As I review “As Is” business processes at new mid-size customers I constantly run into applications that claimed to be “integrated”. Customers have environments that have integrated CRM, Accounting, Inventory, Job Costing, Project Management, etc. However, rarely are these software systems truly integrated. Behind the thin veil of “integration” is often a mess of data batching, incongruent information, orphaned data, re-keying of information and always lots and lots of spreadsheets cobbled together to try and make sense of it. But the marketplace is full of “integrated software” claims so who can tell the difference or fathom the ramifications when you are researching and making a choice. So let’s take a look at what “integrated” can actually mean.
There are many obvious benefits to integrated package and we will discuss them in detail on another day. In today’s market there are really two types of integrated packages; those offered by software companies that partner with other applications to build a bridge between them to share their different data sets, i.e. you can get a CRM software package that will talk to accounting system. Or you can get an inexpensive point solution for job costing that will push invoices to an accounting system, and a reporting package that will pull data from various databases to patch together some information for management to make decisions from. The alternative type of integrated solution is a true single system with one database that contains all the information about your departments in one location. Usually these are designed from the onset to address a business holistically and lots of planning goes into the design and vision of what their customers will need in their business.
Both can be the right choice for your business; the decision to use one over the other comes down to need and the size of the problems facing an organization. When evaluating integrated solutions, you need to ask the following questions:
- Is the total package you need to address the needs you shared with the sales person or consultant from the same manufacturer? If not,
- What type of communication is there between the different software packages?
- Is there a real time integration of batch processing of data?
- What data is not shared between them and what happens if they are manipulated separately by different people in different systems?
- How will reporting be accomplished?
- How will data integrity be addressed in multiple databases?
Unfortunately when separate systems are connected there is often a one way integration point. For example a CRM system will push an invoice into accounting system….now what? What happens to the accounts receivable? The CRM probably sees that as a sale, maybe even a cash receipt against its customer master record. But what happens if it turns into a bad debt? The accounting system will register the write off correctly, but will that be reflected in the CRM without a manual process?
Another example can be found in project management or job costing systems that are bolt-ons. The job costing system can report on cost complete and then produce an invoice that is replicated in the accounting system over night. That is a step in the right direction. But what happens when it’s a big project worth lots of money and risk? What is the level of accuracy you have in tracking your costs? What does the feedback loop look like to the project management office from the accounting department? How much lag is there? Is the labor fully burdened and does it represent the true costs of the staff that did the work? Bidirectional or real-time information is critical in managing costs and project timelines. The feedback of what is actually happening with material and labor can make or break you as you grow your business and allow you to be proactive in managing that growth.
Herein lies the problem. Whenever there are two or more manufacturers involved in a software solution there will be data integrity issues; either lining up (data mapping) data or having orphaned data. This is not a problem if you have a small number of people running your business and knowing what is going on in every area. In fact this type of solution is very economical to purchase, but is it the right model to grow your business from start-up. But as you can see through this discussion that model will start to breakdown as you scale. The data integrity issues in fact can be very costly or even crippling as the speed of business increases and margins shrink. That is the tipping point where moving to a single database, all encompassing package starts to make economic and strategic sense.
Again drawing from my experience of visiting customers that have outgrown their multiple systems, there are some other costs to consider when deciding if it is the right time to move from integrated software to a single system software there:
- Maintaining multiple applications and working on the integration if one package upgrades and the other doesn’t.
- Potentially maintaining multiple hardware platforms.
- Cost of multiple service contracts.
- Having to export more and more data to spreadsheets for new reporting requirements.
- Customization between applications can prevent updates. There may be compatibility issues leaving you stuck with the old software.
Building efficiencies into every process in your business, utilizing resources efficiently and gaining access to key information in timely basis has become more critical than ever in your business operation, especially if you are in growth mode. Removing those barriers from cross departmental information allows for more holistic view operation and ultimately more gross margin.
When evaluating your next solution, ask the question: What type of Integrated system would best serve you?
What has been your experience?