ERP Software or Best of Breed Systems: Which is the Best?

Integrated ERP Software or Best of Breed Systems: Which is the Best Digital Strategy?

One of the longest standing debates in the technology industry is whether you should deploy a single ERP Software system or a best of breed model?

But how do you know which answer is best for your organization?

Certainly I have tried to provide answer to this pertinent question in this article.

My name is P. K. Saxena and I am CTO of Sofcon Systems India Pvt. Ltd.

Sofcon Systems is having 27+ years of experience in the field of Automation and it is located at NOIDA, Uttar Pradesh, India.

I will be undertaking this journey with you to reach to the most suitable answer and my guide for this journey will be Eric Kimberling

Eric is the CEO of Third Stage Consulting which is an independent consulting firm that helps clients throughout the world reach their third stage of Digital Transformation success.

While implementing ERP systems as part of Eric’s Client’s Digital Transformations projects, one of the biggest debates which Eric has to face is

“Do we want one single ERP system that can do everything we need it to do?

Do we find the best Technologies for different parts of our business and deploy a best of breed model?”

Hence I would discuss the pros and cons for each option in this article.

As well as I would provide you a foundation to make the right decision to determine which path makes the best sense for your organization.

Single ERP System

Accordingly I start with the single ERP software model and that is where most organizations start their digitization journey.

I will first discuss some of the pros and cons for this option in this article.

Hence with single ERP software model, one of the biggest advantages is that you have to deal with one system only.

When you have one system then it leads to another set of advantages such as there is a lower learning curve.

Because you do not have to teach people how to use multiple systems.

In particular you are training them on one system only.

Moreover it is easier to maintain and easier to deploy.

That means when you are focused on one system

versus

when you are focused on multiple systems for multiple Technologies

then it provides a single source of Truth for data.

So when you deal with a single ERP system then you have one system that houses all of your data.

Further you do not have to worry about the data flowing between systems

and something happening to the data

because it is going in between multiple systems.

Indeed you have one single system that is handling all of it.

And that leads to another benefit which is that there is less technical complexity with one system.

Because you do not have to tie together multiple systems.

Also you do not have to worry about all the different integration points.

As well as you do not have to worry about some of the architectural issues that come up as a result of having multiple systems.

So there is less technical maintenance and complexity when you deal with single ERP system.

In short these are advantages and reasons why you should consider one single ERP system vide Fig 1.

Best of Breed Model

Further I explore what a best of breed model might look like and how it compares to the single ERP System model.

Till now the single ERP software model sounds pretty good.

When I look at this then I think that it sounds reasonable.

In fact it sounds like something which I would want if I were a leader within an organization.

Likewise I also explore the best of breed model in detail to see if it is as good as it seems to have a single ERP software model.

What do we mean by best of breed model?

Best of breed model means that we are not looking for one single system to do everything throughout our organization.

However we are looking for the best Technologies for the different parts of our organization.

For example your accounting and finance group might go out

and buy a Finance and Accounting system.

Also your supply chain managers might go out and find a Supply Chain management system.

As well as your sales team might go out and find a separate customer relationship management

Salesforce automation system.

And it continues so on and so forth.

Hence the idea is rather than finding one technology across the Enterprise

we are finding the best Technologies for different parts of our organization.

Best of Breed Model vs Single ERP Software

As a result some of the benefits of best of breed model would be that you are more likely to find the better fit across the organization.

When you talk to a software vendor especially the ERP vendor that sell the single ERP software model.

Then they are probably going to tell you that this is not true that their software can do everything which the best of breed model can also as well do

but you get all other advantages also.

The fact of the matter is that it is not true when you go out and look at Best of breed models then you find that there are Technologies out there

that can typically handle certain functions better than anyone system can offer.

And the reason for that is because no single ERP software vendor is going to be able to offer everything to everyone even if they focus on one industry

and you are in that one industry they focus on.

It is likely that you have different nuances in different parts of your business that have different needs

that are not going to be satisfied fully by the single ERP model.

The other component of best of breed that can be helpful to understand is that there is a higher learning curve in case we opt for best of breed model.

So whereas with single ERP model there is a lower learning curve

however with best of breed model there is a higher learning curve

because you have to train people on how to use multiple systems.

One of the potential downsides is that you could have multiple sources of Truth when you opt for best of breed model.

Comparison

For example in other words if we have a CRM system that is tracking our sales Pipeline and we are capturing prospective client information in that CRM.

Then we are housing customer and prospective customer data in the CRM system.

But we have also got presumably another system for inventory management

or for financials where we need that same data of the customer related information.

But it is not available in the other system.

So now we need to go for integration.

And there is integration back and forth.

And there is more chance for something to break down

or to become undermined as a result of some of the human interactions between various systems.

So it looks that there is some advantage of having singular ERP system.

Another consideration for best of breed is that this has higher technical complexity.

Because we have to take multiple systems and tie them together and to figure out how we are going to integrate these systems.

How the data is going to flow?

Also ultimately what the overall landscape is going to look like?

Moreover we have to maintain multiple systems for longer term which adds to our technical complexity.

So on the surface when I look at both the models then I think the real advantage is largely to single ERP system model only.

Moreover if I have to find a better fit then I might be favoring best of breed model.

So in short I can conclude that probably I want the single ERP model.

Because there is only one advantage in best of breed model but there are three advantages in single ERP model vide Fig 2.

Problem in choosing Single ERP Model

When we choose Single ERP Model then there is one problem.

While working with most of clients it was noticed that Eric had found that criteria of likely to find better fit in best of breed model became the most important thing.

Hence the problem was that this particular difference between these two models is a lot bigger than just one item on a checklist vide Fig 3.

So in other words a lot of times you are more likely to find some bigger Show Stoppers in their projects.

Because it functionally cannot handle what you need it to do.

So it ends up pushing organizations to at least consider more best of breed model.

Now one thing I would like to highlight is that in some cases the fact that people resist this single ERP model.

And they want to look at best of breed model.

So in other words we do want to change the way we do business today.

Hence we are going to push for more of best of breed model.

But a lot of times for a lot of organizations you find that they really do have needs that are better satisfied.

This is actual stuff that we need to do our business well and we need to be more effective as a business leader.

So it becomes the biggest challenge for most organizations that they are trying to resolve the debate.

Hybrid Model

So how do we figure out which model is best?

What do we do?

And are there any other options than what we already have?

That is what I now elaborate in Hybrid option.

Basically it offers trade-off.

Of course this decision was not hard enough to figure out.

In fact there is actually a third option that a lot of organizations do not consider.

And that is a Hybrid Model.

So that it suggests that rather than choosing one or the other option we can opt for mix of both options.

That means we are going to have a core single ERP system that does all the core vanilla type functions within our business.

And then we are going to do best of breed for the complex or the unique aspects of our business or our industry vide Fig 4.

For example if you look at an organization like a manufacturing organization or a complex engineered order manufacturing organization.

Then you might have a core ERP system that handles all the financials and basic Inventory management along with basic bill of materials and customer information things.

But when it comes to product lifecycle management, CAD drawings and engineering types of processes then you might have bolt-ons.

That would bolt on to the core ERP system and this ends up being a good middle ground for a lot of organizations that are really having trouble deciding between these two models.

And by the way vendors even recognize that this is a very powerful model.

Examples

For example a lot of vendors like SAP and Oracle and even Microsoft have gone out and acquired a lot of best of breed providers.

Because they know that their single core ERP system cannot do everything they needed to do or that their customers needed to do.

So they go and buy these best of breed providers so that they can say that they have a single ERP system.

When in reality what they are doing is that they are providing a hybrid model to their clients.

So regardless of which model we opt for our project whether it is single ERP, best of breed or hybrid– one thing that is very important is integration and operability.

So when we think about interoperability and integration what we are discussing about is how multiple systems tie together.

Hence especially if we are going down the hybrid path or the best of breed path we need to have a Clear Vision for how systems can tie together.

And how we can leverage solution architecture.

As well as how we can do integration to ensure that we tie the systems together.

But that function is important even in the single ERP model

Because as I mentioned earlier so many vendors have gone out and acquired best of breed providers as bolt-ons to their system that are technically third-party systems.

It just happens to be that the vendor owns those multiple systems.

So interoperability and integration is something that is very important in any sort of Digital Transformation especially if you are going down the path of best of breed or a Hybrid system.

Which is the Best Model?

Therefore the question now becomes which of these models is best?

Actually it depends on what you are trying to accomplish as an organization.

Also it depends on what your priorities are.

If you need to find the best Technical and functional fit for your business processes.

As well as you know that your business is fairly unique in terms of being in a unique industry.

Or if you have a distinct competitive advantage that others in your industry do not have.

Then it is probably going to push you more towards the best of breed model.

But if you are a younger organization and you do not have established business processes yet.

Perhaps you do not have any complex business processes or needs yet as an organization.

Then a single ERP system probably makes more sense.

Of course chances are that you might be somewhere in between.

If you are somewhere in between or if you are somewhere in between those two extremes on the Spectrum.

Then you might find that the Hybrid model works best.

Trade off

What a lot of Eric’s client organizations do especially when they approach his company and say

“Hey Third Stage Consulting can you please help us?

Define a digital strategy that helps us leverage the best single ERP system.”

Then Eric might start with that as a starting goal.

But then he would recognize that he only would get let us just say 80 percent of the way in the path forward.

Anyway this is a reasonable number by the way.

If we say we have 80 percent fit here then that is great.

That means we could probably start with this figure.

And at the very least maybe go for a Hybrid model.

We may not necessarily need to go fully down this path.

But we may find that we need to now figure out what do we do with the other 20 percent.

Are we going to water down our business processes?

And let the software dictate how we do the processes.

That may be an answer depending on what the process and the function is.

And how important it is strategically to your business?

Or it could be that we are going to actually go find in via a Hybrid model or some other best of breed options that we can plug into or bolt onto our ERP system.

In short those are the kind of trade-offs in the decision points that you need to go through as an organization to determine what the best fit is for your organization vide Fig 5.

Take Away

If you want more information and want to learn best practices on how to navigate decisions as mentioned in this article.

As well as if you want specific software reviews and rankings that Eric does on an independent basis at Third Stage Consulting Firm.

Then I encourage you to read Eric’s Digital Transformation report.

This is an annual report he publishes each year that highlights best practices and Lessons Learned from Digital Transformations throughout the world.

Also it provides independent reviews and rankings of different technology options that you might consider both in terms of single ERP systems as well as best of breed and Hybrid models too.

Further I encourage you to download that Digital Transformation report which will give you some starting point ideas on what your short list might be.

Or what your long list might be for some of those different categories.

You can find a link below in the Resource field so that you can download that Digital Transformation Report.

I hope you found this article useful.

One of the longest standing debates in the technology industry is whether you should deploy a single ERP system or go with a Best of Breed model.

How do you know which is best for your organization?

Pls. let me know.