What is ERP Integration? Benefits, Strategies, and Challenges

If your company relies on an ERP to optimize business processes, you’ve probably heard you need to integrate with other software to gain the most benefits. How does ERP integration work? In short, integration establishes communication between two or more software solutions, such as a new ERP and a pre-existing legacy system, to create a single source of data.

Learn more about the specifics of ERP integration now:

First, let’s cover the basics:

What is ERP?

Enterprise resource planning (ERP) tools is an integrated suite of business applications designed to centralize the majority of your back-office business processes, such as financials, sales, and operations. In fact, an ERP can manage a wide range of company operations across every possible department, including:

• Accounting
• Billing and invoicing
• Business intelligence (BI) tools
• Customer relationship management (CRM)
• eCommerce platform
• Human resources (HR)
• Inventory management
• Manufacturing resource planning (MRP)
• Project management
• Supply chain management

Think of an ERP as an all-in-one software for a business which creates a single source of truth from your internal workflows and customer data. And with system integration, you can further ease forecasting and streamline decision-making with additional, diversified data sources.

What is ERP Integration?

Software integration combines ERP with one, two, or more software solutions, including those made by different developers, into a compatible business system through application programming interfaces (APIs). This process is undeniably difficult, as each software vendor has their own methodology for how their software should function independently or with other compatible systems. Once integrated, ERP solutions can exchange business data without losing valuable information in the transition.

Of the different business functions mentioned above, many have their own standalone software products available. ERP integration allows those solutions to work together in a larger system. For instance, while an ERP offers basic accounting tools, it can also coordinate communication between a separate accounting software to provide additional functionality.

Additionally, integrated ERP systems can improve the operation of pre-existing or legacy business software. For example, if you already have a cloud ERP platform in place and are adding a specific on-premise solution to handle certain functions, you’ll want to know the two are compatible and won’t create more work through accidental data duplication. Or if you currently have legacy software, ERP integration can automatically draw upon the existing information without the need for manual data entry.

Features and Benefits of ERP Integration

As described above, combining ERP and other software functionality can lead to a lot of useful benefits at your organization. To start, you can reduce the amount of downtime between performing basic business functions by allowing workers to perform all tasks from one ERP platform. Instead of logging in and out of different programs, or running manual calculations in spreadsheets, your employees can perform all their tasks in one centralized location with shared data.

For instance, imagine an HR department is responsible for performing monthly payroll. Before integration, the HR team tracked employee time and attendance in a spreadsheet, manually marking who was in or out each day. Once ERP software is integrated with their legacy HR system, the team uses real-time tracking to automatically calculate wages, ensuring compensation accurately reflects the hours of each employee and is completed in record time.

Next, ERP customization adds another benefit to your business. Combining different software functions can lead to a more precise process for your workforce, cutting down on wasted time between tasks. The integration of ERP software with another system lets you build a custom approach to how your company operates.

Finally, ERP integration can offer time and cost savings. Rather than spend thousands to implement a brand new software to replace a legacy system, you can simply establish communication and data exchanges with the ERP to continue using your existing (and paid for) software. An integrated ERP can also reduce human error caused by manually entering data from different sources into various programs.

Challenges to ERP Integration

ERP integration challenges can get incredibly messy in the best of circumstances, especially if you are dealing with cloud-hosted or mobile migration of a lot of data. Integrating an on-premises solution with an entirely web-based solution can lead to accessibility issues since using an additional software can complicate formerly simple processes by requiring deeper coordination between the systems. And customizing the ERP can further complicate integration.

Data storage methods can also vary between systems, further complicating the integration process. Imagine trying to find a file which one software has organized alphabetically which another has categorized numerically. Trying to consolidate files without a clear plan in place can lead to accidental data duplication.

One of the biggest headaches of an ERP implementation is coordinating software with overlapping functionality. Poor data management during the process can lead to duplication or deletion of important information. You will have to decide if it’s better to have two separate software solutions or one integrated option when adding an ERP to your existing system. In short, the more software you already have to add, the more difficult it’ll be to fully integrate.

Another difficulty comes from the users themselves. Manual data entry is a leading cause of human error, as the tedious task can lead to duplicate or deleted entries. And the employees at your company may have trouble adapting to a new solution when they prefer to use an older, familiar system. This steep learning curve can lead to additional costs for training workers on an integrated ERP system. Of course, once users are comfortable using the new system, the ERP software can essentially pay for itself by reducing time spent on manual business processes.

ERP Integration Strategies and Methods

Fortunately, an integration platform can streamline the process of bringing an ERP and other software applications together. A properly integrated ERP can provide access to real-time data, reduce downtime, and overall improve your business performance through streamlined automation.

There are several different ERP itnegration strategies. Each has its own advantages, along with key similarities. First, whatever your method, you must first plan your integration points. Ask:

• What data do you already have?
• What data do you need?
• How should one system communicate with another?

By establishing each point, you know where you need connectors between each software the most. For example, your mobile apps for tracking employee attendance probably won’t need to coordinate with your main budgeting module, so it pays to know what parts of your software can stay separate from each other. And anything related to the front-end customer experience probably doesn’t need to be included either. Once all points have been identified, integration can begin.

Next, you have to consider how you will actually integrate the software together. There are several different types of software integration you can use with your ERP. Some of the main methods are:

• Point-to-point integration: Connects different software individually to create separate points of contact - this also makes the most direct connection between separate software
• Vertical integration: Organizes “silos” based on the functionality of each software subsystem; the fastest integration method though only intended as a short-term solution
• Enterprise Service Bus (ESB): Also known as horizontal integration, matches specialized subsystems to reduce the number of total connections
• Integration platform as a service (iPaaS): Similar to software as a service (SaaS), this cloud-based method syncs up different software components
• Star or spaghetti integration: Interconnects all systems with subsystems based on their functionality, replacing duplication between the different interfaces

The right integration strategy for your business will depend on several factors. Do you need fast results? How many connection points will you need? Will the ERP vendors be able to assist with integration? All these need to be considered when making your choice.

How Real-Time Integration Works

Regardless of the main method of integration used, the timing is critically important. Larger systems require significant time in order to fully function after integration is complete. The more points of data integration you have, the longer it’ll take. Fortunately, real-time integration is possible to minimize downtime.

The expedited process lets changes in one system be reflected immediately in the other and is accomplished through the use of a shared database, such as the aforementioned silos. Alternatively, APIs can pre-configure a set of usable instructions that allow for changes in one program’s database to be triggered by actions in another.

In terms of functionality, real-time integration is best for fast results, though may not be technically feasible or cost-justified for your company depending on the types of ERP you use.

Popular ERP Integrations

Further, there are many ERP systems which are specifically designed to integrate seamlessly with some of the more popular software products and websites out there, such as:

• Infor
• Microsoft
• NetSuite
• Oracle
• QuickBooks
• Sage
• Salesforce
• SAP

If you are using a variety of different software products, integration platforms and APIs can come together to make integration seamless. Additionally, there are many integration solutions which combine general ERP systems with industry-specific software to fully fit your business needs.