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When To Invest In An ERP vs. Standalone Systems: Do You Need A Toolbox Or A Swiss Army Knife?

Enterprise resource platforms (ERPs) are like Swiss Army knives — they are a multifunctional set of tools that come in one sleek package. Typically built around a core set of financial modules, ERP systems often include feature sets for customer relationship management (CRM), operations, customer service, supply chain, and more. But determining where to rely on your ERP vs. an integrated third-party system to cover your core business needs can be a big challenge.

When you are implementing a new ERP, you have to think carefully about how all your business systems are going to work together. On one end of the spectrum, you can opt for an ERP that covers all your needs, like a Swiss Army knife — but then you have trade-offs on the quality of individual functions. At the other extreme, you can choose to use an ERP primarily for your finance requirements and meet your other business needs with specialized tools (aka your Phillips-head screwdrivers), but sometimes that can result in an expensive and hefty toolbox to carry around. The choice comes down to where you can live with the trade-off, and where you need more robust functionality.

There is a spectrum between going all in on your ERP and supplementing your ERP with standalone tools, and most companies land somewhere in the middle — that is, they use an ERP for most functions and a select few standalone tools for specific needs. In this post, we will share three essential considerations as you figure out where on the “ERP vs. standalone systems” spectrum makes most sense for your business, including meeting your business needs, preserving data quality, and maximizing your budget.

1. Map your core processes to determine what functionality is sufficient for your needs

When you are selecting a new ERP, we always recommend first mapping out your current business processes and identifying your pain points (check out our ERP selection article for an in-depth guide on how to do this). This process will give you a clear picture of where your needs would be better served by an ERP than a specialized tool, or vice versa. It is critical to distinguish between what is an actual business need and what is a nice-to-have. While you want to give your team the right functional coverage to do their job properly, you also want to ensure you are investing your limited resources in the right processes.

Say you are a construction company and your ERP comes with a basic project management tool. It is not very advanced, but tracks everything you need it to and allows you to accurately collect work in progress (WIP), bill clients, and recognize revenue. Assuming your project load and staff are a manageable size, there may not be a need to purchase a more sophisticated project management tool yet. Or perhaps you are a third-party logistics provider with a very sophisticated warehouse management tool. The standard ERP you are looking at does not have the advanced features that you need to manage inventory and logistics. In that case, you are much better off buying a dedicated warehouse management tool with robust fulfillment capabilities and then building a robust integration with your ERP.

It all comes down to what your core requirements are and what the ERP can offer — whether you can make your ERP work for your purposes, or whether you need a specialty tool to bridge the gap.

2. More points of connection mean more complexity and more potential for error

Data integration is an important consideration when designing your digital ecosystem. The more handoff points between systems, the more possibility for bad data to proliferate. You do not want your contacts or customers to become out of sync in between your core tools. And while it is not too much extra effort to connect one or two tools to your ERP, the more complex your ecosystem gets, the more likely errors become.

For instance, if you have your leads in a dedicated CRM system but your orders in your ERP, what happens when your prospects convert into customers? You do not want to have to recapture all their information. And likewise, your salespeople will want to know all of the orders they have made, payment patterns, and so on. The advantage of an all-in-one ERP is that there is no data handoff. But if you need the extra functionality of a standalone CRM, you should give careful thought to how you are going to maintain clean data within your integrated solution environment. Consider whether an integrated platform as a service (iPaaS) solution will be required to maintain and facilitate the transfer of all of that data.

There are some cases where you might not necessarily need to integrate all your systems. Say you have a standalone marketing automation tool, like Mailchimp, just for your email campaigns. If your top-of-funnel marketing efforts have no material bearing on the financial decisions you are making, you likely do not need to integrate it with your ERP.

3. Take an architected, ecosystem approach to business systems

In an ideal world, your systems should support and enable business processes with minimal duplication of effort, have high levels of data integrity, and provide meaningful insights to support effective decision support within an organization. Whether all these objectives can be met by a single ERP or rather multiple systems strung together, being deliberate about both the process and data flow design is important.

In multi-system environments, we strongly recommend mapping out both business process flows, and business data flows. Once you know what data needs to be exchanged between systems (either manually or via integration), having a detailed understanding of the underlying data models will reveal whether the intended business process design can be achieved or whether there are trade-offs to be made due to design limitations. For example, if you are using a specialist system to manage your orders and fulfillment but want to maintain your account receivables (AR) in the ERP system, you would need customer records to exist in both systems. If system A does not have the features to store tax zones the way your business needs to, you may need to design your tax code naming convention so that it can be compatible with both systems for ease of integration when sharing the customer and order-level records.

There is not one right answer when it comes to business systems. Finding the right combination of systems that best supports your business processes should always be the goal.

The right toolkit for the job

Even though a Swiss Army knife is unlikely to contain every tool you will ever need, it is still a great multifunctional device that can be ideal under the right circumstances. Today’s ERPs are the same way. When chosen thoughtfully, they can make your business operations more streamlined, preserve data quality, and save money that you do not need to spend on multiple software licenses.

When designing your ERP ecosystem, think carefully about what needs are best met by your ERP vs standalone systems with more specialized functionality. With these three principles in mind, you will be well equipped to build out the right toolkit — one that makes efficient use of your resources and fulfills your business’s unique requirements.

Citrin Cooperman’s Strategy and Business Transformation Practice is here to help you identify the correct ERP toolkit for your business. Contact us today so we can help prepare you for success.

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