The best-of-breed vs. integrated suite has been an ongoing battle since integrated ERP software suites were first introduced. In the early days, buyers were forced to choose between multiple standalone systems that performed single functions very well or one integrated system that offered modules for most functions, but with varying degrees of functional depth. Over time, however, the functional gaps between best-of-breed offerings and integrated suites has narrowed. However as business models are beginning to change rather rapidly, the gaps are starting to widen again as smaller more agile vendors are able to focus on best of breed software for key processes with high rewards and quick paybacks. Software as a Service (SaaS) offerings are also threatening traditional business models.
Large expenditures for ERP software solutions may be a thing of the past. For most organizations, there is stiff resistance against long-term and high-cost ERP maintenance contracts. Companies typically spend 16-22% of their software license fees on maintenance and support each year. This maintenance cost is becoming too high for many organizations as they look for other alternatives. Some organizations have simply cancelled their software maintenance contracts while others have sought alternative support mechanisms. However, these strategies are not advised and together present many risks for an organizations, including, among others:
- Inability to upgrade the software
- Lack of support for critical situations
- Difficulty in supporting changes in business processes without new software functionality
- Proliferation of workarounds, and
- Conflicts with other contractual arrangements
The cost of upgrading ERP software to current versions is extremely high, often in the millions or tens of millions of dollars, especially if the package has been customized, so software upgrades are often delayed. Delayed software upgrades prevent organizations from taking advantage of new functionality offered by the vendor. There is no doubt that ERP upgrades are painful, expensive experiences. Forrester Research’s Paul Hamerman, recently stated that this is why “most businesses and IT execs put off upgrades as long as possible to avoid costs and minimize business disruption.” Aberdeen’s ERP research states that upgrades are typically performed every 3.5 to 4 years. Budget, time constraints, and lack of business value are the top reasons given for delaying upgrades.
Unfortunately, its often the case that companies find themselves falling behind their competition, and the need to upgrade becomes essential. When an organization finds that they cannot easily change business processes because of lack of software functionality or falling behind the competition, because the cost of software upgrades and maintenance is so high, they often see their ERP systems as “digital concrete.”
Many organizations are evaluating SaaS cloud based solutions as an option. With SaaS, upgrades are usually much easier and sometimes automatic. Releases are usually delivered more frequently than on-premise packages. All SaaS customers are generally upgraded to new features because of the multi-tenancy nature of SaaS. Lower implementation and maintenance costs and the ability for the business to take advantage of new software features are compelling reasons for organizations to consider a SaaS solution.
If your organization is considering SaaS solutions or moving away from large ERP systems for specialized functions such as CRM or Supply Chain Management, then you should consider the following:
- Requirements Management – Defining good requirements is absolutely essential for any software implementation, development or improvement project. Incomplete and inaccurate requirements are a major cause of project failure. Organizations should consider a tool such as the Enfocus Requirement Suite™ from Enfocus Solutions Inc. to allow business and IT stakeholders to collaborate and define clear requirements that deliver business value and address people, process, and technology issues.
- Master Data Management – Moving to a best of breed application or to a SaaS application will almost certainly create a master data management problem. Proactively managing master data is critical to achieving improved business performance in today’s highly competitive environment. Data that evolves independently becomes error-prone and keeps decision makers from having a unified view of the data. It also prevents internal customers from obtaining accurate and timely information they need to make accurate decisions. The result is higher costs, missed sales opportunities, eroding margins and increased risk. Master data management issues should be considered from the beginning.
- Cloud Integration – Many technologies, such as Dell Boomi Atomsphere, Jitterbit, and IBM CastIron Omni Connect are beginning to emerge that allow cloud based applications to be seamlessly integrated with on-premise applications. These technologies often use a graphical “no-coding” approach to integration which accelerates and simplifies the configuration and management of moving data to and from the Cloud.
- Business Process Management – BPM Software is used for managing business processes while connecting people and applications. BPM Suites generally provide a platform for enterprises to tap into the power of mobile, cloud and social technologies to drive high-value business process improvement across the enterprise, through the supply chain, and out to customers. BPM software can make business process more efficient and can overcome many of limitations of traditional ERP systems.