Best of Breed vs. Integrated ERP

We have all heard the proverb “A chain is only as strong as its weakest link.”   Applying this concept to business software, we would conclude that a business solution is only as strong as its weakest integration.  Usually overlooked and underestimated, integration is one of the most important factors to consider as part of a best of breed vs. integrated ERP solution.   The benefit of richer functionality is limited by partial integration.   In the next sections, we will discuss all the factors to consider as part of making an informed decision regarding best of breed vs. integrated ERP.

Best of Breed versus Integrated ERP

The typical value proposition for best of breed software is the deeper and industry-specific functionality provided.  This advantage is especially important for generating competitive advantage.   It is vital that an organization’s revenue-generating business processes are competitive.  However, it is not strategic to an organization to be competitive in non revenue-generating business activities.  Consider the following:

Advantages and Disadvantages with Best of Breed vs. Integrated ERP

Advantages and Disadvantages with Best of Breed and Integrated ERP

Allow me to expound on a few key facts expressed above:

  1. Integrating a best of breed application with ERP software will result in additional cost and maintenance (ex. dual upgrade and maintenance cycle).
  2. Developing integration between a best of breed application and ERP software will not be as robust as the delivered ERP integrations between its applications.  Part of result has to do with the total integration cost over the life of ERP and the other area is the simple fact that the underlying data models are different.

The question I challenge my customers with is “Will having a best of breed software versus integrated ERP worth the cost?”  Will the additional investment generate a significant impact to competitive advantage?

Allow me to provide a real life example.  I was working with a large insurance provider with their ERP implementation.  As part of the ERP implementation, the customer was considering a best of breed software package instead of utilizing delivered ERP functionality to support IT project management activities.  Following is the case I presented to advise the customer in making their decision:

Outlining considerations for best of breed and integrated ERP

Building the Case for Best of Breed vs Integrated ERP

Ultimately, the business makes the decision but as business technology advisors (IT, Consultants) it is our responsibility to present all the relevant information in the appropriate content so an informed decision can be made.  There is one area in particular that is generally not fully elaborated – the true cost of integration.

The True Cost of Integration

When we think about integration between two different software packages we usually only focus on transactions.  To continue with the example I provided in the previous section, following is a representation of the required integrations between ERP and the best of breed packaged software.

Integration points for Best of Breed with ERP

Integration points for Best of Breed with ERP

Each packaged software has business rules and control data (ex. Project types) that govern how software functionality supports business activities.  Also, consider that the underlying data models for each packaged software are different.  There must be a process (either manual or automatic) in place to keep the respective business rules and control data in sync.  Business transactions must also be replicated between the ERP and the Best of Breed packaged software.  It is worth considering the amount of data that must be replicated between the two software packages.  I understand that replication sounds much worse than integration; however, when we need to integrate transactions between different data models, replication is typically the approach taken.  Even when an ERP vendor indicates they have delivered integration with a best of breed packaged software we need to ask whether the integration is services-oriented or data-oriented (replicated).

There are also strategic considerations for a customer’s IT organization.  Consider the following sources:

Costs required to integrate a best of breed software with ERP

Total Integration Costs for business software

Making the decision to implement a best of breed approach for supporting business activities will increase the total cost of IT as well as put the underlying technical architecture is not flexible and adaptable to meet emerging requirements.

Does Best of Breed Make Sense?

Let me say this loud and clear “ABSOLUTELY”.  ERP can be a good integrated solution to support revenue-supporting, compliance, and generally accepted best practices.  However, ERP does not support competitive practices (if it did then the business practice would no longer be competitive because it is generally available to everyone).   Generally speaking, a best of breed software vendor may be more open to active collaboration and co-development with customers in developing solutions for emerging requirements – which is the nature of revenue-generating business processes.   Yes, there will be the additional cost and support but the payoff is far more significant in terms of the potential for increased revenue and market share.

Summary

Business processes, not individual business functions, generate business results.  Too often, we only focus on business activities and the specific software functionality that supports these activities without holistically addressing the entire business process.  This limited view typically results in a short-sighted decision resulting in a higher Total Cost of Ownership (TCO) and a less flexible software solution.

Best of breed software may be the best decision for supporting revenue-generating business processes.  There are times were integrated ERP is the right choice given the potential return.  What is most important to consider is which choice will enable the customer to be in the best position to take advantage of future opportunities.

About Brett Beaubouef
For the past twenty years Brett has helped customers select, implement, and manage ERP solutions across five industries (manufacturing, professional services, staffing, retail, and telecommunications). Business process knowledge and experience includes human resources, benefits, compensation, recruiting, time & attendance, finance, resource scheduling, contract administration, services procurement, sales, billings, project accounting, and project/portfolio management. Software selection experience includes evaluation of both ERP software and proposed implementation services. Brett has recently authored a book on leading ERP/COTS implementation strategies.

15 Responses to Best of Breed vs. Integrated ERP

  1. Pingback: peoplesoft hr: Understanding PeopleSoft 8 | peoplesoft hr

  2. Pingback: erp market: The 2009 Report on Enterprise Resource Planning (ERP) Applications: World Market Segmentation by City | erp market

  3. Pingback: erp: E-Business and ERP: Rapid Implementation and Project Planning | erp

  4. Pingback: what is peoplesoft: Peoplesoft Application Development Tools (Erp Series) | what is peoplesoft

  5. Pingback: Cloud ERP – New Dog, Same Fleas « ERP the Right Way!

  6. This is a very useful article. Based on our experience implementing both best-of-breed and integrated Cloud business solutions (mostly NetSuite and Salesforce) here are our observations:

    1. Many full suite solutions make compromises in usability based on the need to meet the functionality requirements of a full suite. This very often results in a complex or cumbersome solution for some of the specific areas that would be covered by a best of breed solution. The Best of Breed is optimized for that point functionality and can add prodigious amounts of efficiency to an organization. So it is not always world class competitive advantage that drives the Best of Breed decision.

    2. Integrations can certainly add to the TCO. The challenge is to keep them at a level where they meet the basic needs without becoming too complex. Many organizations try to integrate too much functionality and end up with a nightmare. Focus on the basics and the TCO can be manageable, try to build the ultimate integration and the costs and timing can be a problem.

    3. A practical rule on integration best practices is to try to keep it at the data layer wherever possible because the more business logic you put into the integration, the more complex and expensive it will be to maintain.

    I hope this is a useful perspective.

  7. Pingback: Best of Breed vs. Integrated ERP | Pardaan.com

  8. Pingback: The Next Evolution of ERP: Adaptive ERP « ERP the Right Way!

  9. Pingback: Building a Business-Aware Cloud Solution « ERP the Right Way!

  10. Pingback: Cloud ERP Strategy: Goodbye IaaS, Hello IaaS « ERP the Right Way!

  11. Pingback: Implementing a successful ERP strategy | e2benterprise Blog

  12. Pingback: BPR, BPM, and ERP | ERP the Right Way!

  13. Pingback: Assignment 2

  14. Pingback: Week 3 | Assignment 2

  15. Pingback: ERP SaaS 101 – Services Trump Software | ERP the Right Way!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 4,410 other followers

%d bloggers like this: