ERP burst onto the IT scene in the 1990s and brought with it a debate within companies, implementation consultants, and vendors. And it's one that you will likely engage in within your own company: should you pursue a single, integrated ERP or implement multiple best-of-breed solutions?
If you’re wondering how to approach an ERP project and how to get your business ready for implementation, check out our recent eBook, “Making the ERP transition – A guide for CFO’s and decision makers struggling with the growing pains of successful NZ businesses.”
The debate begins with the premise that no ERP product will satisfy 100 percent of an organisation’s business process needs. Best-of-breed solutions are typically designed to do one or two things, but in a way that can meet highly specialised requirements.
A single ERP solution ensures that business processes are tightly integrated and that data exists in only one place to be used for transaction, execution and analysis. Best-of-breed solutions on the other hand, may split processes between software modules, requiring duplicate transaction entry and the development of interfaces to keep multiple databases in sync.
A single-vendor solution delivers new software functionality by upgrading software releases as they become available. Since a best-of-breed approach brings with it a combination of vendors, this strategy may complicate the implementation of new software releases, which can delay or limit the availability of necessary new functionalities. A best-of-breed approach also adds to the cost of development and maintenance of interfaces.
So how do you know which path is right for your business? This is a philosophical question you’ll need discuss within your organisation, but the following are some good starting points to get the conversation going.
Define your organisation’s competitive advantage.
Before you begin weighing up vendor options, the most important first step in selecting an ERP system begins with defining your competitive advantage – i.e. what is the thing that will put your company ahead of your competitors?
Most ERP solutions cater to ‘business-as-usual’ demands well – but getting your accounts receivable to more efficiently communicate with your accounts payable is unlikely to allow your business to leapfrog its competitors.
Will your organisation gain a strategic advantage through more efficient processes? If so, this function should be the top priority in the ERP selection process, since it's the one factor you cannot afford to compromise on.
Wait. Why should I compromise?
Regardless of whether a ‘best-of-breed’ or an ‘integrated solution’ is right for your business, it is unlikely that any solution will completely match your current and future requirements.
You will need to face the fact that there will have to be compromises on some things – but your decision about what functions you’re prepared to compromise on should be based on your competitive advantage.
Consider this: If an integrated ERP system can meet 80 per cent of the needs of your business, where does your competitive advantage or value proposition lie? Is it within that 80 per cent? Or does it fall in the 20 per cent outside? If it's the latter, you may want to consider a best-of-breed approach. Or, consider customising your ERP system or integrating a third party solution to fill that gap.
How do you know when your organisation is ready for an ERP change? Take our short evaluation questionnaire to find out.
Want to avoid a wasted ERP journey for your business? Download our full guide to get more in-depth insights, advice and strategies to help you achieve stakeholder alignment in your business, so that you can experience the benefits of a modern, efficient ERP backbone for success.