Best-of-Breed Business Systems: Traps & Lies

Background

In my 20+ year career helping middle market companies select and implement business software systems, I often come to client situations where an executive makes the declaration: “We are going Best-of-Breed with our software solution!”.  I understand the appeal and logic.  It seems smart and will provide for a range of options.  In the background, my client believes the following arguments: 

1. I will get the best software in that class so I will end up with the best practices in my business.
2. I won’t get vendor lock-in because I am mixing and matching systems.  If one vendor gives me a problem, I will take that portion of the system out and replace it with another.

We all like to look smart and no one likes to be pinned down in a situation.  But I urge you to develop different criteria for making decisions around your business system investments.   I offer that Best-of-Breed thinking is really a marketing lie designed to sell more software.  Under the allure of making you feel clever as you believe you are minimizing risk you are led into a trap that becomes later expensive to untangle.  I suggest that there is a more powerful orientation for selecting business software:  Select your software based on 

1. Its capacity to organize work.
2. Its ability to help you synthesize information for decision making.
3. Its mechanisms to allow you to act quickly and consistently with customers and partners.

Let me debunk the background arguments for the Best-of-Breed approach:

1. Business Practices: Software opens and closes your capacity to produce a practice.  But it does not make the practice.  You will have to design, craft, and learn your desired practice and that is a human endeavor, not a software undertaking.  It’s more demanding to envision a practice first and then select the software that most closely meets your future process.  Simply assuming the software is used by many others (i.e., “so it has to be good”) is a recipe for unpleasant surprises and sub-optimal workarounds.
2. Vendor Lock-in: Once you adopt business software, you are locked-in primarily because of the investment effort to get off it.  All software migrations are demanding especially if you want to adopt them in the least disruptive manner.  I generally don’t believe that a software company is “out-to-get-you”.  In my assessment, most software vendors are behaving ethically.  Part of the software selection process should be about the vendor’s reputation and their commitment to serve its customers’ marketplace.

What about Total Cost of Ownership?

Of course, your future software should meet your requirements for producing a return on investment.  I choose not to labor this point because many have traveled the Total Cost of Ownership (TCO) discussion and I think it does not reveal other important concerns.  I have seen many cost of ownership analysis and I assess they mainly miss the soft, qualitative aspects of the investment; or they don’t see all the other functions that won’t be solved in the point solution – to look beyond immediate or qualitative concerns is more demanding and it may be difficult to measure and it often is ignored.  I argue that there are larger opportunities to adopting a business system than solving the most immediate pain point.

Best of Breed Example

Salesforce.com is the premier best-of-breed marketer in the systems marketplace.  It is a “point solution” in that it tries to solve a type of problem in the business.  Today, Salesforce.com is the Customer Relationship Management (CRM) leader.  As of December 2009, Salesforce.com touts well over 67,500 implementations and over 2,000,000 subscribers.   If the software doesn’t do what you need it to do, you are urged to visit their Force.com community to find applications that are pre-integrated to Salesforce.com.  Salesforce.com is the hub in this spoke and wheel environment.  Wow, what an array of applications you can choose from!  You can also develop software on the platform to make it fit your requirements as well.  On the surface, you feel positively overwhelmed with options; just like what it feels like to go to a Super Retailer and have a large variety of products to choose from.

It feels good to know that so many others have traveled this path.  You can’t go wrong because somebody out there must have an answer to your business problem in the Salesforce.com / Force.com community.  But here is the rub — it only gets you a partial (point) solution and you lock-in Salesforce.com in the middle of your overall systems strategy. Does that serve you well?  Maybe.  But it definitely serves Salesforce.com well.  Your business systems solution will now be organized around an elaborate contact manager and Salesforce.com knows that the more applications you adopt along the spoke, the more you will remain loyal to the hub.

But that’s okay, you say, because you don’t have time to solve all the other problems in the business and you can just get started now.  This syle of “need to act quickly” thinking is commonplace in the small-to-mid-tier.  This line of thinking definitely helps sell point-solution software – And I can’t say it will make a big difference in your business because for the problems it solves, an array of new issues emerges.

Best-of-Breed Case Example

I have a recent Distribution industry client that is making a significant investment in information technology to help it reach its next level of growth.  We were asked to help in a special area of their business related to operations and information technology; but not to help with the overall strategy which was set some time ago.   We have been brought in to work with the client on a strategy to bring these components together:

1. Microsoft Dynamics NAV for ERP (Inventory, Accounting)
2. Magento (Open Source eCommerce Platform)
3. Salesforce.com (Sales forecasting, Customer Support and Marketing Automation)
4. Vertical Response (Outbound eMail Marketing)
5. Drupal (Content Management)
6. SurveyGizmo (Survey Tools)
7. Lucene (Search Engine)

There are other components to the solution mix but you should get the picture.  This punch list of applications is not at all unusual.  There is a mixture of Cloud Computing, Open Source, and Traditional Mid-Tier software systems within the mix.  I applaud them for having a roadmap for the major components that will be needed to produce the overall functionality.  In my career, I have done a number of systems strategies that outline components like the ones above.  I can draw pictures to help people see how it comes all together.  The client is too far down the investment road to turn back so it is best to help them navigate this future well.

Guess what I can reasonably predict?

1. They will have to invest in software integration.
2. They will have to develop expertise in each of these packages.
3. They will have to develop relationships, at some level, with each of these vendors.
4. They will have to eventually develop their own data warehouse to get good reporting.
5. They will have to get custom software development help where requirements do not quite fit the native software.

Are they prepared for this?  At some level they are. But in many ways they aren’t.  They really don’t want to develop IT competency.  They want to focus on getting their products to market.  Someone will need to own this configuration as it will need care.

How Does The Best-of-Breed Solution Score?

Let’s see how well this Case Example solution noted above will do in our criteria evaluation?

1. Its capacity to organize work:  Each department will have to learn the special nuances of the software at hand.  Until the integration is working really well, there will be latency and errors in the information as we copy and paste (if at all) between environments.  In my assessment, this approach does not really organize work well although for specific departments, it will be an improvement.
2. Its ability to help you synthesize information for decision making: Very little.  Information will be scattered in various systems and it will be difficult to aggregate until the data warehouse is built and operational.  There will be analysts that will resort to spreadsheets to massage data into actionable information.  Costly, slow and error-prone.
3. Its mechanisms to allow you to act quickly and consistently with customers and partners:  This depends on how much customers and partners interact with the organization.  The more the customer interacts with various company functions, the higher the likelihood they will have an inconsistent experience.  There will be more propensities to handoff customers to others in the organization and time will be required to “research” information that is managed by others in different applications.

I suspect these points will be valuable to the CEO and COO who are trying to build more trust, develop greater customer loyalty, steer the company toward better offers, all while trying to build an overall leaner organization.

Are There Best-of-Breed Alternatives?

Is there an alternative?  Well, up until a few years ago, for the small to mid-tier market, this was pretty much the situation.  You were forced to “roll your own” solution because the marketplace did not have many alternative offers.  Back then, I helped companies develop these types of strategies. Those companies that made the integration investments and built the skills were competitive — and consequently IT grew and became increasingly heavier and slow to act.

SAP and Oracle Applications are two well-known platforms that had a compelling vision:  a single instance (database) solution for the entire organization.  While not perfect, they could deliver a rich set of applications to take care of large organizations’ complex needs.  Consequently, they own the business software marketplace for the large-tier (e.g., Fortune 500).

The more visionary mid-tier organizations saw the power of this large-tier offer.  However, they struggled in their implementations of Oracle and SAP as they were heavy:  Most were not ready for the expensive software licensing, significant supporting infrastructure investment, complex configuration options, demanding implementation and operational skill requirements, and significant training for user adoption. Consequently, most organizations failed in their attempts to capture the single-database promise.

One Fully-Integrated Solution

I am pleased that there is finally an offer that comes close to delivering the vision of a full-integrated application for the small and mid-tier.  That solution is NetSuite.  In the above simple case example, NetSuite can deliver most of the functionality today in a Cloud Based service offering.

Of course, it depends on the industry segment for this statement to be true.  But what is exciting about NetSuite is that we finally have arrived.  In my mind, the marketplace standard has now been set higher.  I would not be surprised that over time, there will be a handful of cloud-based fully-integrated applications that will be known in specific industry segments.  Point-solutions will have trouble making compelling offers to savvy business managers who seek to transform the organization by making it leaner, smarter, and adaptable.

In our case example above, if our client selected NetSuite as its business platform, I can reasonably predict the following:

1. Work will become coordinated.  Every employee will see the same information because there is only one version of the truth.  One department’s work will impact another department’s so it will require tighter coordination between employees.  Hence, culture will become more collaborative as the systems encourage that behavior.
2. Information will be aggregated and real-time.  Decision making will be augmented because reporting, data warehousing, and business intelligence are a by-product of a single database.  Our client will get this automatically as a consequence of choosing this application approach.   Management will have a superior capacity to make meaningful business performance assessments because information will be reliable and available on demand or pushed via email as it happens.
3. Assuming good training and design practices, customers will have a seamless experience when interacting with all areas of the business because the same records, display methods, and information access will be used.  Employees will possess greater ability for department skill cross-over because the same software system is used in all departments (screen layout, lookup, input, validation, etc).  For example, if a customer changes his billing address on an online web form, employees, without even knowing it, will automatically be working with the latest address information from that point on.

NetSuite is by no-means perfect.  There will be investment to realize the power of this application.  But I can confidently say that the investments will be lower and you will get there quicker than the Best-of-Breed approach.  Due to single database architecture, your investment is going to be about working out the issues with people in different departments now needing to work more closely because each one will be impacting the work of others.   The conversation is going to be about how you can keep adopting more functionality to better serve customers and partners.  There will likely be opportunities where you will want to enhance the application to meet your more unique (and hopefully competitive) requirements: fortunately, the platform is extensible using standard development approaches and open architectures.

Pricing

The NetSuite system is modular.  It is priced to be competitive in the mid-tier marketplace.  It is deliberately priced to not appeal to very small organizations.  The platform is not toy.  It really starts to make sense when you have 20 or more employees on the platform.

NetSuite modules can be turned on-and-off.  For example, many customers may elect to go with NetSuite to solve their immediate CRM requirements (versus Salesforce.com) with intention to migrate their legacy ERP systems later.  The pricing model, for the most part, allows for this.  As a Technology Strategist, I look for ways to sequence new capacities with existing and future business strategies; every company has its own special concerns and it takes some conversation to see a good implementation approach.

Invitation

I invite more conversation.  If you are considering a new business system, let’s talk so we can assess if NetSuite is a candidate platform.  I suspect that you will find NetSuite compelling once we look at your strategic concerns for scalable and low cost growth.