The web continues to change how businesses engage with customers, as an increasing percentage of transactions move online. Meanwhile, integrated software application suites are revolutionizing business management capabilities with better data-handling and improved efficiency. E-commerce applications and ERP systems have entrenched themselves as the software platforms supporting these massive information technology changes. But can they manage to get along?
When you speak with companies on a regular basis about their enterprise software needs, certain trends start to reveal themselves. And, here’s one of the trends that’s been troubling me: Generally, back-end ERP solutions are struggling mightily to support front-end, web-based e-commerce applications. Perhaps the problem syncing up the two technologies lies in the velocity of the evolution ERP and e-commerce applications are undergoing. Regardless, something is noticeably amiss.
What do I mean by this? Well, there are two specific complaints I hear very often from software buyers dealing with e-commerce to ERP software integration issues:
The vision of ERP is complete end-to-end support of business processes–but this vision frequently does not seem to extend to include native e-commerce support or manageable integration. Since many other complex functional integrations are handled so seamlessly by the majority of ERP solutions, I’ve long wondered, why so much trouble supporting e-commerce applications?
In order to get some answers, I connected with ERP research guru Cindy Jutras. Cindy literally wrote the book on the topic of ERP’s role in supporting e-commerce when she published her book: ERP Optimization: Using Your Existing System to Support Profitable E-Business Initiatives. Cindy continues to be an important voice in the ERP community speaking at conferences, writing about ERP, and providing consulting and research services to ERP solution providers and buyers alike.
The real answer is probably a combination of both. First generation e-commerce solutions were largely bolted on to existing business management applications. After all, the customers and products were already stored in these enterprise applications, along with the transactions that formed the system of record of the business. So either these bolt-on applications needed to be integrated into the existing business applications, or (just as likely) they stood apart with their own customer and product masters. Integration, if it existed at all, was usually characterized as an arm’s length interface. This interface was often manual and resulted in redundancy of data.
A few ERP vendors (including NetSuite) have built e-commerce right into the system, but even today that is not necessarily a “given” unless the solution specifically targets retailers. Many solutions are still based on electronic data interchange (EDI) methodologies first introduced by the American automotive industry decades ago. And few outside of the retail industry address the enormous diversity of devices used for e-commerce today including websites, smart phones and even embedded commerce-enabled capabilities that allow for machine-to-machine (M2M) commerce. But this adds a lot of “moving parts,” so to speak. Think about the simplicity of your enterprise printer automatically ordering toner when it gets low. What adds simplicity for the customer adds complexity to the systems that record the ordering and shipment of product.
Taking a suite approach to address these new modes of commerce ensures that both front and back offices are in sync and are not introducing a new layer of data redundancy, requiring off-line synchronization. Taking a modular approach to installation and implementation allows customers to implement new features as needs evolve. Yes, this would be great for any company manufacturing, selling or distributing physical goods, but it requires a certain level of technical sophistication in the underlying architecture. If that level of technical agility is present in the platform on which ERP is built, e-commerce is a natural extension. And yes there are a few ERP solutions (not all) with that level of underlying technology.
Yes, eventually they will, but for the forseeable future, this type of extension will primarily be added through acquisition. Marketing has largely been underserved by ERP - and that may be a gross understatement. So this will not be a natural extension and few ERP vendors will have the marketing chops to add this type of functionality. And these types of tools will not run effectively on aging or legacy technology. In-memory databases and the ability to deal with large volumes of both structured and unstructured data will be a prerequisite. Adding this function organically may first require a generational leap in technology, as well as specific functional expertise.
I mentioned NetSuite previously, and they are differentiated in the market with an integrated solution. With its roots buried deeply in the cloud, it has always been about delivering enterprise resource planning (ERP), customer relationship management (CRM) and e-commerce as a single platform. While developed as an integrated end-to-end solution, the suite can be implemented all at once or modularly and incrementally. NetSuite reports that 98% of its 12,000 customers take the full suite approach (although many implement in a modular fashion) while only 2% go the route of what it calls CRM+. The “+” refers to order management capabilities added to traditional CRM.
NetSuite views the customer order as the heart and soul of a business. While it provides an application development platform and encourages its channel partners to develop incremental solutions around its data model, NetSuite takes ownership of any piece of the suite that directly manages the customer order.
NetSuite Suite-commerce combines an e-commerce platform with a customer experience management system that is uniform regardless of customer touchpoint. Unlike bolt-on e-commerce systems, the integration with back office fulfillment, billing and support services is seamless and transparent, because all are built and designed as an integrated suite. Yet even though built and delivered as a fully integrated suite, the e-commerce capabilities can also stand on their own merit. NetSuite customers have the choice of implementing a full end-to-end solution, or just the pieces they need.
While this is a point of differentiation for NetSuite, it is not the only ERP company that offers this integrated approach. Epicor takes a similar approach and SAP’s acquisition of Hybris last year enhances its e-commerce offering. Hybris however continues to run relatively independently. While this allows it to continue to interoperate with other ERP solutions, it doesn’t couple it as tightly to SAP’s ERP. Infor also has an e-commerce offering but it is interesting to note the company categorizes it under CRM and not ERP. The fact that Infor offers so many different ERP solution almost forces them to loosely couple this to ERP, rather than model the tight integration favored by NetSuite.
For more great insights on ERP related topics make sure to check out Cindy’s frequently updated, ERP-focused blog. If your business is considering an ERP or e-commerce software purchase, don’t forget to check out our software selection guides on the topics.