How ERP integration is finally coming of age

Rahul Singh, President of HCL Technologies' Financial Services Division, describes the impact of EAI, "APIs have become a critical component of modern ERP systems, enabling businesses to leverage their ERP data and functionality with other software systems, automate key business processes, and improve their overall operational efficiency. As businesses continue to adopt digital transformation strategies, APIs will play an increasingly important role in enabling seamless integration and collaboration between different software systems and applications." (source: Forbes)

By the mid-2010s, so many popular ERP systems had already begun offering APIs to integrate with other software systems and automate specific business processes.

The growing popularity of APIs and the trend toward integration and automation in the software industry has been a bottoms-up movement in the widespread adoption of APIs in ERP systems. ERP systems can expose their data and functionality to other systems and applications using these application programming interfaces (APIs), allowing for more streamlined and efficient operations. The millions of software developers out there are to credit for this. So many of our integrated software systems today, (yes, even in the enterprise), initiates through opportunistic moments exposed to tech executives by software engineers. They say things like, “we can totally do that easier,” or, “yeah, that can be done with some code and a little time.” This offer is not empty. The reality is that the developers are often the change-makers in the company, pushing dotted lines back and giving oxygen to what is possible.  

Key Developments Facilitating ERP Integration

Since 2021, there have been several significant developments in the field of ERP application integration that have contributed to its coming of age, such as:

• The complete adoption of cloud-based ERP systems
  Because the cloud was not always welcomed, it had a bit of a stall when it came to procurement decisions of the higher-priced ERP systems. But the future is now the present, and cloud-based ERP systems are being licensed every day, around the world, by the largest companies in the world.
• Increased use of APIs
  The use of APIs has made it easier for ERP systems to communicate with other applications, improving integration and reducing manual labor and the volume of minutia for the average organization.
• The emergence of integration platforms
  Integration middleware SaaS platforms have emerged as a popular solution for organizations looking to integrate their ERP systems with other applications. These platforms offer a centralized point of control for data integration, making it easier for organizations to manage their integration efforts.
• A renewed focus on automation
  Automation has become a key focus for organizations looking to improve efficiency and reduce manual errors. ERP integration is critical, enabling organizations to automate key business processes, such as procurement and invoice processing.
• Greater integration capabilities
  Advances in technology have led to increased integration capabilities, allowing organizations to connect their ERP systems with a broader range of applications and systems, including mobile apps and the Internet of Things (IoT) devices.

These developments have made ERP integration more accessible and practical for organizations of all sizes, enabling them to streamline their processes, improve data accuracy, and gain a comprehensive view of their operations.

Companies that have Successfully Implemented EAI (Enterprise Application Integration)

1. Amazon
   The company has integrated its ERP software with its supply chain management system, customer relationship management system, and financial management system. This integration has enabled Amazon to automate several key business processes such as inventory management, order processing, and financial reporting. This has resulted in increased efficiency, reduced costs, and improved customer satisfaction.
2. Nike
   Nike used enterprise application integration to integrate its ERP software with other software systems such as its point of sale system, customer relationship management system, and supply chain management system. This integration has enabled Nike to automate several key business processes such as order processing, inventory management, and customer service. As a result, the company has been able to improve its overall efficiency, reduce costs, and provide a better customer experience.

A well-formed ERP system

Though misconstrued as an oxymoron, a well-formed ERP system in the wild has been spotted once or twice. We’ve run into them on a few software safaris and note a few facets of their existence. Mainly - they are thoughtful and integrated with the core of the business architecture.

ERP (Enterprise Resource Planning) integration enables organizations to automate key business processes - mainly these 3: procurement, finance, and inventory management. This of course will improve efficiency, reduce manual errors, and enable better decision-making. But arguably the most important benefit is that ERP integration enables leaders of these organizations to achieve a more complete and comprehensive view of their money, matter, and moments (err, operations?). It’s the difference between luggage lost and luggage delivered for an airline. It’s the difference between spoiled milk and fresh milk for the grocery chain. It’s really the ultimate system of systems for a brand. Without ERP being well-founded and well-formed, everything breaks.

And ERP systems, unfortunately, may not age well. Critical systems of record can tend to accumulate malformed integrations from other apps over time, and start to look like old boats in the harbor with thousands of barnacles stuck to their sides. That is, they’re doing the right things, but without long-term and proper integration into the overall enterprise system architecture. That’s what we call in consulting, legacy software. And, it’s got a big red target on its back, practically shouting, “replace me! rewrite me!”

Why ERP application integration is vital for your organization

ERP (Enterprise Resource Planning) application integration plays a crucial role in organizational operations as it streamlines processes, enhances data accuracy, and offers a unified perspective of vital business information.

Integrating ERP systems brings several benefits to organizations, including increased efficiency by automating key business processes such as procurement, finance, and inventory management, resulting in fewer manual errors. Integrating ERP systems with other applications also improves data accuracy, ensuring the data used is up-to-date and consistent.

The comprehensive view of operations provided by ERP integration enables organizations to make informed decisions based on accurate, real-time data, which is crucial for effective decision-making. Integrating ERP systems also allows organizations to be more agile, quickly adapting to changes in their business environment, such as market conditions or customer demands. Lastly, integrating ERP systems with customer-facing applications like CRM results in a more personalized and seamless customer experience.

Possible challenges

ERP (Enterprise Resource Planning) application integration can present several challenges, including:

1. Higher than normal levels of code and data complexity
   ERP integration can be a complex and time-consuming, requiring a deep understanding of the different systems and applications involved.
2. Integration costs that depend on vendors and licenses
   Integrating ERP systems with other applications can be expensive, requiring significant investment in hardware, software, and human resources. But the hard part about this one, is that many of the costs are allocations under the buckets of specialized vendor (niche consultants) fees and software licenses. They vary widely, and can trap you into years of invoice pain and shaking of heads.
3. Data mapping and data translation (ETL, ELT)
   Ensuring that data is accurately mapped and translated between different systems can be challenging, and misalignment of data can lead to errors and inconsistencies.
4. Deeper than normal integration with existing legacy systems
   Integrating legacy systems with modern apps can often be difficult, requiring significant effort to overcome technical and operational barriers. But ERP integration work is even heavier. Programmers have to understand far more detail, and have a lot of test cases to work with. Data prep and data validation can be extensive, trying to ensure that package gets from Miami to Denver using the cheapest routes and the fastest times. It’s tricky.
5. Data security becomes mind-bending and complicated
   ”Who’s data is it now? Once it’s transitional into our other vendor’s systems? And where does that leave us liability-wise?” Ensuring that sensitive data is protected during integration can be challenging, and organizations must implement appropriate security measures to protect their data. But with the ERP systems getting integrated into multiple levels and layers of other external partners, it increases the complexity.
6. Changing business requirements
   If this is difficult to manage on normal projects, just compound that times three for an ERP system. Business requirement changes and scope expansions are trouble in the worst ways on ERP projects.

These challenges, at least most of them, are mostly expected by the folks doing the work. What’s more unexpected is the sentiment and fear around some of them for the folks not doing the work. They would prefer to not talk about it. I don’t blame them. It’s expensive, takes time, and not easy. But alas, the future begs for integration.

The ongoing nature of ERP integration

Integration - as a whole - is not just a one-and-done situation. It requires periodic reviews, requirements, documentation, context to data domains, realignment to the context and direction of the business and more. This can almost certainly exhaust the IT executive, but below shows the paradox as a visual. It’s not that bad.

What we did last year may not be valid for next year. This is reality. But most of the time, the adjustments are just a few rules or parameters. Some tax law was passed, or a tax rate changed for some jurisdictions. Or even further to the point, a company was bought or sold or merged. These are common and will be a tail wagging the dog when it comes to setting project priority and budgets.

The ERP systems to lean on

Just to cover our bases, here are some of the most widely used and highest rated ERP systems in the world:

1. SAP
   One of the largest and most established ERP systems, SAP offers a wide range of applications for various industries, including finance, logistics, and human resources.
2. Oracle
   Another significant player in the ERP market, Oracle offers a range of cloud-based and on-premise solutions for businesses of all sizes.
3. Microsoft Dynamics
   Part of the Microsoft product suite, Microsoft Dynamics offers integrated, scalable ERP solutions for small to mid-sized organizations.
4. Infor
   A leading provider of industry-specific ERP solutions, Infor offers cloud-based systems for industries such as healthcare, hospitality, and manufacturing.
5. NetSuite
   A cloud-based ERP solution designed for small to mid-sized organizations, NetSuite offers a comprehensive range of applications for finance, procurement, and e-commerce.
6. Workday
   Workday is a cloud-based ERP system that focuses on human capital management and financial management. It is particularly well-suited for organizations in the human resources and financial services sectors.

What The Future May Hold

"ERP integration is not a luxury, but a necessity to keep pace with the rapid changes in technology, customer expectations, and regulatory requirements."
Mark Nash, CEO at Strategic Information Group

Further advances in technology, increasing cloud adoption, and a growing emphasis on data-driven decision-making will likely characterize the future of ERP application integration.

ERP systems are likely to become more intuitive, user-friendly, and mobile-friendly, making it easier for organizations to access and analyze critical business information on the go.

Additionally, there will likely be an increased focus on leveraging artificial intelligence and machine learning technologies to automate tasks and improve decision-making within ERP systems.

The trend toward digital transformation will also continue to drive the adoption of cloud-based ERP systems as organizations seek more flexible, scalable solutions that can support their rapidly evolving needs. Furthermore, integrating ERP systems with other technologies, such as the Internet of Things (IoT), blockchain, and big data analytics will likely become increasingly common, enabling organizations to derive even more value from their ERP systems.

Overall, the future of ERP application integration looks bright, with exciting new developments and opportunities for organizations to improve their operations, enhance their decision-making, and remain competitive in an increasingly digital world.

Takeaways

Some advances extend the frontier. Others establish the infrastructure that allows the best use of what is within the frontier.

1. APIs are a must with ERP systems, and leveraging them is the promised land for most businesses that require ERP in the first place.
2. Cloud-based ERP systems are the only way to go. Don’t bother installing anything, ever.
3. Integration platforms have emerged as a popular solution for organizations looking to integrate their ERP systems with other applications.
4. Automation has become a key focus for organizations looking to improve efficiency and reduce manual errors, and ERP integration is critical to achieving this.
5. Microservices architecture and containerization technologies enable organizations to break down their ERP systems into smaller, more manageable components that can be deployed and scaled independently.
6. Low-code and no-code platforms have made ERP integration more accessible to a wider range of organizations, including small and mid-sized businesses. This is where many small-to-mid sized businesses get their foot in the door with the larger platforms. And, it’s available to the large-sized businesses who want to try before they buy.