Do you buy a full ERP package or go for best-in-breed individual software?
That is the question facing CFOs when they are looking to upgrade their financial systems and whilst it is true that there’s a lot to consider we think that we have the answer.
Read on to find out how to make the best choice of technology for finance.
Making the case for ERP
Enterprise Resource Planning (ERP) systems have been around for many years and although they were once the preserve of very large corporations they have become much more affordable in recent years.
The basic premise is simple: buy all of the software you need in one package.
It’s neat and tidy and means that you only need to make the decision once.
ERP system implementation is a major undertaking and the benefit of this is that with a major investment the minds of the business are most definitely concentrated on getting it right.
One of the main criticisms of separate systems has been that it is difficult to get them to integrate properly. A good ERP system will have everything you need and it will all be in one place and you’ll know where to find it.
You can choose between a SaaS ERP or an on-premise and so if you have security concerns or your CTO just prefers software installed on his server then ERP is the way to go.
With a major system, it can be very easy to find people who already know how to use it and have a good deal of experience with the software.
With all these points in mind, why wouldn’t you go for an all-in-one approach?
ERP - the case against
One of the biggest arguments against ERP systems is that in the majority of cases the implementation just doesn’t work.
In their 2020 ERP implementation report the Panorama Group found that the average budget overrun was 62% and according to Maarten Geerts at Trifinance, 70% of ERP installations fail.
The reasons for failure are numerous but among them are the difficulty in finding an internal resource to manage the project, project scope creep and difficulty in getting senior management buy-in.
It is also the case that with very large systems there is an onerous training requirement to help staff get to grips with the new software.
The move to an enterprise-wide single system is a risky one and getting it wrong can be costly both in terms of cash and reputation as Hewlett Packard found out in one famous ERP disaster.
The cash flow requirement of a major project can also be restricting for businesses that need to upgrade their systems but simply can’t afford the investment in one fell swoop.
There is one overriding question that does need to be answered when looking at ERP; Do you want a suite of tools that are all reasonably good at what they do or would you prefer everything to be the best you can get?
Why we like best of breed
Our first reason for preferring the best of breed approach is in the title – best of breed!
Why wouldn’t you want the very best you can get to manage your payroll, reporting or expenses?
Having the very best you can get has got to be better than having a suite of tools that may or may not be particularly good just because they all come in one box!
The reduction in risk is also an inherent feature of upgrading piece by piece. Put simply, if you find that one of the solutions you choose doesn’t do what you want then that doesn’t have a knock-on effect on all of the others.
For example, imagine that the HR system you choose doesn’t measure up. If you are using the separate systems approach it is possible to simply choose a different provider which is not an option that is available in a full ERP implementation.
From a cash flow perspective choosing to implement piece by piece gives you the option to add on parts of your digital transformation and feel the benefits straight away rather than having to find the investment all in one go.
Implementing one discrete section of your transformation project at a time also reduces the amount of internal resource you need to devote to it and the amount of training that needs to be done.
One of the criticisms often levelled at separate systems is that connectivity can be a problem and that would certainly be the case if we were writing ten years ago but today APIs are so slick that adding on a new app is a piece of cake.
Legacy systems can date from the 1980s in some cases and this means that untangling the whole infrastructure can be a nightmare.
Adding on systems that take over smaller parts of older systems reduces the risk involved when dealing with software that in many cases isn’t even documented.
Did you know that 70% of ERP installations fail?
In our new ebook you will learn to avoid the same mistakes.
Software or package?
We can see then that there are good points for both approaches but in our view, the low-risk approach of choosing the best in breed individual apps is the winner.
Having apps that are perfectly suited to the job you want them to do and implementing them to your own timeline has to be the best answer.
We’ve produced a new guide “Working in Harmony; Creating a Technology Stack Fit for Your Finance Team” which goes through this and many other important aspects of transforming your finance department and you can download this here.