“Although ERP vendors offer numerous enterprise applications and claim that their integrated system is a superior solution, all modules in an ERP system are rarely best-of-breed.”
When you shop for a new ERP or financial management solution, you’ll quickly discover there are two opposing camps: best-of-breed and all-in-one. What do the terms really mean when applied to ERP and accounting software, and how should you go about choosing which option is best for your organization? In this first post in our series covering the topic, we offer an overview of each approach to help you begin to decide which camp to pitch your tent in.
The Best-of-Breed Approach
A best-of-breed business management solution combines a full range of functionality, with some parts of that functionality provided by integrated companion applications (add-ons). Although many best-of-breed vendors bundle core functionality like GL, AP, and AR together, the add-ons are usually licensed separately through your business partner. The result is a solution that brings together multiple vendors’ applications, each considered at or near the best in its class. Think of best-of-breed financial management software as a building’s foundation, purposely built for integration — you bring in the pros when you want to add a new room of functionality.
Due to their smaller focus, best-of-breed ERP vendors often promote that they have the resources to invest in being the very best at a smaller number of capabilities. Some have world-class core accounting modules, for example, while others have an industry focus like construction. Around that core functionality are vendor-provided modules and third-party applications that can integrate with the core, providing all sorts of functionality — from AP automation, to eCommerce, to wealth management. You license (aka pay for) only the functionality you need when you need it and can choose the best of breed in each of those areas. This gives you best of breed across the board — albeit from different providers — but all through the same partner and set up to work great together. It should be mentioned that these additional applications do need to be set up to be integrated though and depending on the combination of functionality you’re looking for, this might require more implementation time (aka costs).
The All-In-One Approach
An all-in-one business management solution incorporates broad functionality into a single suite. Vendors of all-in-one applications embrace bundling, grouping collections of modules the are commonly wanted by a lot of companies. If you need a lot of different functionality, then this can be an easy way to avoid having to choose additional add-ons, since it’s all there for you already. The different functionality areas are integrated right out of the box and fully supported by the same vendor. This means that with an all-in-one solution, you have easy access to a lot of different functionality right off the bat, but are also paying for all of it whether you need it or not, and sometimes at a higher cost than best-of-breed solutions.
Think of an all-in-one financial management software not as a foundation, but as a whole house with many rooms pre-built for you. It should be mentioned though, that the modules might not have been built together originally. Often vendors will combine different modules that work well with their native solution and make them part of the ‘suite’ through integration. This might work out well, but it could also mean that you’re not gaining the theoretical benefit of having something pre-built as “all-in-one”. It’s simply something to look into if a certainly level interconnectivity between areas is a deal breaker for you.
How to Choose?
The ERP solution you choose for your organization is one of the most important investments you will make. Arguments can certainly be made for both options and as with all business decisions, it’s important to focus on your needs and requirements. There may be one clear answer right off the bat. If there isn’t, then there are a few things to keep in mind.
First, it’s simply not possible for an ERP vendor — even one advertised as a best-of-breed solution — to be the best at everything. Some ERPs have exceptional manufacturing capabilities, others have robust project management modules, while others may concentrate on the supply chain functions. When you look at an all-in-one ERP, you’ll want to focus your review on the capabilities that matter most to you. For example, it won’t matter that the suite includes materials requirement planning capabilities if you’re a private equity firm. If you’re a SaaS company, the complexities of the subscription billing models and revenue recognition requirements might lead you to favor a best-of-breed financial management solution that excels in this area. This is equally important when you look at a best-of-breed solution, again focusing on the capabilities that are most relevant to your organization. For example, if you’re a food manufacturing company who needs strong ingredient traceability, inventory & warehouse management, transportation integration, and other specific functionality, that might be a lot of best-of-breed components to put together; an all-in-one food manufacturing suite could be a better overall fit.
Ultimately, your choice of best-of-breed or all-in-one is less important than picking a solution that meets your business needs now and has the capabilities to address your needs going forward. Next in our series, we’ll look at the economics associated with both best-of-breed and all-in-one ERP applications.