Single Versus Mixed Sources: It’s a One-Stop-Shop World
E-commerce websites like Amazon.com have enabled us to live in a one-stop-shop world. There’s no longer a need to hunt all over town or the Internet when you need to buy books, sporting goods, and groceries all at once. This one-click shopping experience is made possible by companies with strong ecosystems containing multiple vendors and partners (mixed sources).
The same can be said for enterprise software applications. For decades, companies seeking to automate processes had two options:
- Use multiple standalone systems (i.e., one for accounting, another for document sharing, and yet another for project management) that often do not communicate well with each other.
- Invest an exorbitant amount of money and resources in a multifunctional enterprise resource planning (ERP) system offered by one vendor (single source). The risk businesses face when purchasing software packages designed to “do it all” from one vendor is that available customization and add-on options may not be enough to provide a perfect t for each department’s or industry’s specific needs. And understandably so. For example, most ERP solutions have features applicable for sales and marketing, but not construction project management.
Many business owners end up spending even more money to purchase additional software to address unmet needs. Unfortunately, the new application does not always connect well with the system already in place.
In recent years, the advent of cloud computing combined with open source coding has ushered in exciting alternatives to both of the above options. Platform- as-a-Service (PaaS) and Software-as-a- Service (SaaS) providers are bringing their customers several steps closer to one-stop- shop functionality by providing open or compatible application program interfaces (APIs) that can connect to and share data with other software packages, regardless of the vendor.
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These providers are also building software ecosystems that are rich with plug-in and add-on products and service/product partners that can customize or add to an application’s functionality. The result is a mixed-source solution that provides integration options so users can accomplish more with systems they already use.
What’s more, because these solutions are web-based, or reside in the cloud, they are not as costly to install, maintain, or even upgrade as software requiring on-premise installation and in-house upkeep and maintenance.
Much like what e-commerce sites have done for shoppers, cloud-based software with open APIs and product/service partners have transformed how businesses leverage software to manage operations across multiple divisions and locations—and even industries. We have entered a new era of integration.
What is ERP?
With its roots in the 1990s manufacturing industry, enterprise resource planning software is typically a suite of integrated, modular applications that tap into one database management system to carry out financial and business planning functions such as product planning, manufacturing or service delivery, marketing and sales, inventory management, customer relationship management (CRM), shipping, and payment.
Many business owners end up spending even more money to purchase additional software to address unmet needs.
Using common databases maintained by the central database repository, ERP systems track resources, often in real time, and the status of business commitments (i.e., orders, purchase orders, and payroll) from start to finish. The applications that make up the system are able to share data across various departments.
A single, modular ERP system links together multiple processes and parts of a business, breaking down silos of information that are often inaccessible to those who need them. By centralizing the data in one place, users also can synchronize changes between multiple systems without losing valuable records.
The High Cost of ERP
To reap these benefits, business owners must pay a hefty price for an ERP system—and then pay again to customize it to suit company needs. Aside from the cost of the system itself, business owners also must commit time, staff, and resources to install the system—a process which involves extensive data transfer and could take months or years depending on whether the system is web-based or installed on-premise.
Businesses must also be willing to re-engineer processes to fit the ERP system and invest in ongoing training of information technology (IT) staff as well as system users. If the system is installed locally, investment in additional hardware may also be required. And, of course, don’t forget maintenance fees and the need to upgrade most systems a few years down the line.
One Vendor Does Not Fit All
ERP solutions are based on the concept that one software vendor can control your entire technology stack. It is an unrealistic expectation when you take into consideration the complexities and idiosyncrasies that can reside in individual business units as well as various industry segments. Invariably, business owners find themselves buying additional solutions from other vendors because, for instance, the ERP package’s accounting-driven platforms focus on accounting first and revenue-generating activities second, when the opposite is needed.
As another example, both construction companies and entities with construction divisions may find an ERP package useful for accounting, human resources activities, invoice tracking, and inventory control. However, they may have to look elsewhere to manage construction projects and share plans and drawings.
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