From an accounting perspective, some companies are better suited to foregoing an integrated ERP solution.
Whether a company wants an integrated system, or how it wants to integrate its information, will depend on its operating model, said James Cashin, a partner in Boston at the McGladrey accounting firm. The needs of a company with multiple, diverse, business segments rolling up through a holding company differ from that of a company with a very consistent operating model.
“It depends on what is driving the business,” he said.
A company with multiple entities running different enterprise resource planning packages or accounting software may want to use a business intelligence reporting package or corporate performance management system, such as software from Oracle Hyperion or IBM Cognos, to sit over the top of the ERP systems and other systems or databases, Cashin said. That allows the company to consolidate information from the various sources for management reporting and year-end reporting.
“There really are a lot of different models that are out there that could be integrated,” Cashin said. “Some clients like to go with a best-of-breed approach, where they have a human resources system that sits outside of the ERP, they have a customer relationship management system that sits outside of the ERP.”
For example, Cashin said, one of his clients — an e-commerce company with $500 million to $600 million in annual revenues — has multiple billing modules, and solving its complex billing problems was the company’s priority. So it bought a tool specifically to handle its billing issues rather than an integrated ERP package.
Another example is life sciences companies that outsource major components of their procurement, manufacturing and distribution, which limits the need for an in-house ERP solution, he said.
Certain companies may want an integrated ERP system for the logistical, supply-chain management benefits — allowing manufacturing to communicate directly with accounting, Cashin said. If a company is handling its procurement, manufacturing and distribution in-house, then it would definitely meet the criteria for needing an integrated ERP system.
“There are certain elements of ERP that work better than others,” he said. “But if you’re a growing company or a large company and you’re looking to standardize, and yet you’re running multiple ERP packages at a certain cost that are not meeting your needs, that is certainly a time when you would consider an integrated platform.”
Standardization may be necessary for a company to manage to a common environment and a common way of discussing the business throughout the organization — starting to use a common chart of accounts, using a common tool, standardizing the monthly close process and putting the company’s information in one central location that everyone can view, Cashin said.
Another consideration for a company is whether it is becoming too complicated it to aggregate data within business segments or geographies, and whether the complexities could be alleviated with an integrated solution, he said.
Standardizing can save the company on the costs of multiple, disparate software packages, including IT costs, he said. Ensuring data accuracy is another soft cost benefit of standardizing.