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ERP Integration: Strategy, Challenges, Benefits, and Key Types

The common phrase, “United we stand, divided we fall,” applies to more than just war movies and superhero TV shows. It’s also a great example of why ERP integration is key to running a successful business. By putting together multiple “best of breed” applications to build or fortify a near-custom ERP solution, your business can automate processes and increase revenue. So, what exactly is ERP software and what does integration mean in this context? In this article, we will explore these basic definitions along with looking at some of the benefits, pitfalls and challenges involved in ERP system integrations.

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What Is ERP and What Is Integration?

Enterprise resource planning software is a tool that is commonly used by businesses of all sizes to streamline and automate business functions. This could include components such as accounting, distribution and human resources. One of the main appeals of ERP software is that it operates as a centralized data hub for a variety of workflows, which makes it easier to share data insights across departments. ERP systems also automate processes across departments that typically need to be completed manually. For example, an ERP could take information from a sales order and automatically send its relevant financial data to your company’s accounting program.

Integration is a way of connecting ERP software to other systems to ensure that consistent information is shared while also automating workflows. It is useful because it affects relationships between ERP software and other vendor systems so that businesses can customize and select the specific tools they want to have in their solutions. The most extreme form of this is called postmodern ERP strategy. This method is a new way of developing a personalized ERP system for a company that uses solutions from various vendors to essentially build a completely unique ERP program.

Even if you go with a more traditional ERP strategy, implementation can assist in the streamlining of processes by improving the communication between various modules. For example, it is incredibly time-consuming to take data generated from your ERP and input it into a different program. Integration can streamline this process and reduce the potential for human error to occur. Human error can have horrible consequences for your business. A 2016 study found that 57% of sampled prescriptions had typos. For your business, a typo might not be life or death, but it can create inefficiency.

The bigger your business gets and the more advanced your software solutions become, the more likely it is that inconsistent data and clunky workarounds will become part of your day-to-day business. ERP software integration is critical in reducing the potential for inefficient workflows through its centralization of information. It also often leads to increased collaboration among employees and improved transparency.

Benefits of ERP Integration

Now that we have a basic understanding of ERP integration and what exactly it does, we can go into more detail. Let’s examine some of the key benefits associated with ERP system integration and how they could positively influence your company’s bottom line.

Centralized data

Having all of your data in one accessible location can significantly improve internal workflows. For example, your accounting team wouldn’t have to reach out to the sales team every month for an updated record of revenue made. Ultimately, having data available in a centralized location helps to facilitate business processes and reduces the amount of time that employees spend waiting on people in different departments to provide them with information necessary to complete important tasks.

Automated processes

The more automation, the better. ERP integrations can streamline processes across various departments and workflows. This reduces the amount of manual input required and the time that it takes for tasks to be completed.

Workflow visualization

Higher visualization of the tasks and workflows of your business goes hand-in-hand with data centralization. Additionally, integration with a tool such as project management software can allow employees to see what their peers are working on. This can be beneficial when requesting feedback from a fellow employee or assigning a priority level to tasks. For example, if you need a standard report from a manager, but see that they are working on a direct request from the CEO, you might downgrade the severity level of your inquiry accordingly.

Reduction in human error

Because ERP system integration can increase the amount of automation that occurs along business workflows, there is an opportunity to reduce human error. Typos and emails sent to the wrong client can negatively impact your business, so automation is a huge benefit. The amount of human error that occurs every day is incredible, so a reduction in this rate could give your company a competitive edge.

More time for labor-intensive projects

When you reduce the amount of time spent on tasks such as data entry, you free up employee time for other duties. Because of the wide range of processes that can be automated, your employees will now have more time for essential tasks that require human input, therefore improving productivity.

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Types of ERP Integrations

CRM

Two essential features of a successful business are proper communication and excellent customer service provided to your customers. Excellent customer service can give you a considerable advantage over the competition, so optimizing your customer communication with a “best of breed” customer relationship management tool is crucial. For this reason, CRM and ERP integration is relatively common, and therefore can be one of the easiest categories on this list to integrate. If you’re already using a CRM program but haven’t integrated it with your ERP yet, it’s highly suggested that you do so because of the critical link between demand (CRM) and supply (ERP). This connection between CRM and ERP is used to streamline the marketing and sales process.

Business Intelligence

Business Intelligence (BI) software is one of the most useful tools available on the market right now. By collecting and analyzing internal data, BI software helps companies discover insights that lead to successful new ventures or business practices. The insights gleaned from BI software data are often the launching points for new software implementations. By integrating your BI system with your ERP solution, these valuable insights become easy to access at any time by any authorized employee.

Human Resources

The HR department has some of the most extensive back-office needs of any department, so providing an efficient workflow is vital. The HR department is, after all, the one department that deals with every employee in your business regardless of title or leadership status. Incorporating your HR vendor’s capabilities with your ERP system helps keep track of and automate time-consuming back-office tasks by connecting them to the workflows of your ERP.

Project Management

Many ERP systems include a project management solution. If you’re already using a third-party project management software, it’s unlikely that the project management tool included in an ERP is as sophisticated as the standalone tool that you’re already using. What makes project management integration so useful is that all of your business tasks, processes and workflows can be aggregated in one place. An employee can see which projects are done, which are in progress, who’s working on them and what projects are coming up at any time. This can be a huge time-saver. For example, you could look at which developer is tackling a bug fix or which sales rep is following up with a lead.

eCommerce

The main benefit of ecommerce integration comes down to the all-encompassing buzzword of efficiency. Any business that manages orders can benefit from integrating ecommerce applications largely because of the data collection associated with implementation. Some of the most essential data that companies collect are related to orders, inventories, customer information and shipping. You can reach a higher level of efficiency when this data is available across your other systems, thereby automating the data transfer process and eliminating the need for any manual input.

These five types of third-party software are essential and standard features to consider when looking into ERP integration. When you start the process, it’s crucial to make sure that it happens as seamlessly as possible. Ask your ERP vendor about which third-party vendors it can integrate with. You can also take a look at our Leaderboards to help you choose from the wide variety of vendors available on the market.

Approaches to ERP Integration

There are a few different methods of implementing ERP integrations. The best ERP system integration option for you is dependent on your specific business and can be affected by factors such as the current systems you are using, your integration budget and whether you use on-premise software, a cloud-based solution or some hybrid of both. Here are some of the ERP integration approaches that you may consider:

Point-to-point

In a point-to-point integration, the ERP software is individually connected to each software or tool. The difficulty with this method is that you have to conduct an integration separately for each system that you wish to use. Additionally, the process can become complicated quickly as more and more tools are added. However, some companies opt to go with point-to-point because it has a reasonably low barrier to entry.

Custom applications

Some companies might choose to build their own customized applications or adapters to integrate their various business tools. Custom applications often start with data transfer capabilities but may grow to encompass more tasks and workflows. Custom applications have a similar issue as point-to-point integration in that it can be challenging to maintain as a company grows and adds more tools to its software portfolio.

Enterprise Service Bus (ESB)

ESBs are the latest and greatest in the integration sector. In an ESB, applications are connected by a “communication bus.” The bus serves as a centralized tool where the applications communicate. The perk of doing integration this way is that other apps don’t have to be tweaked when another component is added – the bus centralizes all of the communications. This is a more straightforward process than using custom applications or point-to-point integration.

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ERP Integration Challenges

ERP system integration is highly beneficial, but it’s not a walk in the park. In fact, data suggests that 60% of ERP implementations fail in some way. This could be a whole system failure or the inability to reach a targeted goal. There are multiple reasons why ERP systems and integrations fail, and it’s essential that you keep these potential ERP integration challenges in mind when selecting and adapting the solution that’s right for you. Here are some of the potential roadblocks to consider before deploying your solution.

IT Integration Needs the Support of a Coherent Strategy

Deciding on an ERP system is an important strategic choice. To determine which program will be most effective for your company, it’s essential to first consider how the business operates while also aligning a potential ERP solution with your organization’s goals. The first step in selecting software should include defining your ERP solution.

For example, you should consider the type of functionality that your business requires to operate effectively. Your company might require shipping labels of a unique size, so be sure to note this and communicate these specific needs to any software vendors that you interact with. By creating a list of needs and developing a specific ERP integration strategy, you can reduce the burden on your IT department and increase your odds of a successful implementation.

Maintenance and Updating of ERP Integration

Depending on the ERP integrations method that you use, you may need to consider how upkeep of the implementation will work. For example, if you go for a point-to-point integration, you will likely need to upgrade and change your system as elements are added and removed. This would likely include an associated cost for the updating of your program, which is an important factor to keep in mind when selecting an integration approach.

ERP Integrations Involving Legacy Applications Might Look to Cloud Solutions as a More Cost-Effective Alternative

It can be difficult and costly to integrate legacy applications that were not designed to integrate with other platforms. There are middleware software solutions available that can deal with some of the issues, but they can be costly and require customization and manual processes. Other options, like upgrades to on-premise systems, can also be expensive. Cloud solutions that can integrate with many types of ERP might be a good alternative.

They’re more affordable, more flexible and offer pay-as-you-go pricing that may lower the total cost of ownership. This doesn’t necessarily imply that companies would have to convert to an all-cloud ERP. But moving some functions to the cloud could prove advantageous to many companies. This option is becoming more feasible as many enterprise ERPs now support cloud applications on their on-premise systems, furthering the ultimate goal of meeting specific business needs.

Potential Pitfalls of ERP Integration

Enterprise resource planning systems streamline business processes by integrating the routine management of multiple departments into one software system. Large companies that need to manage their finances, supply chain management, customer service, and human resources often want to do so in a single centralized, integrated solution. Therefore, these companies turn to ERP software integration.

ERP systems are in high demand because of their ability to communicate with existing business software. However, such integrations are often complex and costly, no matter if the system is an on-premise solution or cloud-based ERP. Business owners need to be aware of common pitfalls of ERP system integrations when weighing the different options.

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When evaluating an ERP application for possible integration, consider these factors:

Complexity

ERP software is often very complicated and may require specialized knowledge to manage the system. Because of this, some departments may not take to the new software as easily. It’s important to get major stakeholders and decision-makers on board before pursuing a new ERP system integration. Lay out a timeline and estimates for the integration so the necessary departments can prepare accordingly.

Cost

ERP integrations for large businesses can be costly up front. That’s why doing your research and testing your integration before committing to it is so important. Besides the direct costs of software, you need to consider the indirect costs as well. Will you need to pay someone to maintain the system? What if you have technical problems? What if the system malfunctions? Include these indirect costs in your estimate. To make sure you aren’t wasting your money, check out this cheat sheet of features to look for in ERP integrations.

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Training

Because of the complexity of the software, teams usually require training on how to use it. This adds an additional cost in both time and money. If you’re developing custom middleware to connect your CRM and ERP, for example, you’ll need to provide additional training specifically for that.

Customization

While many companies originally intend to implement off-the-shelf technologies, project requirements often require customization. ERP implementations in particular usually require a lot of customization. Whether this is a custom interface or middleware to connect the ERP to your existing IT systems, customization is widespread.

According to a 2018 report by Panorama Consulting, only 25% of organizations use ERP solutions with little or no customization. On the other hand, 75% of organizations use solutions that have at least 11% of the solution code modified to create a unique solution. Customizing the system allows your business to meet each of your departments’ specific needs, but also adds a layer of complexity and risk to the product.

Questions to Ask Before You Integrate

It’s no secret that ERP integration is a timely process. However, there are many benefits to integrating your ERP system such as reduced human error, increased revenue and an uptick in productivity. When you’re deciding which vendors to choose from and whether ERP system integration is the right choice for your company, there are a few questions that you should ask yourself to ensure that you’re going with a viable solution.

Will operations be standardized on one platform without sacrificing functionality and productivity? Will any operations remain independently operated?

When speaking with vendors, you need to verify that your selected software solutions can be integrated. If not, consider how certain features could work as a standalone software outside of the integrated ERP. You may also need to consider other “best of breed” software options.

How will the vendors undertake data migration with the least disruption to my business and the greatest overall efficiency?

You should consider how the migration from your current software system to an integrated ERP model will disrupt your business. There might be downtime between the implementation of the new system and the uploading of historical data from your business. You should also make sure that there is an efficient way for historical data to be added to the new system so that you can retain insights.

Do the vendors have experience with my industry?

This question is generally important for any software purchase that you make. In this scenario, you should ask each vendor if they have experience both in your industry and with ERP integration. The experience level of a vendor can inform how difficult an implementation will be.

How much do the standalone solutions cost? How much do the integration and ongoing maintenance cost?

There is a wide range of direct and indirect costs to consider when going with ERP system integration. You should discover how much each software system costs, along with the anticipated cost of integration and maintenance.

How is software training conducted? Is it done directly by the vendor, or will I need to hire a third party?

Training is an additional cost that should be factored into your software budget. You may also need to hire a consultant to help you with integration depending on the level of support that your selected vendors provide.

Do I need the functionality associated with integration, or could I go with an out-of-the-box ERP solution?

Some companies can operate with an out-of-the-box ERP program. This means that there is no need for customization or configuration. If your business needs are fairly standard and you don’t have any special requirements, a basic ERP solution might be best for your business.

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The Future of ERP Integration

As technology needs shift and change, so does ERP system integration. This includes the tools that are available for integration with ERP along with the actual implementation approaches. Currently, ERP integration is ramping up due to postmodern ERP strategy. We’ve gone over this strategy a bit in this article, but as a refresher, postmodern ERP is a completely personalized solution where a company selects modules or standalone software systems that they want to integrate to create a whole and unique solution.

There are a few approaches available for ERP integration, but ESBs seem to be leading the way as technology shifts. This is because it allows new integrations to occur without the risk of ruining the way that other tools communicate. With other approaches such as point-to-point integration, connectivity between other software can be affected by a new integration because of how tightly the integrations are woven together.

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Final Thoughts

Enterprise resource planning solutions are incredibly beneficial to the productivity and bottom line of companies of various sizes. Like most businesses that operate in the technology sector, ERP software is constantly changing and adapting to business needs. That is why ERP integration is so prominent in companies today. Its customization opportunities are attractive and often successful. Before you select an ERP system integration strategy or an ERP vendor, you should consider the types of tools that you wish to include in your solution along with the kind of integration that would work best for your company. After all, in today’s technology industry, all of the choices are up to you.

What tool do you think is most beneficial in an ERP integration? Sound off in the comments below!

Lindsey JenkinsERP Integration: Strategy, Challenges, Benefits, and Key Types

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