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Microsoft Dynamics AX Company Split

March 4, 2017

 

Company Split and approaching the Dynamics AX/systems part of the project

As we have seen, a lot of businesses like HP and Google are splitting their enterprise into different companies. These are large projects for the business and IT to undertake. Of course, these decisions are driven by business reasons, such as regulatory requirements, a monopoly in an industry, a portfolio that is too big and diversified to manage, getting ready to sell off part of the business, limiting liability to certain parts of the business, tax liability, and so on.

 

We recently helped a large customer in splitting their Dynamics AX and enterprise systems. At a high level, it may sound as easy as creating separate legal entities in Dynamics AX, and that it probably wouldn't take much time. However, there is definitely a lot more to it due to business process impact, business decisions to be made for operational impacts, and changes to the overall ecosystem of the enterprise architecture. Here are some of the high level areas to consider while approaching such projects.

 

Master Data Management

  • Customers: Manage credit limits, statements, customers in each company.

  • Vendors: Manage vendors for each company, multiple account numbers with the vendors.

  • Product Management: Product catalog maintenance in each the company. Business rules for defining Products available in each entity

  • Intercompany Pricing (transfer pricing for intercompany transactions)

  • Banking: Bank accounts and reconciliation

  • Employees, Organization hierarchy and related workflows will have to be revisited.

 

Integrations

  • CRM and Website: If integrations are designed to work with only 1 company in AX, it may be time consuming to upgrade them. Also, if legacy applications do not have the concept of company, you may need to review your options, including replacing the application in question.

  • Invoicing processes including EDI may need changes and testing. You may end up creating multiple trading partners for EDI, and testing with the partners may, of course, be needed.

  • Sales Tax Integration for each company, certificate management for customers and tax reporting for each legal entity

 

Sample Transaction flow in the new world after splitting the companies

These are a few areas which need to be explored. However, IT solutions are dictated by the needs of the business, and some of these complexities may or may not be applicable based on your scenario. E.g., if you are splitting into totally different businesses that are not going to buy/sell from each other, then you may not have to worry much about inter-company trade.

 

Along the same lines, if operations does not demand for arm's length transactions between legal entities, your solution may be to add legal entity as a business unit and use it to address your reporting needs. It can be the least expensive option when considering all available solutions.

 

At other end of the complexity spectrum, we may have, for example, a customer that serves the military and governments with security systems. In that scenario, the parent company is not allowed to influence the operations of each subsidiary, so the solution will require a lot more effort.

 

If you have questions on this topic, contact us at info@realdynamics.com

 

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