All in One Enterprise Resource Planning or Integrated App Ecosystem?
Which is the better IT setup for your business? The all in one ERP or the integrated app ecosystem? This is something we often have our clients ask. Below we highlight some of the key differences and considerations when selecting a system for your business.
Years ago the all in one ERP system seemed to be the only option if you wanted advanced features. Then the rise of the cloud apps and eco systems allowed small businesses to gain features piece by piece without the need for a server. Now we have cloud based ERP options which again compete for the SME business!
So which is the right setup?
We see businesses in both camps and the systems can work really well either way, so it depends on your particular circumstance and sometimes just preference, so here are six points to consider.
This is where the “best of breed” apps vs the ERP debate gets interesting. When an app has only had to focus on a single module, e.g. CRM, they can be more powerful than the module within an ERP.
We have seen this to be true in some cases, and not in others. ERP systems are often very powerful in the key modules they have focused on, sometimes with more advanced features than many standalone apps. If an ERP has more advanced features in the area you need, those advancements will then work throughout the entire system. While an integrated app might be more advanced in its specific area, it may not integrate those features across the core system.
Often it is assumed that ERP systems are far more expensive than their nimble app competitors.
If you only need one module from an ERP and you don’t have multiple companies to run, then the app ecosystem is likely more cost effective as you aren’t purchasing modules you don’t need.
However when the apps start to add up, e.g. take your GL, add inventory, throw in a CRM and an advanced reporting app, then that ‘small monthly cost’ can start to stack up! If you have multiple companies, e.g. in two countries, then you usually need to purchase all of the apps twice, and now we are getting really up there in cost!
We spoke with a small business owner recently who had a similar two company situation requiring advanced inventory. But with only two ‘users’ required, the cost of some ERPs came out cheaper on a monthly basis than adding up the cost of the apps in the ecosystem for the two companies.
- Multi Company
This is generally something that ERP systems do better than the integrated app solutions. Most smaller apps don’t include significant multi-company features or pricing, leaving the user of a multi-company group purchasing multiple licences to the same apps and having additional manual processing between the companies.
The app ecosystems have some great reporting tools that can consolidate if that’s all you need. But it’s the complex intercompany transactions that the ERPs usually do more efficiently.
The more systems you have means the more logins you or your staff need to remember. That can mean different password rules, some with two factor authentication and some without. As an administrator, it is much easier to manage a singer user list for your system rather than many. If your users work all throughout the system(s), then they will appreciate an ERP system where they don’t have to switch between apps all the time.
However, if you have more segregated duties, you may find it useful to give some users access to the GL and others access to the CRM for sales, and others doing the invoicing. This segregation is easily achievable with an ERP also, however it highlights that the ‘annoying multiple logins’ argument can be a pro or a con depending on the situation.
This is where the ERP option is generally more powerful. When the ERP has the modules you need, they are completely integrated throughout the system. The ecosystem setup, by its very nature is reliant on how each vendor has built their integration between the apps. Some integrations are fantastic and robust, taking full advantage of features between the apps and easily reconcile together. While others are rudimentary and temperamental, meaning you may not end up with the flow of data you really need.
When running multiple apps, you will need to understand where your ‘one source of the truth’ is. Reconciling between the apps can become a task if things go wrong. We are often approached by businesses who need assistance in reconciling the information between their apps and they don’t know where to start.
ERP systems will generally stay more reconciled (although they are not fool proof either!). It is always important to put in place good business and accounting processes to ensure all of your ledgers reconcile even in a single ERP system.
As you can see there are a number of things to consider when determining which system is right for any business, and it always comes down to that business’s set of circumstances.
Always ensure a system meets your requirements. Don’t write off any options until they have been considered.
Author: Carl Ferner
Carl Ferner is a senior manager in the BDO Information Systems team, specialising in accounting and ERP systems consulting and implementation for mid-market SME businesses.