Will your ERP system become the hub for everything? Here's why it matters
By Jeroen Figee August 16, 2022 Audio mode
IDC predicts that 40% of Global 2000 companies will be using their ERP systems as the data and transactional hub for their industry-based ecosystem by 2023. Jeroen Figee of Unit4 asks, how should organizations negotiate the opportunities and perils on the path ahead?
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IDC FutureScape: Worldwide Intelligent ERP 2022 Predictions provides a fascinating glimpse into how intelligent technologies within the enterprise applications markets could evolve in the next five years.
If borne out, the report's forecast about the use of ERP systems as data and transactional hubs could lead to greater business agility, competitive advantage, and reduced costs. But there's something that companies mustn't miss: the way business-critical systems connect with the ERP system will either accelerate or hold back the enterprise.
Integration isn't just an issue for technical teams, it's relevant for CFOs, professional services teams, compliance managers, HR leaders, sales, support, and many others across the business.
Increasingly, people's ability to succeed will rely on data flows. These could relate to the critical information needed for a project, background checks on an employee, or financial insights to guide a major investment decision.
Integration challenges
When implementing ERP systems, vendors typically leave companies with an integration toolkit, equip them with best-practice templates, or provide pre-built integrations for some common applications.
This sounds simple enough, but a typical company could have 100-250 potential integrations. It may want to run credit checks, collections, customer address verification, bank account verification and integrate with its main bank for accounts receivables. That's only five integrations, but if it operates in four countries, then all of a sudden, this snowballs into 20 integrations. Once you add connections to local payment, electronic billing, tax filing, exchange rate services and business intelligence tools, you could end up needing hundreds of integrations.
Alternatively, companies may turn to a third-party suite of connectors to solve the issue. But often, connecting the systems requires a lot of work, which slows down the business and drives up cost.
But with ERP systems becoming the central hub within an architecture, these connectors will grow in significance and volume, as the number of software-as-a-service (SaaS) solutions increases. ERP systems will link to CRMs, customer support systems, SaaS billing, credit management tools, professional services automation software, and more tools.
However, problems can occur because implementing connectors isn't enough — they must also be monitored and maintained. For example, standard connectors need to keep pace with endless SaaS software releases; IT teams must move from deprecated APIs to new versions; integrations must be able to reflect changes to security policies, GDPR and privacy by design, along with a host of other factors and changing business priorities.
However, if important flows stop running to and from your ERP system, IT teams have to spend hours trying to find out why — and then rebuild integrations against the clock to avoid the business faltering and customers being impacted. Over time, internal costs can snowball.
Three strategies to explore
Going forward, companies need to create greater speed and resilience around these integrations. The strategy they follow should remove the burden of having to build and maintain integrations, so they don't need the resources of developers, in-house integration knowledge and error-solving capabilities. If they want credit checks in five countries, then the provider should simply deliver the service, including maintenance and updates when changes happen.
There's no one-size-fits-all approach to managing connectors. Rather, companies need choice, with different options to fit specific needs over time. Here are three strategies that can work:
1. The mesh approach
Companies can choose from a selection of data flows to the most commonly used applications across different industries. These turnkey integrations are available out-of-the-box with an ERP system — with no activation or onboarding required. They are provided as a service, rather than as a one-time deployment.
As a result, businesses can optimize the application ecosystem in an enduring way to enable a strategic advantage. Even if companies don't use all the connectors in any suite they purchase, the lower investment delivers sufficient value. Each mesh is dedicated to the industry it serves and delivers value by including the most common integration flows within the industry eco-system.
2. The marketplace approach
Here, companies can build on the same common integration platform using ERP-accredited partners which add additional flows that fit their bespoke needs. These customizations may relate to country requirements, niche sectors, or nuances that are unique to that company. Again, connectors are provided as a service.
3. Intuitive tools
Some company requirements for new flows may extend beyond the scope of the mesh and the marketplace. But organizations can keep up by building integrations themselves with the same ERP integration platform using low-code/no-code tools. Companies can stay agile without any additional knowledge or skill set required.
In the first and second approaches above, the ERP vendor takes ownership of the service and maintains the connectors and flows. For customers with scarce IT resources, this is a major win. In the third example, the customer is responsible for maintaining the flow, while the vendor makes the integration platform available.
But there's even more that ERP vendors can do to help...
Gaining a competitive edge
To date, managing ERP connectors has often been a reactive process. But some ERP vendors are finding new ways to put their customers on the front foot.
For example, if the company you use for credit ratings had a major system change coming, imagine if your ERP provider got advance warning and adapted your connectors automatically, without you even needing to know? Customer approvals could proceed without skipping a beat. That's one development we're likely to see.
Having your ERP system as a hub also presents new opportunities. For years, emphasis has been placed on operational excellence and cost savings. But ERP systems can also deliver significant innovation and insight once data is enriched and flowing freely. The vast potential exists in terms of use cases.
For example, instead of just one or two flows with an application, you might have six or seven that tell you far more about your company and its customers in real-time — or satisfy a new government requirement for checks against blacklists. You may also extend your flows out to your wider ecosystem and gain a broader picture of supply chains and the marketplace.
At the same time, automating data entry and rekeying will reduce time and cost, while improving the work experiences of IT professionals. They can switch from manual and mundane tasks to more business-focused, higher-impact projects. Undoubtedly, this will help with people's satisfaction and retention at a time when talent is in huge demand.
As IDC predicts, ERP systems are destined for a bigger stage in the corporate world. But it's your connectors that will play an essential role as members of the supporting cast. Make them a priority and you can expect a standout performance from your ERP system.
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