If you’re currently shopping for ERP software, you’re probably looking at some of the major players in this space — Sage Intacct, Oracle NetSuite, and Microsoft Dynamics 365 Business Central. As you research each of these applications further, you’ll discover many distinct differences between them, but one of the fundamental differences is the vendors’ decision to promote a best-of-breed or an all-in-one approach. Earlier, we outlined the differences between the two options. Here, we’ll discuss the economics associated with each, to help you make the best ERP decision for your organization.
Which Costs More?
Which costs more, best-of-breed or all-in-one? That’s the million-dollar (well, not quite) question. Ultimately, what you’ll pay for the solutions depends on many factors, and it’s not possible to make a blanket statement that an all-in-one approach always costs more than a best-of-breed approach or vice versa.
In the past, we’ve compared Sage Intacct pricing to Oracle NetSuite, and Sage Intacct is commonly considered a best-of-breed solution, while NetSuite is an all-in-one solution. Of course, that other article only discusses these two products and the pricing also depends on your specific needs, so while we can’t explore all possible options, we can offer some insight into the economics of each approach.
All-in-one — Marketing Ploy or Value-added Benefit?
All-in-one ERP vendors bundle suites of functionality together. From fast food combo meals to new car feature packages, the practice of bundling is widespread. Vendors understand that you might not include the side of fries or the heated steering wheel as part of your purchase, so they creatively bundle that feature with others. You might never eat the fries (ok, you probably will eat the fries) but the point is, you just needed a hamburger. Still, the vendor made it easy to include extras in the purchase, or in some cases the vendor makes it impossible to get the hamburger you want without buying the extras.
Lest you think we’re all down on all bundling, there are times when bundling saves buyers money. For example, your insurance company might bundle your home and auto policies, saving you money on your premiums. If you have both a car and a home, and want to insure them both, then this is a good deal. Or, when you really do want those fries.
Our point is, be sure what the vendor is including in the bundle and that you actually need it.
Best-of-breed — Is Solving for Your Current Needs Shortsighted?
Best-of-breed ERP vendors offer core functionality with optional modules available for licensing. Typically, ”extended” functionality comes from third-party-vendor partners. To get the full measure of functionality your organization needs, you may need to aggregate several vendors-partner solutions.
As you would expect, best-of-breed ERP solutions typically come at a lower initial cost than all-in-one solutions because you’re licensing a smaller set of functionality. Licensing fees increase as you add in the third-party solutions your organization may need. An advantage to this model is that you only need to license new functionality when you need it. Maybe you’re not ready to implement CRM until next year – does it make sense to start paying for it now?
The bottom line is, understand what’s not included in the core solution, what you may need to add to flesh it out, and when.
Who’s in Control?
With a best-of-breed accounting solution, you have more control over the cost since you decide which modules you license. With an all-in-one solution, the cost includes a suite of modules, some of which you may not need – now or ever. This doesn’t necessarily mean a best-of-breed ERP application will cost you less than an all-in-one ERP application, it simply means you’ll have more say in how and where you spend your money.
That’s why we encourage prospects to fully understand what they’re being quoted. It’s not unheard of for a best-of-breed vendor to leave off commonly-used modules to lower the licensing fee, knowing that it’s likely the customer will want to add the module shortly after signing. It’s also common for an all-in-one vendor to group lesser-used modules into the suite to increase the overall sale, even with the awareness that it’s unlikely the customer will ever use it. If you’re thorough in your comparisons, you’ll be able to see through the marketing tactics and make the best determination.
We encourage prospects not to get too caught up in the sizzle of features vendors tend to promote and look instead at the steak – the real meat of the solution. It’s the steak, not the sizzle, that satisfies the appetite of growing companies. The best advice we can offer is to go into the selection process with a clear idea of the functionality you need – and come out of the selection process with a clear picture of which vendor’s product incorporates that functionality the best.