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Analytics Playing Greater Role in ERP

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Posted October 28, 2014 By Drew Robb     Feedback

More ERP vendors are including analytics as a standard feature so companies are less inclined to use third-party business intelligence tools.

Are the terms enterprise resource planning (ERP) and business intelligence (BI) destined to become obsolete, replaced by something that encapsulates the two such as enterprise resource analytics? While a new term is no sure thing, these two areas are coming together so rapidly that the distinction between them is beginning to blur.

"Business intelligence and analytics features are becoming more of a standard function in ERP systems," said Derek Hitchman, solution consultant/senior partner at SCS Cloud.

In the past, Hitchman said, many ERP solutions were so customized and crafted to exact client needs that business intelligence and analytics also had to be custom and required a lot of work to develop. As a result, add-on BI tools were really only affordable for large companies. That’s been changing over the past few years, as business intelligence has become more broadly available and affordable.

In Web-based forums about ERP, business intelligence is one of the most popular trending subjects (along with document management, workflow and integration), observed Steve Farr, product marketing manager, Tibco Software. Part of the reason is that BI gives ERP a sales edge that it might otherwise lack.  

"ERP systems are not sexy; they are expensive to implement, and in general it is a replacement market where everybody already has one," Farr said. "So what's going to make you throw out the old for something else when they all have broadly similar functionality? If you look at VARs selling ERP, they are all trying to use BI as a way of beating the competition."

ERP with Intelligence

Many ERP vendors are building BI/analytics in as a standard feature rather than relying on third parties to provide those capabilities. As technology has advanced, it has become expected that systems will provide actual intelligent data that can be used to drive business decisions and strategy, not just numbers. This has shifted the expectation away from only viewing your finances within an ERP system to being able to dive deep into your customer characteristics, their satisfaction levels, your product data, production data and more. 

"This trend is being driven primarily by executives who are expecting intelligent data from their software that can be used to make decisions rather than simply the raw numbers," said Hitchman. "The numbers coming out of old-style ERP for reports were really just exports and tallies from the database."   

Frank Scavo, president of IT research firm Computer Economics, added that business intelligence reporting is more useful if it is delivered at the point of use within the transactional system.

"There will always be a need for sophisticated BI tools that are utilized by data warehouse and BI specialists," said Scavo. "But many of the routine reporting needs can be handled directly by the users requesting the information. Rather than have them toggle out to a separate reporting tool, leading ERP systems are providing that reporting right within the ERP application."

Analytics for All

Not so long ago, only software giants like SAP or Oracle had the resources and product sets to be able to easily combine ERP and business intelligence. Only large companies implementing enterprise-level systems were able to really implement an ERP tool that was tailored to their business and collected enough of the data that was important to them to provide adequate BI. Even then, it was expensive to run and maintain. That’s changed dramatically in recent times

"Small and mid-market companies have the option of using platforms configured to their business with relative ease and no actual code," Hitchman said. "These platforms are able to provide business intelligence out of the box and even include pre-built dashboards for all roles in the business."  

As well as mega-vendors such as SAP and Oracle, Scavo named companies such as Workday and Infor as having strong business intelligence capabilities embedded within ERP applications.

Victoria Adesoba, BI Market research associate, Software Advice, added Sage to the list. She said it offers small and medium-sized businesses business intelligence functionality in all of its ERP software packages. And for midmarket ERP vendors lacking the capabilities or incentives to develop their own business intelligence applications, Adesoba said, several best-of-breed analytics vendors such as SAS now offer SMB-specific BI solutions with easy ERP integration.

Third-party add-ons have gained a foothold in the market by using pre-built connectors to link to almost any database or system and providing integrated dashboards from multiple sources.

Keep It Simple

Another driver is simplicity. While putting information into ERP is relatively easy, getting it out in any meaningful way can be challenging due to the complex underlying table structures and the particular way that accounts information must be recorded. "If an ERP has 30,000 underlying tables, then the BI vendor needs to work on providing a front end to the user that eliminates that spaghetti," Farr said.

He sees this as much broader than business intelligence converging with ERP. Areas such as CRM, supply chain management and other business systems are being brought into the mix, as well. "Analytics lets you take data from other systems to provide data visualizations, help spot trends and outliers, and even do statistical tests of what you are seeing," he explained.

Adesoba agreed, noting, "Previously, many companies wasted a lot of time hunting for insights across siloed departmental databases. So being able to aggregate CRM, accounting, and HR and conduct predictive analytics in one suite is highly convenient and efficient. It’s a function that businesses want, and in most cases need."

Convergence often translates to simplicity. Being able to analyze relevant and related data from different business functions within a single dashboard is time-efficient and simpler than the alternative. The resulting insights allow businesses to better evaluate and improve operational efficiency, and to better predict, understand and adapt to trends in customer behavior. 

But convergence might have a dark side.

"Software consolidation is an interesting phenomenon as it increases efficiency, but it is left to see what the downsides of the move toward consolidating multiple software and capabilities into a single suite will be," Adesoba said. "With cloud-based software, processing speed may not be an issue; however, the intricate capabilities that characterize specialty suites may start to dwindle in light of the compromise between increased consolidation and specificity of specialty software offerings."

Drew Robb is a freelance writer specializing in technology and engineering. Currently living in Florida, he is originally from Scotland, where he received a degree in geology and geography from the University of Strathclyde. He is the author of Server Disk Management in a Windows Environment (CRC Press).

 

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