How to know if you need one software system or multiple systems

By Malcolm Roach on Aug 28, 2017.

Do I have to use only one software system for my equipment rental business or can I run several?

This is not a simple question to answer. I have been working with mid-market accounting and ERP systems since 1989 and I can tell you from personal experience there is no simple answer to this question. This document does provide several guidelines to help you in your search and a link to a checklist to help you evaluate your particular situation.

Blog Do I have to use only one software system for my equipment rental business or can I run several-988312-edited.jpg 

In my 25+ years working with systems, I have worked with ones offering no access to the source code but did have the ability to access a Btrieve/Pervasive database through an ODBC connection. Others allowed customization of Transact SQL code in a SQL Server database. I currently work with one with several options for customizing or configuring the system, which is running on a SQL Server/Azure database with a number of data integration options that make ODBC look primitive. Over the years we have integrated with many third party systems with differing technology, including Oracle databases. Many times we added industry-specific functionality via third party add-on products. There are many choices.

The good news is over time key Enterprise Resource Planning (ERP) vendors like SAP and Microsoft have built functionality for many more industry segments so the need for standalone vertical market solutions has declined. As well, the move to service-oriented architectures (SOA) is making systems much more flexible, meaning working with multiple systems is much easier and brings lower costs.

Now let’s see if we can make some sense out of this hodge podge of alternatives. To start with, here’s a few things to consider before we start discussing your options.

1. There are actually three options, not just two

Everyone’s first choice, if it actually exists, is to have one system that covers every aspect of your business. Now that we’re all done laughing, let’s talk about those three choices. We all know that no system will ever give you 100% of what you would like unless you have very low expectations. We’ll cover the advantages and disadvantages of these options later in this document.

  • Single Source - a system provided by one software provider, such as Microsoft. 

    This applies regardless of whether the system runs on an in-house server or in the cloud.
  • Best of Breed - more than one system each covering different aspects of the business, such as financials, service, rentals, etc. This option often happens by default when different key stakeholders are allowed to select the system best fitting their business unit.

    These systems usually run standalone and do not have any or limited native integration to other systems.
  • Integrated - an integrated solution taking standalone systems and making some effort to integrate data among them.

    This option varies between integration of basic data such as customers all the way to integrating operational data such as inventory and manufacturing data.

2. There are very different levels of cost and risk among the three types

  • Single Source – the least risky and the least expensive

If you can find one system matching most of your requirements, you are dealing with one vendor, one user interface resulting in lower training and support costs, and no extra charges for integrating disparate systems.

  • Best of Breed – medium risk and medium cost

You will be working with multiple vendors, paying multiple times for the same users in some cases, multiple user interfaces requiring more training, and higher risk of errors from duplicate data entry. Real-time data is probably a myth and you will likely end up with a lot of spreadsheets to consolidate or track key information across systems. 

  • Integrated – potentially the highest risk and highest cost, assuming you have to build the integration

The cost and risk depends directly upon the degree of integration among the multiple systems. Done properly, a higher investment cost will significantly reduce the risk by building a more solid integration. On the plus side, duplicate data may be entirely eliminated, which brings a number of advantages. In many cases, a better option is third party add-on products, which are discussed in the following section.

3. Third party add-on products can be a very good choice

The major disadvantage of a Single Source system is the developer can’t include all of the functionality for every single industry. If you choose a Best of Breed to gain the industry-specific functionality you need, you may find yourself working with a small vendor who could have difficulty keeping up with technology. Using a third party add-on product developed as an addition to a Single Source system gives you most of the benefits of a Single Source system while getting the industry-specific functionality you need.

This option is different from Best of Breed in that a third party software vendor has likely developed an enhancement to one or more Single Source systems. The purchase is to provide very specific functionality or industry-specific capability. Typically, the add-on is developed in one of two models. Add-on products may be developed using the main system’s development toolkit, which makes the new functionality look and feel exactly like the base system. In some cases, the vendor will have developed a standalone system, such as for advanced warehousing, and created interfaces to one or more core Single Systems. The add-on provider takes on the responsibility for making sure the integration works and upgrades it as the primary system vendor updates its solution. Although this does increase the cost somewhat, it significantly reduces the risk of higher costs often associated with developing integrations yourself, all for a fraction of the investment for developing specific functionality.

Advantages and Disadvantages 

Some of these we have already reviewed but this list will be more comprehensive.

Single Source

Advantages

  • One technology set
  • One database
  • One user interface
  • Enter data only once
  • Data is generally real-time between all of the modules
  • Only negotiating with one vendor
  • Only have to purchase one set of user licenses
  • Generally cheapest and lowest risk option
  • No vendor finger pointing

Disadvantages

  • May be lacking all or some key industry-specific functionality
  • Change of systems is “all or nothing”, which can be a massive project, both difficult and expensive
  • Can be a problem if you do not like the vendor or are receiving poor service, if the vendor sells only direct to customers
  • Highest risk if the vendor goes out of business or the technology becomes obsolete

Best of Breed

Advantages

  • Theoretically, the best functionality fit for specific business units or industries, i.e. equipment rentals, service, etc.
  • Allows selective change of just one smaller system rather than having to change the entire system
  • Smaller size of individual projects reduces risk of catastrophic failure if a Single System project goes sideways 

Disadvantages

  • Have to deal with multiple vendors
  • May have to buy several sets of user licenses
  • Data may have to be entered into several different systems, raising costs and risks of data entry errors
  • May have to work with several differing technologies and databases
  • More costly than Single System as more training is required, more software purchases, and ongoing support and updates

Integrated

Advantages

  • Provides more options for unique functionality required for specific business units or industries, i.e. equipment rentals, service, etc.
  • Allows selective change of just one smaller system rather than having to change the entire system at once
  • Smaller size of individual projects reduces risk of catastrophic failure if a Single System project goes sideways
  • Ideally, data is only entered once and propagated among the various systems

Disadvantages

  • Have to deal with multiple vendors
  • May have to buy several sets of user licenses
  • Add-on vendors may be smaller companies with limited resources and subject to continuance risk
  • Data integrity may be an issue if the integration is not reliable.
  • Every sub-system upgrade affects an integration, meaning the system is often in a state of change

Questions to answer when considering your system needs

1. Do you have specialized needs?

Can you work with a Single System? Getting 90% of your requirements from a Single System can be much simpler and cost-effective than working with a number of disparate systems delivering 95%.

2. Do you need to integrate significant amounts of data?

Some systems integrate only very basic information, such as a customer master. Others integrate transactions such as sales quotes or sales orders.

3. Do you have highly capable IT resources? 

A complex, highly integrated network of Best of Breed or Integrated solutions can add significantly more complexity and cost.

4. Do you need your systems integrated?

Sometimes there is little practical advantage to having two integrated systems. As an example, a CRM system used for marketing may not need to be integrated to your ERP system whereas it may be very useful to integrate a CRM system used for capturing sales quotes or sales orders and needing access to current inventory quantities and prices.

5. Is the long-term survival of each vendor a major concern for you? 

You should care about the long-term viability of the supplier for each of the systems you plan to utilize. Don’t go too far out. A five year review is probably sufficient as there can be significant changes beyond that timeframe and anything longer is just a guess anyway.

6. Do you think there will be significant changes in your business model?

While a Single System or Best of Breed might work today, what happens if you need to add manufacturing, job cost, or advanced warehousing to your system? Can you choose a strategy today that will give this flexibility in the future?

7. Will you need to have more than one system talk to each other?

You do not want to be the first people to integrate two systems although sometimes it is unavoidable and worth doing. With standardization of Microsoft SQL Server databases, many systems now have the architecture to integrate fairly seamlessly to other systems.

8. Can your people handle multiple systems?

Multiple systems suck up more time. This is a more complex environment. Do your people have the time to manage and update multiple systems? Are they capable of working with different user interfaces and processes?

9. Is real-time data a critical factor for you?

Data in most systems today is normally real-time and this is true of an individual Best of Breed application as well. The question, though, is whether you need the information from one application in another unrelated system as soon as possible? For example, if you are processing sales in your standalone rental system but entering cash receipts in your accounting system, how does your rental system obtain up-to-date customer account information?

10. Do you have a short timeline to get the new system running?

A standalone module can be implemented much more quickly than a global, multi-faceted system. If you need a service module up and running in 60 days, you will be hard pressed to implement an ERP system in that timeframe. On the other hand, if you already have a Single System, adding one more module can be fairly quick, especially service if you already have your inventory items and customers set up anyway.

11. Do you have advanced reporting requirements across multiple modules?

What reports do you need and when? Where is this information going to come from? If you are relying on manual integration or re-typing key data into spreadsheets in order to consolidate information across several systems, you may be compromising the accuracy and timeliness of your data.

12. Do you have a sufficient and flexible budget to support building integrations?

For anything but the most basic integrations, building your integrations will be costly and subject to cost increases. Does your organization have the fiscal capacity to absorb this cost?

13. Do the various systems have compatible technology?

Assuming you are considering integrating them, will they efficiently talk to each other, do those integrations already exist, or can you build them cost-effectively? Don’t forget to consider how they will be updated in the future as each system is updated and upgraded.

14. Do you need a high level of support from the software vendor(s)?

Having multiple systems greatly increases the importance of this question, especially when there are integrations. Software vendors have been known to point fingers at each other when integrations fail.

15. Can you tolerate downtime if an integration fails?

Integrations will inevitably fail, even if the problem is minor. In some cases, the failure is driven by technology changes outside the control or experience of the software vendor. It can take months to get this fixed as the required update may need to go into a software development schedule. In other cases, the fix may need to come from Microsoft or another infrastructure provider.

16. Are there good third party add-on products that will give you the functionality needed?

This can be a low-cost, low-risk alternative for getting industry-specific functionality, especially if you want to utilize a Single System

Conclusion

As you may have guessed, there is not one answer for everything. The exact choice will depend on your circumstances.

The most important points to consider include:

  • How unique are your requirements compared to what is available in Single Source systems?
  • What is the total cost of ownership over an extended period of time? Five years should be your minimum and the numbers needs to include purchase costs, annual enhancement, support costs, training costs, implementation costs, and upgrade costs.
  • How important is timely, comprehensive information to you?
  • Are there one or more add-on products that will give you the industry-specific functionality you need? 

You can find a worksheet here to help you evaluate which option is better for you.

If you have any questions, please contact me and I'd be happy to chat with you at 1-877-777-7764 ext. 105.

Topics: ERP Software, multiple locations, operations, business tips

Malcolm Roach is the CEO and President of Open Door Technology, providers of Open Door Rental Software for the equipment rental industry. Malcolm is a CPA with 25+ years of ERP experience and unique insights into the unique needs of equipment rental companies and how technology can address them.