The Great ERP Debate -- Whether All-In-One Or Best-Of-Breed Systems Are Best Depends On Your Company's Needs
Tom Stein
techweb.com
In the world of enterprise applications, a great debate rages: Should companies rely on a single enterprise resource planning system for all their critical business needs, including financials, manufacturing, human resources, sales-force automation, and supply chain? Or should they pick and choose among several so-called best-of-breed systems?
There are clear advantages and disadvantages to both. The most obvious reason to go with a single, all-in-one system-such as those from SAP, PeopleSoft, and Oracle-is integration. Because all modules of the system are built on the same data model and technical architecture, information can flow easily and uninterrupted among the many modules. But what you gain in seamless data flow, critics say, you lose in functionality. It is commonly agreed that while an all-in-one product can offer a great breadth of functionality, it will not have the same detail and depth as best-of-breed alternatives, which focus all a vendor's efforts on one type of application.
Some companies simply don't need great depth in all areas of their enterprise and will do fine with an all-in-one system-especially one that is strong in the core ERP applications. Others may find that the areas in which they need the most detail are best delivered by a single, best-of-breed vendor. Industry watchers agree that in the case of supply-chain applications, for example, about 20% of companies will demand best-of-breed products from a vendor such as i2 Technologies, but the remaining 80% will be OK with what an ERP vendor such as SAP offers. The challenge, of course, is deciding what's best for your company.
Mott's North America Inc., the apple juice and processed fruit maker in Stamford, Conn., reviewed both sides of the debate and settled on a single, integrated system. At first, the company favored a best-of-breed environment that featured individual systems for all its business units. The sales division, for instance, used a homegrown system that incorporated spreadsheets and an Oracle data warehouse; manufacturing used BPCS from a vendor called SSA; financials used Millennium M&D, from Dun & Bradstreet; and order entry relied on a product called Oasis, from McDonnell Douglas Corp. But while each business unit was well-served under this setup, the company as a whole suffered.
According to Catherine Riordan, director of business solutions at Mott's, companywide meetings were a nightmare. Each division would present its own set of numbers generated by its own systems. Invariably, those numbers, which should be consistent throughout the company, would vary dramatically among the divisions. "Everybody was always thinking overtly or covertly that your numbers weren't any good," Riordan says. The biggest disconnect, for example, was between the logistics-planning and sales-forecasting groups. The sales team would use its system to project how much product the company would sell in the upcoming quarter. Meanwhile, the logistics-planning group would use the manufacturing system to determine how much product it would need to make for the upcoming quarter and how to schedule production. There were often huge gaps between these two sets of numbers-and as a result, there was no trust between the two divisions.
Now, both divisions are running off the same set of numbers. That's because Mott's implemented software from SAP that integrated the company's financials, manufacturing, and sales and distribution operations. "It was a miracle when sales and production planning were looking at the same numbers," Riordan says.
Stand By SAP
SAP is now firmly entrenched as Mott's enterprise computing backbone. Whenever a process needs automating, Mott's first looks to SAP to see if the vendor can fulfill the requirements. For example, Mott's recently selected SAP's supply-chain module and is currently implementing it. The company has also agreed to test SAP's analytical apps, called Strategic Enterprise Management. "We are absolutely sold on integration," Riordan says. "Before we even consider best-of-breed, we must be absolutely convinced we can't do it in SAP."
But even Mott's won't sacrifice quality for convenience. The company recently went best-of-breed with call-center software called Star 2000, from Strategic Information Associates, because SAP's module "just isn't there yet," Riordan says, adding that the company had to customize the package to load SAP information, such as stock-keeping unit numbers, into the system.
While Riordan says Mott's call-center integration went smoothly, Bruce Richardson, an analyst with AMR Research, says it is dangerous and expensive for a company to try to piece together a handful of best-of-breed applications. "The idea of having 10 best-of-breed applications is just insanity," he says. "It's an integration nightmare." Also, the more systems a company has, the more points of breakage exist. So Richardson supports a more moderate approach. He says best-of-breed is fine, as long as you have some kind of backbone system for all other third-party applications. For example, a company might use Oracle as the backbone for manufacturing and financials, then plug in i2's supply chain, Vantive's front-office app, and Documentum's product-data management applications. Instead of having all the apps interconnect, they simply connect to the same, single backbone, which simplifies the integration process.
Software Fits The Business
Rockford Corp., a maker of high-end sound systems for the automobile industry, is taking this approach. The company implemented Oracle's core financial and manufacturing applications in 1995, but soon discovered there was plenty that Oracle could not do. For instance, Rockford uses very complex pricing arrangements for its products-thousands of components go into a stereo system and determine its price, and the company needed software that can handle all the possible combinations. Rockford also has a very complex discounting structure based on which carmaker it's dealing with, and how many units that manufacturer orders and for which types of cars. Oracle's offering was not robust enough for Rockford, so the company chose an application from Trilogy Software, which specializes in pricing and configuration software. "We are looking for Oracle to do as much as possible," says David Richards, CIO of Rockford, in Tempe, Ariz. "But we don't want to compromise our business because of the software."
Rockford also plans to add supply-chain management software into its Oracle backbone. It is looking most closely into demand-planning and sales-forecasting software from i2. Richards says Oracle provides some of its own forecasting software, but that it is not comprehensive enough for his needs. He says even the extra effort and cost of connecting i2 to Oracle is worthwhile if it means getting the right match for the business. "Having a solid backbone and tying in third parties is definitely the way to go," he says. "Going all-in-one often restricts your business operations because of the lack of functionality."
Further boosting the best-of-breed approach is the rise of application-integration vendors such as Frontec, Vitria, and Oberon. "Best-of-breed is looking better because these middleware vendors are getting better," says David Dobrin, an analyst with Benchmarking Partners. For the past several years, these vendors have been furiously designing products that easily and seamlessly connect one business application to another.
"With really good middleware, most of your reasons for not doing best-of-breed go away," Dobrin says.
Joseph Hite, director of IT at Sykes Enterprises Inc. in Tampa, Fla., readily agrees. Sykes, which provides fulfillment and technical support services to such companies as MCI WorldCom and Compaq, uses middleware from Frontec to tie together a host of disparate applications. "I am a systems integrator," Hite says. "That's how I solve problems." Sykes uses ERP software from QAD Inc. as its financial and distribution backbone. It uses Frontec middleware to connect QAD with call-center software from Siebel Systems and logistics software from Tandata Corp. It also connects to its own electronic data interchange package and is looking to link QAD with a warehouse management suite.
Hite says in the past it would have been too expensive for his company to connect all these packages. But for every $5 it once cost to build and maintain an interface, it now costs only $1 with Frontec. "Middleware allows me to do best-of-breed," Hite says. "It gives me the ability to find the best packages and build the connectors that make them all talk."
Still, the debate won't be resolved anytime soon. Some companies will continue to praise all-in-one software suppliers, while others will go best-of-breed or bust. Take Gwen Babcock, CIO of pillow, feather bed, and down comforter maker Pacific Coast Feather Co. in Seattle. She says she believes devoutly in the all-in-one approach. Her company uses SAP throughout almost all parts of its business. The only exception is in demand management, where the company uses software from supply-chain vendor Manugistics Group Inc. But Babcock is even reconsidering that selection. "SAP didn't offer that functionality at the time we made our decision," she says. "But the price we pay to develop and maintain integration is just too high."
Different Route
Walter Curd, VP of IT at Fujitsu Microelectronics in San Jose, Calif., would beg to differ. He also uses SAP for manufacturing and financials, but is very hesitant to entrust future automation projects, such as supply-chain management and sales-force automation, to the vendor. "SAP is evolving so rapidly, I'm starting to see a big functionality gap between them and the best-of-breed vendors," he says. "If you're looking for any competitive value, I think at this stage you must go best-of-breed."
Curd says he wants a constraint-based planning engine to look at capacity across all his factories, which are spread out around the world, in order to do accurate and realistic order planning. "We need to give our customers a realistic date of when their orders will be ready," he says. "This is essential for tying everything together and operating on a global level."
Given the critical nature of the effort, Curd says he would look at SAP for supply-chain modules only if "the gap in functionality was very small." At this stage, he's not convinced that it is. "If SAP can't cover it and some other vendor could, then I would go with that other vendor."
There you have it: Two different IT executives, two different points of view. The great debate continues.
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