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The Enterprise System Spectator

Thursday, February 06, 2014

Enterprise Software: Suites Don't Always Win

The major enterprise software providers promote their pre-built integration as a selling point in capturing new business from existing clients. They argue that, rather than attempting to integrate different systems from different providers, organizations should buy everything from a single provider and get the integration for free.

Why the Integration Story is Getting Old

But do suites always win? In my software vendor evaluation work, I've noticed that the integration story is not resonating with buyers as it once did. I think there are several reasons for this.
  1. Vendor suites may not be as well integrated as vendors claim. This is especially true when the vendor's suite comprises pieces that they acquired. Both Oracle and SAP have made many acquisitions over the past decade. Is the integration of these piece parts really seamless? In some cases, yes. But in many cases, no.
     
  2. Integration an IT-priority, not a business priority. Many software selection projects these days are being led by business users. This has always been desirable, but it is especially true when you get outside of core ERP to systems such as CRM, supply chain management (SCM), and human capital management (HCM). IT leaders generally put a high priority on integration because it makes their job easier (notwithstanding point #1). Therefore, when IT leads the vendor selection effort, integration rises near the top of the selection criteria. When business units lead the selection, they tend to rank process alignment, ease of use, and maximizing adoption higher than they do integration with back-end systems. Whether rightly or wrongly, business leaders often say to IT: we want System X--make it work.
     
  3. Integration has gotten a lot easier. The integrated suite story was more convincing 20 or even 10 years ago, when the choices for integration were either brittle point-to-point flat file interfaces or complex middleware or integration hubs that required substantial investment before the first integration could be built. Today, application programming interfaces (APIs) and web services make integration a lot easier than it used to be in the past. SaaS providers, in particular, have gotten very good at integrating with other systems, whether cloud or on-premises, as this is a common requirement among their customers. So, the problem has gotten smaller.

  4. Not all integration points are equally critical. In a recent CRM selection, the incumbent ERP vendor made the claim that there were something like 300 integration points between the vendor's ERP and CRM systems. Did the buyer really want to program all these touch points between ERP and some third-party CRM provider? It's a good sales pitch. But when we investigated further, we found that there were really only a handful of integration points that really mattered to this customer. For example, if pricing only changes once a year, is it really necessary to have the CRM pricing tables automatically updated from the ERP pricing tables? Investigate your real needs for integration and often you will find they are much less than your incumbent vendor will claim. 
In addition, think about the benefits of not having all of your enterprise system "eggs" in one basket. True, there are benefits to having fewer vendors in your applications portfolio. At the same time, it is possible to have too few--to grant too much power to a single vendor. Behind closed doors, suite vendors talk about how much "share of wallet" they have among their customers. But is it in your best interest to have so much of your IT spending wrapped up with a single provider?

Situations Where Integration Is a High Priority

To be sure, there are situations where integration should be a high priority. I would not like to see an organization pick an accounts payable module from one vendor and a purchasing module from another. These functions are too tightly coupled. Furthermore, purchasing and accounts payable are generally not systems of strategic advantage. Customers are better off buying them from a single ERP vendor, implement them, and move on to more strategic opportunities. 

Likewise, in supply chain management, I don't like to see sales and operations planning, advanced planning, and event management selected from different vendors. These functions form a closed loop with a single data model. Material planners need to be able to perform these functions simultaneously in parallel. Building interfaces to cascade information from one system to another is simply too cumbersome.

Criteria for Evaluating Integration Needs

I don't expect that the large integrated suite vendors will change their message. For them, suites always win. But for buyers, I recommend a broader perspective.
  • Is the system you are looking for one that must be integrated with other systems in your portfolio? 
  • If so, can you verify that your incumbent vendor has really integrated those two systems? 
  • How many integration points are really needed, and how many are nice-to-haves that could be satisfied with a simple work around?
  • For those that need automated integration, how difficult would it be for another vendor to provide that integration? 
  • Do third party vendors have references that have done that same integration with other customers? 
  • Do the benefits of a third-party vendor in terms of adoption, ease-of-use, and competitive advantage outweigh the benefits of pre-built integration? 
Finally, is the system you are looking for one where innovation, competitive advantage, ease of use, and high adoption are top priorities?  If so, the best choice may not be from your incumbent provider. The fact that the large Tier I suite vendors have been acquiring smaller best-of-breed providers is evidence that leading edge innovation is happening outside of the integrated suites.

Customers should think through the answers to these questions and make the right decisions for their businesses. If they do so, many times, suites won't win.

Related Posts

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Implement EAI, or just roll your own?  

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by Frank Scavo, 2/06/2014 01:47:00 PM | permalink | e-mail this!

 Reader Comments:

These arguments nicely support our position as a vendor, and complements a recent blog of ours located here http://www.industrios.com/snapblog/hybrid-erp-cloud-plus-on-premise.asp
 
Thanks for the well-reasoned, timely article. Re point #1, you always need to look under the hood and see how many platforms are combined in any vendor offering. To the extent there are multiple platforms, then you must perform due diligence and test the degree of integration.

Re point #2, business people should have no problem supporting "integratability" as a paramount requirement. After all, they want fast, end-to-end processes which accelerate processes like billing and the month-end close, reduce non value-add work, eliminate key controls, and improve data quality. Repetitive processes such as these are precisely what you want to automate.

Having said that, each potential point of integration should be evaluated for its ROI before any decision is made. In the context of limited resources, many are not justified.
 
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Independent analysis of issues and trends in enterprise applications software and the strengths, weaknesses, advantages, and disadvantages of the vendors that provide them.

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