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Business Transformation

How complex is your ERP localization project?

Monday, March 7, 2016

Whenever you assume something about ERP systems across borders, assume you’re wrong. The surprises are always hidden in the details. The ERP localization challenge is a typical example of this: never underestimate local complexity.
You might have decided to use one language (English) across borders and streamlined your processes across your subsidiaries – that simplifies, of course, but still you are note home safe. Localization is not limited to languages – far from it! You will find that regulatory requirements vary tremendously from country to country. Just within Europe, VAT, taxes, regulatory requirements can be completely different from one country to the other. And then other practical things add up to this: have you taken into consideration the various options for internet access? Depending on the country language can be a significant barrier and finally culture plays a major role – or rather the difference between cultures – also within the same company.

 

Define your project’s cross localization index

Because I have spent the past many years dealing with this type of projects, I have analyzed the degree of diversity in regulatory requirements between different countries – as shown in the picture below. Note that I have set the global common denominator (ERP Localization Index) as index 100.

 

ERP Localization complexity

So, if a country has a localization Index of 110 and another country an Index of 105, the cross localization index of the two countries will be at 115 (100 + 10 + 5). The Cross Localization Index shows how much gap there is between the two countries’ local legislative requirements in a business management solution perspective. In the above graph Denmark has a Cross Localization Index of 109, meaning that the Cross Localization Index for Denmark in relation to, for example, Turkey is 130.

 

When does it become a complex localization? I tend to have a subjective limit around index 125. If the index is under 125 it is simple while indexes over 125 are complex. If the solution includes several countries, you can use the Cross Localization Index to calculate the multiple Cross Localization Index between the countries calculated.
Take for example the case of a company that wants to implement a core ERP system in Denmark, Germany and Malaysia. Let’s calculate the multiple cross localization index to assess the complexity of the task.

 

ERP localization cross-localization index

In this case, the Cross Localization Index is 100 + 29 + 23 + 34 = 186, so a fairly complex task.

 

Build an ERP localization scorecard to calculate risk

You can also work with the index to define the complexity of your local implementations, where localization will only be a part of it). I created a quick example below how a scorecard can be built:

  • Language: are there English-speaking resources locally? Can they actually really work in English?  (rate the risk from 0 to 3 where = is the lowest risk)
  • IT infrastructure: accessibility, internet access, power, risk of theft, etc. (0-3)
  • Localization: complexity of localization (0-3… for example, Russia or Brazil will here get a 3)
  • Transparency: do you really know what is going on? Is there a local partner you can trust? (0-5)
  • Culture: we work with the same standards and efficiency (0-5)

 

Pursuing with the example above, this scorecard will look like this:

ERP localization scorecard

 

Note that you can add or remove other aspects to build a model that fully fits your project. You can also reach out to me and I can help you assess the complexity of your localization project.
In an international ERP project, localizations are never a walk in the park. But there are tools to understand that complexity and plan around it. Have a look at our whitepapers about Local ERP Implementations to learn more about the localization aspect and understand the pitfalls related to ERP implementations in your subsidiaries.

 

 

 

 

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