Consolidation Considerations

By: | May 1, 2018 • 6 min read
Steve Boese is HRE's Inside HR Tech columnist and is a co-chair of HRE’s HR Technology Conference®. He also writes an HR blog and hosts the HR Happy Hour Show, a radio program and podcast. He can be emailed at sboese@lrp.com.

Here are some issues to examine when weighing a move to a single platform for HR, finance and ERP solutions.

Long before I became an HR-tech person, I worked in the corporate accounting and finance department for a major U.S.-based tech company.

The job entailed lots of financial and managerial report creation, distribution and even some presentations to leadership on the financial state of our part of the business. The position also required some decent technical skills, as the finance systems we had back then were not exactly user-friendly—think green screen data entry, lots of overnight batch processing and reporting systems that were only “current” about two days each month (and those were usually the 14-hour days we put in to generate all the reports we needed for management).

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But it was a great job and a fantastic learning experience, and it also led me to spend quite a few years implementing new financial systems for that company and eventually others. In fact, helping finance organizations define new charts of accounts, reporting hierarchies and improving processes for things like bill payments and cash receipts was how I spent the better part of the mid-’90s to about 2003 or so, before transitioning to focus exclusively on HR and HR systems. One tip I learned about installing new finance systems still resonates to this day: When implementing a new AP system, if there is a backlog of unpaid invoices piling up, make sure to find the one for the electric company and pay that first when the new AP system is up.

I share this little tale not just for my amusement, but because my experience with finance, accounting and ERP systems (and now HR systems) gives me some interesting perspective on the issue I want to dig into this month: whether it makes sense for organizations to try and standardize their HR, finance and ERP systems on one common, single-provider platform or have separate (often described as “Best-of-Breed”) systems for HR, finance, supply-chain and purchasing processes.

This debate is not really new, of course. Back in the days of “Big ERP”—prior to about 2000—large organizations often did consolidate on one provider’s solutions for all or as much of their administrative functions as possible.

But once the initial set of HR, talent-management and recruiting technologies emerged as cloud-based Software-as-a-Service solutions, the systems’ footprints in many organizations began to bifurcate, with some solutions migrating to new cloud-based providers while others (often “core” HR and finance) remained as on-premise systems. The combination of the systems themselves not being cloud-ready and many organizations’ early reticence about moving fundamental systems-of-record to the cloud continued to drive this split for several years.

Fast forward to today, where we see many (if not all) administrative systems having cloud-ready options. Several of the larger enterprise-solution providers are developing and offering full suites of cloud solutions for HR, finance, ERP and more, and the enterprise IT debate from the ’90s about the benefits and risks of consolidating on a single platform has emerged once again.

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I know that is a lot of background material, but I think it’s important to have some context before thinking about the question more deeply. Here are some things to consider when thinking about the pros and cons of moving to a single platform for HR, finance and/or ERP solutions.

Advantages of a Single Platform

The advantages of having a single, consolidated platform for HR, finance and ERP systems are many. From a technical perspective, the nature of modern, consolidated administrative systems drives a significant reduction in the number and complexity of the systems integrations that organizations must manage to support essential transactions, workflows and reporting.

Think about how many processes in the organization require information about employees’ status, role, location, department, compensation, etc. Most organizations still follow an organization chart in order to enforce all kinds of approval rules and processes for purchasing, expense reporting, even bad debt write-offs. Having built-in, current and always-available access to employee records is critical for many “non-HR” systems, and a consolidated platform largely solves this problem, as all employee information is shared by design with finance, ERP and other applications.

Additionally, a single consolidated platform across functions provides a unified and consistent user experience—application layout, look and feel, interaction conventions, and usually a central method for seeing and responding to system notifications and requests for action. This helps organizations achieve better user adoption, increases transaction efficiency and reduces the need for user training, as cross-application consistency makes it easier for users to learn and adjust.

For example, when an organization has one set of applications for entering travel expenses, another for approving job requisitions and another for employee self-service transactions, employees are forced to learn three systems, become familiar with differing flows and looks, and perhaps even remember three different user names and passwords. And don’t forget the three separate mobile apps for employees to install on their phones. A single, consolidated platform solves, eliminates or reduces many of these problems.

Finally, consolidated platforms for HR, finance and ERP almost always make cross-functional reporting and analysis faster, better and easier to deploy. With disparate systems, someone (usually IT or consultants) needs to deploy yet another system, a third-party data warehouse and reporting tool, to be able to successfully extract data from each system, map or scrub the data for consistency, and deploy them in a format for users to be able to define and execute company-wide reports. And once again, the reporting tool is another system, with its own user interface, authentication and password to remember. With a single platform for enterprise-wide use, with a single data model, method of data storage, embedded reporting and dashboards, and end-user familiarity the reporting and analysis tasks are simpler and more efficient.

Potential Drawbacks of a Single Platform

Traditionally, when an organization deployed an enterprise-wide platform for all administrative functions, the primary downside for HR leaders and teams was that the HR and talent-management capabilities in these systems were suboptimal when compared to stand-alone or “Best-of-Breed” HR solutions.

This was often the result of enterprise systems that were developed with non-HR functions at the forefront; think of an amazing finance system that had basic HR functionality bolted on, or a leading manufacturing or supply-chain-management solution that added HR capability in a limited fashion. In these kinds of scenarios, and in a time when enterprise-technology decisions were made without much input from HR—IT and the CFO usually led these evaluation and purchase teams—HR was often an afterthought, and therefore, its needs and requirements were not typically granted the same weight and importance as other areas of the business.

While there are still some elements of truth today in the idea that the most capable “Best-of-Breed” solutions for specific elements of the HR-tech ecosystem often offer more complete solutions for a given area than do the larger, enterprise platforms, the gap has seemed to narrow over the last decade or so, coinciding with widespread cloud adoption of HR and other systems. Much of this was due to HR leading the enterprise in the push to more complete and comprehensive cloud adoption, with finance and ERP usually coming later. Said differently, many of today’s leading enterprise-cloud providers were or are “HR first,” and their cloud HR-solution sets and functionality do not substantially lag behind many of the “Best-of-Breed” solutions.

Please note, that’s a general statement and of course there are many examples in different areas where tailored, specific solutions for applicant tracking or employee recognition, for example, are much more capable and sophisticated than equivalent functionality in enterprise platforms. But my sense in many areas of the HR-tech stack is that these gaps are narrowing and are often narrow enough to not outweigh the benefits that accrue from a combined platform as described above. Of course, every situation is unique, and every company needs to do its own analysis and due diligence when making these extremely important decisions.

There are clearly benefits and strengths for organizations consolidating administrative systems for HR, finance and more on one platform with a single provider. But as noted above, there also can potentially be some negatives, as it’s almost impossible that one set of solutions can meet all of a customer’s primary requirements. But every new solution introduced to the organization’s IT environment introduces new challenges and integrations. This is a complex question and HR leaders have to be extremely well-informed about the benefits, risks and costs of both scenarios in order to help their organization make the best decision.

For insights, expert advice and a chance to meet executives from providers of HR-technology solutions that can help you and your organization succeed, make sure to join us in Las Vegas in September for the 21st Annual HR Technology Conference & Exposition®.

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