What Is ERP Integration: Understanding the Methods, Benefits & Risks Involved

Think of ERP integration as upgrading to a new smartphone with built-in applications.

This new smartphone (which, in this metaphor, is your new ERP Software), has replaced your old outdated flip phone (or, your existing Excel spreadsheets).

Previously, when using your flip phone, you would also use an MP3 player (or, an accounting system), a calculator (or, a CRM system), and a camera (or, an inventory management system) – all separate from each other.

Whereas, with your new smartphone, all these tools – and more – are built-in. This keeps all tools and data in one easy-to-access place, creating a seamless experience.

What Is ERP Integration?

ERP integration is the process of connecting current business day-to-day operational applications or systems with your ERP Software and feeding it data. This provides:

• Greater insights into data, and the value of business processes and supply chains
• The ability to upgrade legacy systems and improve data security
• Identify and eliminate data silos for improved analysis, centralising data sources
• Automate business processes and deliver faster analytics through live dashboards across the business

The cost of an ERP integration and the need for it to succeed make this one of the most challenging purchases for any business. Getting the right ERP and integrating it across the business and with your data sources successfully can drive growth and opportunity.

An Oracle finance survey highlights, “incorporating AI into ERP systems can yield a 36% drop in errors and reduce the time it takes to close the books by 3.5 days.”

IT buyers and CIOs adopting ERP to simplify their software footprint, add value to the business and use unified data to generate a clear, single view of business-critical information. Doing integration right will help gain insights across departments, finances and operations.

Use our sophisticated software comparison tool to find an ERP system to manage all your business operations data in one place.

How Application & System Integrations Can Supercharge Your ERP

Typical ERP applications aim to compile data from across the business to generate business intelligence. Changing the business perspective around ERP delivers a broad view of activity, so managers and leaders can drill down into the details and data.

A successfully-integrated ERP can import data from applications managing:

• Accounts and finance
• Supply chain for materials or stock inventory
• Warehouse and distribution
• Sales, orders and returns
• Product lifecycle management
• Customer relationship management (CRM) and service
• Data from marketing efforts
• Human resources and people management

When integrated, data can be viewed live or displayed in operational or strategic reports across the business, highlighting issues or opportunities for improvement through analytics tools or AI-powered suggestions.

The results for the business are clarity into expenses, visibility into opportunities or potential efficiencies and data to drive business growth.

Beyond immediate operational benefits, ERPs can also integrate with other services, such as AI and automated or low-code tools for analytics and the development of custom features by users, and with social media tools for marketing.

3 Primary Methods for ERP Data Integration

There are three main methods of ERP integration:

1. Native Integration

The ERP application has a built-in method of accepting data from an external app.

2. Custom Integration

The use of a third-party tool (such as IPaaS) to integrate the data from an application into your ERP.

3. Point-to-Point Integration

The creation of a custom plug-in, API or code to integrate data from an unsupported application to the ERP.

Depending on the business, a mix of these approaches can integrate data from the vast majority of applications. And for businesses using typical cloud applications, the integration process can be very fast indeed.

Benefits and Business Value of ERP Integration

When successfully integrated across the business, the benefits of the ERP should rapidly become apparent. They include the ability to:

• Save money on multiple applications with redundant features
• Track and improve budgets, workflows, productivity and processes
• Identify delays, manage costs, and find efficiencies to balance budgets
• Understand analytic trends to drive long-term business growth

With business data increasingly under threat, a modern ERP can support data security efforts and regulatory and compliance regimes to ensure data is protected and secure.

Another benefit is enabling workers to gain a better understanding of the business, their part in its success, and creating opportunities for workers to suggest further improvements.

When it comes to using ERPs, the most popular use cases and applications among responding businesses for their ERP:

Source: Global ERP Statistics, 2023

Challenges Associated With ERP Integration

According to McKinsey, “only 20% of companies manage to capture more than half the projected benefits from ERP systems.” A modern ERP is billed as a simple tool for firms to adopt.

However, there are multiple challenges that any business will face:

Data Silos and Incompatibility

Data from legacy, bespoke or niche applications can be a challenge to import into the ERP. These typically require extra steps, and perhaps cost, to import.

Personnel and Personality Issues

Some departments or team leaders might not appreciate extended visibility into their data or applications. Explaining the broader business benefits and ability to improve performance can overcome resistance.

Impact on Business Operations

Switching to an ERP requires training and explaining to users the value of the ERP’s functions. Doing this in advance and creating a strategic vision for business data makes the change about business growth and not a focus on IT or systems.

How the ERP Integration Process Works

ERP vendors can make data integration sound simple. They may explain it as just two systems with application program interfaces (APIs) simply talking to each other.

However, the process can be time-consuming and complex, depending on your business needs and existing applications.

Many businesses focus on a core ERP integration first and then expand to capture additional data over time. The rise of Integration Platform as a Service (IPaaS) delivers an efficient way to integrate data into an ERP system. IPaaS is a cloud-based platform used to simplify the integration of applications.

With an IPaaS platform in place, the integration of ERP systems will look something like this:

1. API tokens for both your ERP system and the intended integrated applications are configured
2. Integration flows are set up to instruct how and what data should be transferred from applications
3. Pipe connections are established through the IPaaS platform
4. Data mapping and modifiers are put in place to ensure the right data fields are input
5. Regular, real-time data synchronised schedules are set up

How to Drive the ERP Integration Process

Integrating an ERP successfully into your business requires a clear understanding of your current business applications and identifying the data sources to integrate. As part of the analysis, build and validation process most software adoption follows, integration plays a key part at every stage to ensure a successful deployment.

The need for integration may happen as part of a wider digital business transformation, an ERP integration strategy, or solving pressing issues as companies grow or acquire other firms.

Most vendors provide a series of ERP integration best practices to follow to deliver success, while software integration platforms can support complex efforts.

Acquiring the right ERP also requires some technical knowledge, plus the right training and messaging for users to ensure it delivers maximum value.

Creating a cross-functional team in charge of the ERP integration helps:

• Assign leadership support to key tasks
• Deliver an audit of applications, data sources and existing integrations, silos of data
• Understand who will use the ERP and is responsible for data across departments
• Identify problem applications and data
• Ensure business continuity across and beyond the integration
• Encourage adoption and solve post-ERP implementation issues

The ERP integration may take place in phases to reduce the risk of impacts on the business, or as a single process to move all workers and departments to the new ERP.