There are many compelling reasons why organisations turn to Enterprise Resource Planning (ERP) software to manage core business processes and collect and interpret data from a variety of activities such as HR, supply chain management or financial control.
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According to figures from Allied Market Research, the ERP market is showing no signs of slowing down and is predicted to reach $41.69 billion by 2020. There’s no doubting that ERP delivers to businesses on many levels. Sales forecasts are no longer based on guess work, order volumes can be easily balanced with inventory, and workforce planning can be brought in line with business needs. ERP systems help with these and many more challenges for tens of thousands of organisations.
However, for all of the many benefits it offers to the organisation as a whole, it’s not uncommon for certain business functions to become frustrated by the rigidity and limitations offered by the functionality on offer to them from their organisation’s prescribed ERP system, whether that’s JD Edwards, Oracle, SAP or Sun Systems. While ‘core functions’ such as finance, manufacturing and HR are well supported by ERP’s ‘core features’, often other business functions, procurement being one, can find themselves in receipt of ‘add on’ functionality that purports to be a fully blown system. However in reality these more niche functions may have been the result of a gap-filling acquisition of a technology that is poorly integrated or not part of a long term roadmap.
Making the move
Let’s take procurement’s plight as an example. We find that many procurement professionals are looking to move away from what’s offered to them in their ERP system towards best in class eSourcing and eProcurement technology. This will enable them to automate manual processes and contain and better manage organisation-wide spend, thereby delivering a multitude of business benefits. It’s worth noting that there is a stark difference between the make-up of ERP and procurement systems. While ERP tends to be a ‘deep’ system used by relatively few people, purchasing systems perform ‘shallower’ processes, relatively speaking, and can be used by almost anyone in an organisation that needs to buy something. Where ERP needs to manage complexity, procurement needs to offer simplicity to its user base. The same applies to other outlying functions less well served by ERP.
Increasingly, procurement teams are facing the choice of continuing to use their ERP system or make the move to a cloud-based eProcurement system that can integrate seamlessly with it.
But how can departments like procurement convince the rest of the business, especially IT, that ERP no longer meets their needs and that moving to a cloud-based system that can be integrated and be done securely and without disruption?
The integration challenge
We’ve seen many of our customers seek to take these steps before being halted by the integration challenge, and concern from IT managers that integrating with a remotely hosted, third party system may pose a risk to the organisation, especially where business-critical master data and finance systems are concerned.
When it comes eProcurement software in particular, often one of the biggest roadblocks is the question of integration with financial processes, however, the tide is now turning and some cloud-based eProcurement solutions come with ready configured integration Platform as a Service (iPaaS) in order to securely integrate with any required system offering users freedom of choice and the ability to automate, improve and better manage many of their day-to-day procurement processes.
For example, one of our customers uses JD Edwards (JDE) for finance and used its procurement module for over ten years to raise purchase orders and approve invoices. The system wasn’t considered very efficient or easy-to-use so certain departments chose to bypass it all together, preferring instead to manually process their orders. However, the complexity and limited functionality of the existing system was preventing the organisation from making wide-scale purchasing efficiencies and restricting its view of organisation-wide spend.
Deciding to integrate a new eProcurement system with the JDE finance system that would enable a number of efficiencies including better spend control, more efficient order processing and payments, the organisation decided on a hybrid cloud approach allowing us to host our cloud-based service from within its data centres.
Another of our customers, a global organisation of scale, was keen to make efficiencies to the management of its indirect spend across Europe. Multiple systems were being used across the region for indirect purchasing and these were largely manual, paper-based processes that did not provide full visibility and control over expenditure. As a result, collaboration between the purchasing teams and finance, and with suppliers, were not integrated and could lead to duplication on spend or even the business purchasing goods or services it didn’t need.
After considering the choice of using the procurement element of its ERP, in order to improve indirect purchasing across Europe, it chose to move its entire European operations to a separate, cloud-based eProcurement system to integrate with SAP. It now has a single view of European-wide purchasing enabling significant cost savings.
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Best-of-breed cloud-based solutions offer a host of benefits across a business, not just for one team, so for those parts of the business poorly served by ERP, cloud-based solutions complete with iPaaS may offer a viable and low resistance alternative to the limited functionality currently on offer.