Is Single Instance ERP Losing Momentum?

There is some talk in the marketplace about people moving away from the single instance utopia offered by most fully-integrated business system platforms.  In the article “The Future of ERP in a Disrupted Market“, I think the most important matter to consider between being on a single instance (one database to run the business) versus sewing best-of-breed applications together is “why bother?”.  Why bother performing an integration to another system if you don’t need to?  It’s not that we should avoid all other systems.  We are full believers that a single system to support the business transaction cycle is of utmost important.  But I believe there are key questions to ask when considering the “integrate best of breed” approach:

  • What time and effort is required to sew the applications together?  What will the return on investment look like and over what time horizon?
  • What will be the ongoing cost to maintain those integrations?  They inevitably need care.   Is a reserve being created to take care of future issues?

But there is more.  Software applications shape the way people work.  Each application uses different language taxonomies to represent real world structures and logistical coordination.  Having different structures produce costs.  Here are some questions to consider:

  • Communication between departments requires additional effort to produce meaning and proper coordination when using different names to represent the same things.  Consider one system that calls a potential customer a “prospect” and another that calls it a “lead”.  How about one system that calls inventory “items” and other that calls it “products”?  Each translation takes away from value-producing action and can lead to mistakes and misunderstandings.
  • What effort will it take to consolidate and aggregate information that lives in different systems?  Doesn’t this mean we need to add a Business Intelligence (BI) application to report on information living in two or more systems?
  • What about having one or two key people within the organization (or more depending on the size of the company) that know the specifics of an integrated application thoroughly which can then help all departments get what they need?   Wouldn’t that be less costly and less risky than to have no one that understands how everything works together?

In our experience, we basically see a multitude of systems in a small-to-medium business — primarily due to a lack of design and a short-term orientation to solving common business problems.   It’s generally a legacy.  In our experience, if the business is growing, they inevitably hit a “brick wall”.   What this means is that the marginal cost of adding more people to handle transaction volume is taking from profit margin in percentage terms faster.  At these points in a business lifecycle, we think it makes sense to consider a fully-integrated application versus a slew of best-of-breed systems.   Instead of spending time trying to work with different systems, producing and maintaining integrations, and learning different tools, we focus on developing the skills within the organization to adopt and leverage the capacities offered within the single system.

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Marty Zigman

Holding all three official certifications, Marty is regarded as the top NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 30 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to set up a conversation.

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