Replatforming Your ERP: Evaluating the Pros and Cons of Key Options for Organisations

As organisations grow and adapt to the increasingly digital world, modernising enterprise resource planning (ERP) systems has become imperative. Replatforming an ERP system is a complex, high-stakes decision that can profoundly impact an organisation's operational efficiency, financial controls, and overall business strategy. The choice of replatforming can follow several distinct approaches, each with advantages and challenges.

In this article, we explore three standard ERP replatforming options:

1. Point solution focused on a core ledger, augmented by a data platform and consolidation tool.
2. Full ERP suite of modules, such as Workday, Oracle, SAP or Dynamics.
3. ERP suite powered by a data platform for enhanced insights and integration.

It's crucial to consider critical factors like alignment to business strategy, long-term vs short-term impact, manual workarounds, system usability, data flow, and financial controls when choosing an ERP replatforming approach. We'll investigate these factors to ensure you're well-informed and prepared for this significant decision.

Option 1: Point Solution (Ledger Only), Augmented with a Data Platform and Consolidation Tool

A point solution focuses solely on implementing a core ledger for finance, with other essential functions like data management and consolidation handled by separate platforms and tools.

Pros of a Point Solution Approach

1. Focused Implementation and Lower Costs: By implementing only the ledger, businesses can focus on the core financial management processes critical to their operations. This targeted approach can be less costly upfront than deploying a full ERP suite, as organisations avoid paying for modules or features they do not need immediately.

2. Greater Flexibility with Best-of-Breed Tools: Companies can choose best-of-breed solutions to handle tasks outside the ledger, such as data management and financial consolidation. This flexibility allows businesses to tailor their systems to their needs, selecting the best tools for specific functions.

3. Reduced Complexity in Implementation: Implementing a single-point solution for the ledger may reduce the initial complexity compared to deploying an entire ERP suite. The organisation can begin using the core ledger while gradually building out additional functionality with third-party tools, which may result in quicker time-to-value for finance teams.

Cons of a Point Solution Approach

1. Complex Integration: One of the most significant drawbacks is the complexity of integrating the ledger with external systems like data platforms or consolidation tools. Integrations often require custom development, API management, and ongoing maintenance to ensure data flows smoothly between systems. This creates a risk of data silos and manual reconciliation tasks, which can add significant time and operational inefficiency.

2. Lack of Automation Across Functions: With disparate systems, automating end-to-end processes is challenging. For example, the manual effort involved in consolidating financial data across multiple tools can lead to inefficiencies, errors, and reporting delays. Without a unified system, automation across finance, procurement, HR, and other business functions becomes fragmented, limiting the organisation’s ability to scale and operate efficiently.

3. Limited Scalability: While a point solution may work for smaller organisations or those with more straightforward needs, it may need help to scale as the business grows. As new requirements emerge (such as advanced reporting, procurement, or supply chain management), integrating additional systems can become increasingly complex, leading to increased IT costs and complexity over time.

Considerations for Alignment with Strategy

A point solution may offer short-term benefits for organisations whose immediate needs are centred solely on improving core financial reporting. However, the lack of integration and automation could result in long-term post-implementation challenges, especially if the business grows or requires more advanced capabilities. Companies must consider the trade-off between focusing on short-term cost savings and the potential long-term inefficiencies introduced by manual workarounds and fragmented data.

Option 2: Full ERP Suite of Modules (e.g. Workday, Oracle, SAP)

A complete ERP suite is an all-in-one solution that includes modules covering various business functions, such as finance, HR, procurement, supply chain, and customer relationship management. Examples of popular ERP suites include Workday, Oracle ERP Cloud, and SAP S/4HANA.

Pros of a Full ERP Suite

1. Unified System for End-to-End Automation: One of the most significant advantages of a full ERP suite is the integration across all business functions. Data flows seamlessly between departments, from finance to procurement to HR, allowing for end-to-end process automation. This reduces the reliance on manual intervention and improves efficiency and accuracy.

2. Comprehensive Functionality: ERP suites are designed to handle various business processes. Modules typically include financial management, human capital management, procurement, supply chain, and more. With such extensive functionality, businesses have the tools to support every part of the organisation without resorting to third-party tools.

3. Improved Data Visibility and Insights: A full ERP suite offers real-time, consolidated data across the organisation. This holistic view improves decision-making and provides valuable insights into operations. Users can easily access key metrics and trends with built-in analytics and reporting capabilities, enhancing financial controls and governance.

4. Scalability for Growing Organisations: ERP suites are designed to scale with businesses as they grow. Whether adding more users, expanding into new geographies, or introducing new product lines, these systems are built to accommodate evolving business needs. This scalability makes ERP suites a long-term investment that can grow with the company.

Cons of a Full ERP Suite

1. High Initial Costs and Complexity: The upfront cost of implementing a full ERP suite can be significant. This includes licensing fees and the time and resources required for implementation, data migration, and employee training. This can substantially deter smaller organisations or those with limited budgets.

2. Lengthy Implementation Time: Implementing a full ERP suite can take many months, if not a few years, depending on the size of the organisation and the complexity of its processes - typically, if done right and with the right partner, it is about 10-14 months. This lengthy timeline can lead to delays in realising the benefits of the new system, and it requires a high level of commitment and support from leadership to maintain momentum.

3. Risk of Overcomplication: For some organisations, the vast array of modules and functionalities in a full ERP suite may introduce unnecessary complexity. If the business doesn’t require all the features, it risks paying for modules that are underused, creating a misalignment between cost and value.

4. Potential for Resistance to Change A full ERP suite implementation often involves a significant change in how employees perform their daily tasks. Resistance to change can be challenging, mainly if users are accustomed to legacy systems. Training and change management are critical to successful adoption, but these efforts can be time-consuming and resource-intensive.

Considerations for Alignment with Strategy

A complete ERP suite can offer significant long-term value for organisations with complex, integrated operations or those seeking to streamline multiple departments. However, the high upfront investment and lengthy implementation may be challenging for organisations with more immediate needs or limited resources. It's crucial to align this option with the organisation's strategic vision for the future, considering both the short-term pain and long-term benefits.

Option 3: ERP Suite Powered by a Data Platform

An ERP suite powered by a data platform combines the best of both worlds: the comprehensive functionality of a full ERP system with the enhanced data integration and analytics capabilities provided by a modern data platform.

Pros of an ERP Suite Powered by a Data Platform

1. Enhanced Data Integration and Insights: Organisations can unify all data sources into a single repository by integrating a data platform with the ERP suite. This enables advanced analytics, real-time reporting, and predictive modelling that provide deeper insights into business performance. The data platform enhances the ERP suite’s ability to support data-driven decision-making.

2. Flexibility to Extend Functionality: Organisations can connect third-party applications or external data sources more efficiently with a data platform. This enables businesses to extend the functionality of their ERP suite without the need for custom integrations, reducing the risk of data silos or fragmented processes.

3. Scalable and Agile: Adding a data platform makes the ERP suite more agile, allowing quick responses to changing business needs. Whether scaling operations or adjusting to new regulations, the integrated platform enables organisations to adapt more efficiently without overhauling their entire ERP system.

4. Improved Financial Controls and Governance: An ERP suite powered by a data platform can deliver enhanced governance and control over financial data. Consolidating and standardising data from multiple sources reduces the risk of errors and strengthens compliance with regulatory requirements.

Cons of an ERP Suite Powered by a Data Platform

1. Higher Complexity in Initial Setup: While this approach provides greater flexibility and scalability, an ERP suite's initial setup and integration with a data platform can be complex. Businesses must ensure that the data platform is configured correctly to work seamlessly with the ERP system, which may require specialised expertise.

2. Cost of Managing Both Systems: Implementing and maintaining an ERP suite and a data platform can increase operational costs. This includes the expense of managing the data platform itself, ensuring that it integrates properly with the ERP system, and providing ongoing support for both systems.

3. Training and Change Management: As with any ERP implementation, training and change management are critical. Employees will need to adapt to the ERP suite and the advanced data capabilities provided by the platform. The learning curve can be steep, and without sufficient training, the system’s full benefits may not be realised.

Considerations for Alignment with Strategy

An ERP suite powered by a data platform is a future-proof solution for organisations that require advanced analytics and scalable operations. While it may come with higher complexity and cost, the long-term benefits of enhanced insights, flexibility, and automation make it a strong choice for businesses.