The Lesser of Two Evils: Comparing Data Integration Projects and ERP projects

October 12, 2018

Recently we came across a customer project where the owner of the project told us in the kick-off meeting that we had won their business over few alternative solutions they had been looking at prior to deciding to go with us. Instantly we thought that the person meant that we had beaten a direct competitor when bidding for their business. But when we asked, ‘Who did we beat?’, their comment was: ‘It’s not really who we decided to go with, it’s what we decided to do”. This comment was so surprising to us that naturally, we asked them to explain what they meant by it.

They then explained that for a long time this customer had contemplated on replacing their legacy business application with an entirely new ERP system. They explained that their old operational systems (including their old ERP system) were running quite well but required a lot of manual keying of data from a system to another, and their processes were lacking visibility and automation that some of their competitors seemed to have. An ERP project to replace the current systems with one ERP system had been internally discussed for a couple of years already, but they didn’t make a decision. With a new head of IT joining the company it was time for the company to make a decision finally. 

ERP Project

While an ERP upgrade or ERP change can be a significant improvement to a business, there are many horrific examples of ERP project gone wrong. Most failed ERP projects are quietly swept under the carpet, but every once in a while, the really extreme cases make to the press.

An excellent example of such case is the LIDL SAP project that was widely published in 2018, where after many years and spending that had exceeded 500 million euros, LIDL finally decided to call it quits and scrap the whole project.

Another ERP project that made the news in the same year was the Oriola SAP project that resulted in disastrous break down of the company’s core business operations, forced the company to issue a profit warning and ended up costing the CEO of the company his job.

With these type of horror stories on their mind, our customer had decided they did not want to take their chances with a big ERP project. They had no immediate pressure to replace their current systems, they only needed to enhance them for improved interoperability. Most of their applications had the functionality the company needed to run their business, but data just seemed to reside in these isolated systems, which resulted in very low automation levels and lack of visibility in their financial processes. In the end, the company decided they did not need a completely new ERP, they just needed to integrate their current systems for interconnection and interdependency.

Integrated enterprises

While integration projects have also gained a questionable reputation and are certainly not without risk. However, the risks that they bare are different to the risk of the ERP projects. Integration projects are hardly ever disruptive to the core business of the company. Even at its worst, an integration project will typically only fail to deliver the desired results in due time. However, the delays are usually never that dramatic, most likely few months, certainly not years. With the shorter timelines, it is much easier to manage the risks related to the project.

Also, during an integration project, the company’s business can and will continue “as is”. Nothing should change with the core systems, and more importantly, nothing gets broken during the project. Integration is an enhancement to the applications, not a disruptor.

In the end, integrated enterprises can be just as efficient, as an enterprise that has invested heavily in a new ERP system. With integrations come connectivity across different departments, systems, and applications, information sharing with all relevant parties, as well as process automation.

Why choose data integration over ERP?

Most companies may not regard an integration project as an alternative to an ERP project. They probably should. The benefits are clear. Normally an ERP project will cost hundreds of thousands, if not millions of euros and the ERP itself can only resolve internal data issues. A data integration project is typically just a fraction of the costs of an ERP project. In the case of our customer, the cost was clearly a factor in the decision, but the possibility to mitigate their risks was probably even more important.

The data integration project also provided the customer with some other benefits over a traditional ERP project. Youredi iPaaS solution, chosen by the customer, can be used to connect both their legacy on-premise systems as well as more modern cloud-based applications. This allows the customer to use a modular approach when further developing its application landscape. While a single application comes to the end of its lifecycle, it can be replaced with a new application that can handle the same functionality without disrupting the other applications in the mix. This, in turn, makes the replacement projects much more limited in terms of scope that reduces the complexity and risks involved.

Even more importantly, by choosing the modern iPaaS platform as the data backbone of all its applications, the customer also now has the opportunity to connect its operations with its trading partners and even government officials, such as the tax authorities for reporting purposes. An iPaaS solution is able to exchange data with basically any third party, without the customer needing to make any changes in its core systems. The iPaaS layer will take care of all necessary data transformations and ensures that the connectivity to other parties is continuously monitored and managed. An ERP system, no matter how modern it is, would not provide the same level of service and functionality, but the customer would have to deploy the third-party integrations separately anyway.

EAI vs. ERP?

Today, the IT landscape tends to change very rapidly. New systems and requirements emerge, and old systems become obsolete all the time. Many companies have realized that in their line of business the former “one ERP” approach is too slow and much more expensive to deploy. The ERP projects often fail to provide the return on investment that is needed.

Moreover, the constant change in the business environment makes it very challenging for a big ERP project to succeed. The reason is that very often companies are “aiming at a moving target” and therefore the slow and long lasting massive ERP projects become outdated before they are even completed. This means that the original scope and budget of the ERP project changes and companies end up with significant delays and cost overruns.

Enterprise application integration (EAI) and ERP integration can be a much quicker and easier way to achieve the business requirements of increased automation and process visibility. Integration projects do not disrupt the company’s on-going business activities and put much less onus on the organization. Integration projects are typically run by the IT department or the CIO office, which leaves the business people with much fewer responsibilities and does not interrupt their daily work too much. But in addition to that, even the IT resources of the company are not overly burdened by the iPaaS projects. As an example, Youredi’s iPaaS solutions are delivered as fully managed service by Youredi’s integration experts, and the customer only needs to test their applications and possibly provide a project manager on their side to oversee the testing.

In a nutshell, a modern iPaaS solution can provide companies the business benefits they require faster, easier and cheaper than an ERP project.

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