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To ERP or Not to ERP, that Is the C-level Question

Written By: Ted Rohm
Published On: February 22 2013

To ERP, or not to ERP, that is the question:
Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous ERP vendors,
Or to take arms against a cloud of component solutions
 

Whether your organization is looking to take the leap into an enterprise resource planning (ERP) system for the first time or seeking to add to the current ERP system’s functionality, the words of the Bard of Avon (updated for the present day) might be considered before making your decision. No longer does an organization have to be bound to a one-size-fits-all ERP solution. One can pick and choose from the best of the best from ERP component vendors to fit their needs.
 

ERP as a Suite of Components
When you look at an ERP system, it can be viewed as a set of functional component modules that, when put together, provide the entire suite of enterprise functionality needed by your organization. An example high-level view of an ERP system broken down into its composite application modules is shown below. In this example, an ERP system that would support the needs of the organization includes the functional modules of financials, human capital management, customer relationship management, transportation management, manufacturing management, and inventory management.

erp-components-464-pix.png

ERP Component Examples
Let’s look at a couple of examples where a best-of-breed, component approach to an ERP system is beneficial. First is an example of an organization looking at taking the ERP plunge for the first time. As a company, you’ve gone through your software evaluation process. Your organization put together its list of requirements, you sat through vendor demonstrations, and you’ve ranked the solutions. When you review the rankings, the entire organization ranked solution X to be the top solution, except for the human resources (HR) department, who ranked the human capital management (HCM) capabilities of this vendor dead last.

Another example is that your sales organization has been chomping at the bit for the last year waiting for your ERP vendor to deliver on the new competitive sales data integration into the customer relationship management (CRM) solution they promised when you bought their ERP system. They haven’t provided this yet and it looks like they are actually moving away from adding any of these promised features.

When you look at HCM and CRM as stand-alone components of your organization’s full ERP needs, your solution options increase exponentially. Instead of looking for an entire ERP suite to meet the needs of the entire organization, you can allow the HR and sales departments to search out solutions that meet their unique needs separately.

ERP Component Approach Opportunities
If you apply this component approach to the entire ERP landscape, you will also come upon other possibilities which can translate into huge benefits for the business. If your system landscape was designed with this component architecture in mind, you would be prepared to incorporate other slices of component functionality, like talent management or the latest sales-targeting capability requested by the business organizations. You could also simply change out the HCM component when the organization outgrows its capabilities.

As an organization, you also no longer have to build this component ERP landscape on your own. Software vendors are beginning to provide this component solution framework for you. Force.com (by Salesforce) is one provider taking a lead with this approach. On the Force.com platform, a company can subscribe to the financials component, and then choose to go with the Glovia OM or the Rootstock manufacturing component based on the company’s needs.

The Challenges of “Not ERP”ing
Though component-based ERP solutions have many benefits to offer companies, “to ERP” with a component ERP system does have its challenges when compared to a one-size-fits-all ERP system. These user, business, and technical challenges that would have to be overcome are in no way insignificant. For example, on the technology side, the cost of building, maintaining, and supporting integration points can be high. However, the benefits an organization gains from adopting an interchangeable, component-based view of their overall system needs can far outweigh the potential downsides, or in Bard-speak, even though it may seem to some to be nobler to suffer through with a single ERP vendor’s solution, taking arms with the large cloud of component solutions available today to find your best-fit solution may indeed be the answer to the great ERP question.

 
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