Should you choose unified or best-of-breed for your ERP?

Every software system reflects the philosophical approach of its developers. In some cases, differences in development philosophy have little impact on the resulting systems. In others, however, the impact could hardly be greater. The distinction between best-of-breed and unified approaches belongs to the latter category.

A best-of-breed approach to ERP involves purchasing a combination of solutions (‘packages’) from different vendors. Each package may be “the best” in its functional category, but that category will be extremely narrow. The overall system is a composite of these fit-for-purpose packages, stitched together after development.

A unified ERP solution, on the other hand, is a system that covers a wide range of functionality. A unified solution usually has a particular strong value proposition in one area, for example core accounting, while it provides “good enough” functionality in other areas. Unlike best-of-breed quilting, a single vendor develops a unified solution as a whole system.

There are distinct benefits and drawbacks with each approach.

Best of Breed: The Claims

Defenders of the best-of-breed approach will often argue that no one unified vendor could meet all the needs of any organization. Because it allows clients to build their own systems, its apologists claim, the best-of-breed model can lower the risk of functionality gaps.

Best of Breed: The Reality

Best-of-breed advocates tend to gloss over a difficult truth: a build-your-own software system is only as strong as its weakest integration. Best-of-breed packages can therefore create problems, with their custom integrations and specialized coding. As veteran tech executive Rick Teague puts it, “Integrating best of breed solutions requires the work of systems integrators, adding cost and substantially extending implementation time.” Worse, even if two applications can be made to transfer data reliably 100% of the time, problems arise if one of the applications is modified or upgraded. One study¹ found that over a three year period, the total TCO of an integrated application was more than 8 times the initial software license cost.

In addition, buyers that attempt to engage multiple different vendors and products at the same time will have a much more complex IT footprint. They will have difficulty maintaining security, privacy, and regulatory compliance across different platforms, since each module will have separate technological, version, and security requirements.

When you purchase a best-of-breed solution, you must separately purchase multiple licenses, thereby increasing the total cost. By total cost, I am referring to the total cost of ownership (TCO), a sum of all expenses involved in installing, deploying, upgrading, and maintaining an ERP system.

Unified Solutions: The Claims

Conversely, advocates of the unified model argue that it offers system-wide consistency in user interface, authorization, and access. A common UI across diverse functionalities makes unified solutions much easier to use, which in turn saves client-companies time and money.

Unified Solutions: The Reality

In theory, of course, the unified model is not entirely without potential drawbacks. While unified solutions do implement much faster, some best-of-breed systems may offer a client more options to customize their rollout. A composite system may also contain one or two modules that perform marginally better.

However, these drawbacks correspond to significant advantages on the other side. Where isolated areas of the system may underperform relative to single-purpose packages, the unified approach makes up for it with lower costs and more consistent system-wide performance. Unified solutions do insist on a relatively structured implementation, but they do so for a reason: swift, coordinated implementation positions the implementing organization for greater cohesion and competitiveness, as well as for a rapid recovery from any disruption.

Unlike the complicated world of best-of-breed licensing, unified vendors can provide regular upgrades at no additional cost. In this way, unified solutions grow in functionality and security over time, whereas best-of-breed systems start sliding into obsolescence as soon as the buyer finishes assembling them. Given the prevalence of cybercrime in the modern world, the ability to distribute security patches should play a significant role in any organization’s choice of ERP model.

The uniformity of unified solutions positively impacts training, integration, and scalability. Rather than learning multiple interfaces, employees only have to learn one. System administrators need worry only about external integrations, not the makeshift ties between internal elements, and their organizations can grow without perpetual re-integration and re-licensing.

In objective terms, all of this means that unified systems will offer a much lower TCO than the best-of-breed model.

So which should you choose?

The best solution for your organization depends on who you are and what you need. A best-of-breed approach might make sense for small companies or start-ups, organizations that want quick, ad-hoc spending. But for medium-sized enterprises and up, companies that are more mature and defined, a unified solution provides the more compelling, forward-looking, and sensible choice. Organizations looking to plug a single leak or bolster one area of functionality might look to the best-of-breed model. Yet one-trick modules fall far short of the comprehensive solution that larger companies seek.

A unified ERP solution like Xledger acts as a single source of truth, integrating diverse business processes and insuring against dirty data.

If you company expects to need most or all unified ERP functionalities within the next five years, you would do well to consider a unified ERP solution.

1 Survey, The Yankee Group, Uncovering the Hidden Costs in Data Integration