subsidiaries get what they need, regardless of size or complexity. To see a short video on 2-tier ERP, go here:
If you want to learn more about reducing complexity, and getting higher value from your subsidiaries and independent business units, join me, and China Martens from Forrester Research, for a webinar where we will discuss the challenges of managing a subsidiary ecosystem, what can be done to balance the needs of Corporate with the needs of subsidiaries, and how to get the best ROI from your subsidiary investments.
Register Here! For the Webinar: Connecting the corporate body: The importance of subsidiary management
Date : Tuesday, October 30, 2012
Time : 10:00 AM Pacific Daylight Time
Duration : 60-minutes
Pretty sure this has been a well known, well documented strategy for 2+ years.