ERP Errors: When It Comes to Integration, Focus on Business Value
Consider this: Business Spend Management (BSM) sits alongside CRM and HCM as a key business processes that every business needs to manage. Pair those domains with your ERP and the result is coverage of all 4 of the critical areas that every company is required to manage: Customers. Employees. Spend. Money.
Why Have Distinct Platforms Versus Your ERP?
ERPs are the bedrock of a typical enterprise IT architecture. But while they are essential for the financial reporting needs of a business, they can't — and shouldn't be used to — meet the needs of all 4 critical areas.
Ask any IT leader responsible for managing their Salesforce.com or Workday deployments whether their integration strategy involves storing all or a majority of their customer and/or employee data in their ERP and they will probably give you a strange look. What they’ll likely say to you is “Why would we do that? That is what Salesforce and Workday is for!”
Ask them whether their ERP is used to manage sales and marketing business workflows (like lead flow and opportunity progression), or employee workflows (like onboarding and time off requests) and again the answer will likely be “Why would we do that? That’s what Salesforce and Workday is for!”
Why is it then that when it comes to Spend data and workflows there seems to be some ambiguity about the role of the ERP vs solutions designed to manage business spend? Some of the vendors in the spend management market will have you believe that all spend data and even some of the spend management workflows should reside in the ERP. This is despite the well established best practices laid out by Salesforce.com and Workday around the ideal location of data and workflows: within the expert applications that were designed for them.
The reason is that these same spend management vendors are themselves providers of ERP solutions. It’s in their best interest to make you believe that spend data, unlike customer and employee data, should entirely reside in the ERP. They’ve lost the battle in these areas and are doing what they can to not lose it in BSM.
In the end, they will lose. Why?
Business Value is King
Specifically, the business value derived from having, like Salesforce and Workday, a platform designed to address a clearly defined and mission-critical business process. When it comes to spend management, the business value comes from increased spend visibility, spend control, and spend compliance.
Like Salesforce and Workday, a BSM platform’s application areas are already unified out of the box. Business process flows related to spend are entirely managed within the platform. There’s no requirement to send every data point or have every touchpoint in a workflow sent to the ERP. The only thing that’s required to be sent back and forth to the ERP are master data items (such as user information and accounting structures) and some transactional data (such as an update of payment status). We call this a smart, business process-driven approach to integration.
Locking Data and Workflows in ERP Kills Value
The alternative, suggested by others in our market, is to integrate every possible datapoint and use the ERP itself for some workflows. While this results in a hugely complex integration (something Enterprise Architects are trying to avoid), it also delivers very little business value. For example, duplicating Purchase Orders serves little purpose, leads to no incremental business value, and increases integration complexity.
And what about the business problems of lack of spend visibility, control, and compliance? Mirroring everything into your ERP — or multiple ERPs as is more typically the case — simply results in more complexity, more opportunity for duplication, more likelihood of friction and — because ERPs were designed for back office use and not widespread populations — lack of adoption. It’s simply impossible to achieve your business goals in this scenario.
Our recommendation: keep the data required for financial reporting in your ERP and keep your spend data required for visibility, control, and compliance in your BSM platform.
In the end, the choice is yours: Increased integration complexity for minimal business value, or minimal complexity leading to maximum value. I know what my choice is!