Best-of-breed vs. the failed ERP approach
A while back, I wrote about IT and the competitive disadvantages inherent in an ERP approach. The short version: one-vendor suites are not a competitive differentiator and they’re not a business strategy.
With the market requiring CIOs to be more business- and customer-driven than ever, I’m frankly surprised that salvos like Rick Veague’s (CTO, IFS North America) still get any serious credence. In the back-and-forth about best-of-breed and ERP, I appreciate the multiplicity of perspectives. But I say without equivocation that the assertions in this article are just plain wrong, top to bottom. Unfortunately, this seems to be the default perspective for too many CIOs.
In recent years though, there has been a growth in the number of stand-alone software solutions — “best of breed” applications as they are called — that threaten to roll back the progress experienced by manufacturers these many years. These software products deal with only a segment of the enterprise, inhibiting the free flow of communication and reducing efficiencies. The more these software products proliferate, the more expensive and confusing enterprise technology becomes, and he [sic] more difficult it is to coalesce data for reporting and manage enterprise-wide security.
First of all, the big ERP suites are fundamentally a collection of best-of-breed functionality that was acquired piece by piece from competitors who outperformed them in a particular process or function. ERP vendors are essentially marshaling functions and integrating them in the background in the same way a best-of-breed, or bolt-on, strategy would. You’re just paying a hefty premium for the brand name.
ERP cannot provide the best in all things, all the time. Instead of empowering critical teams to seek the best way to do business, everybody is yoked to lowest-common-denominator performance. My thinking is uncomfortable and inconvenient for many CIOs who know that big suites make their life easier and provide a dependable supply of embroidered shirts and free rounds of golf.
But it ultimately comes down to this: once a company is strategically clear about how they’re going to compete, they should then go find the technology to execute, giving their people the absolute best tools they can to beat the competition. ERP vendors routinely blur three critical areas of focus: best of talent, process and platform. This is old-school, reflexive protection of IT empire. It’s locked-in thinking that is killing companies’ ability to compete.
Selected face/palm moments from this article
Late in the article, Veague highlights a number of disadvantages of best-of-breed. On the whole, I found these objections were shallow, ticky-tacky or low-level. What they collectively miss, and it’s a big miss, is the imperative that all technology should directly support your strategic initiatives. One vanilla system cannot possibly help your company do this. If you have an ERP that’s sub-optimizing critical functions that your team needs to better compete, I can guarantee you that it’s costing you a lot more than the growing pains of integrating a best-of-breed ever would. I’m talking about revenue, cost-efficiencies and EBITDA. If you can’t point directly to how IT is driving all those factors, your IT isn’t doing its job.
That’s the standard we hold ourselves to, and the linchpin of our company’s value proposition: we guarantee that our software will deliver outstanding performance (like reducing forecast error by 25 percent) and a bottom-line impact (minimum 5 percent increase in EDITDA) that would offset any issue listed below 100 times over. It is this type of performance that underlies the strength in best-of-breed. Companies need to understand it, utilize it, and let their IT help them be more competitive rather than dummied down and made to be like everyone else.
But on to Veague’s points:
Integrating best of breed solutions requires the work of systems integrators, adding cost and substantially extending implementation time. These efforts are typically unnecessary with a Suite application.
Ain’t necessarily so. Today, integrating can actually be faster and cost less.
Reporting and access to information can be more expensive using a best of breed solutions because corporate information is spread across multiple applications and platforms.
Technologically, this is completely wrong. This has been proven time and time again. For example, having a data warehouse that supports best in breed/performance architecture bears a cost that is certainly no more, and possibly less expensive than an ERP.
A best of breed solution can increase costs for supporting technology acquisition and maintenance costs.
Only if mismanaged. The amount you pay for installs, maintenance and upgrades of an integrated suite are going to more than erase any savings you get here.
Different best of breed solutions tend to have distinct or unique security models, and that means it is harder to maintain security and privacy across an integrated collection of products.
Sorry, but this sounds like garbage to me. There are many applications that will exactly mirror the security model from your ERP and/or financial systems.
Usability and the ability to collaborate are often diminished with a collection of best of breed solutions because users that must work cross-functionally must learn different user interfaces and systems. This is in contrast with a Suite product that offers a consistent, well-thought-out user experience.
I think that this is fundamentally wrong. If you have a big ERP suite with a forecasting module that is there because, well, it just comes with the rest of the bundle, your people aren’t going to use it to the degree they they should. Your best performers aren’t going to adopt some perfunctory, clunky what-not just because it’s integrated. However, if you give them a tool that is tailored to the way that they work and they see how it will make them better, then they’ll see the value and usability will go up accordingly. If you go down to the lowest common denominator, people don’t get deeply involved and they won’t collaborate anyway.
There are a lot of companies out there that are less competitive than they could be because thinking like Veague’s is taken for granted. I’ll be blunt about it: any officers at any company who swallow this stuff wholesale are abrogating their fiduciary responsibilities to their teams, their bosses and their shareholders.