ERP iPaaS benefits hinge on careful planning, CIO involvement

ERP systems link key operations, encompassing core accounting, order-to-cash processes, procurement and production. At the same time, CRM, warehouse management systems, e-commerce, payroll, tax engines, planning tools and a growing stack of AI services depend on timely access to master records and transactional data. Even as CIOs want to automate the flow of information between ERP systems and other software, many ERP systems still can't integrate quickly and easily with the rest of the IT landscape.

Enter integration platform as a service. Among ERP iPaaS benefits, iPaaS can make ERP integration faster, easier and cheaper to maintain, assuming it's deployed strategically and systematically. Used poorly, iPaaS simply replicates the same set of integration problems point-to-point interfaces generated, just on a different platform.

How iPaaS cuts down on ERP integration complications

ERP integrations typically go wrong for predictable reasons, including limited interfaces, changing data models and third-party add-ons.

Legacy ERP systems frequently offer limited interfaces, or they only allow for batch processing of multiple transactions at a time. That bottleneck limits or delays the flow of information -- problematic in a world where speed matters and delay can be costly.

Each ERP has its own data model, and that changes with each new software upgrade. New user-defined fields create blind spots in the data sent to external systems. Third-party add-ons further complicate the mix, bringing redundant tables or fields that duplicate information already maintained in the core ERP software. Changes to any single component disrupts the accurate flow of information from one system to another.

iPaaS reduces these friction points by treating integration as a managed platform rather than a collection of point-to-point connections. Pre-built connectors for SAP, Oracle, NetSuite, Dynamics and Salesforce replace most (or all) of the low-level API work. For CIOs, integration now becomes a matter of mapping and orchestrating, then handling exceptions as they emerge.

Because mapping, transformation, validation, retry and alerting all reside in a single platform, iPaaS gives IT teams a comprehensive view of data flows and exceptions. When, say, a sales order is created in CRM, a single iPaaS workflow creates a new customer in the ERP system if needed, then allocates inventory, processes the order and forwards fulfillment instructions to the warehouse management system.

Point-to-point API integrations typically fail quietly. iPaaS platforms offer a dashboard view showing completed workflows, errors and retries and failed or delayed connections. That means a pricing error or inventory shortage is illuminated right away rather than long after an issue may have occurred, helping CIOs and operations teams avoid negative consequences.

Create an integration strategy early

CIOs assessing ERP iPaaS benefits must plan strategically before picking an iPaaS platform.

Take an inventory of your various integration points and identify who owns the data. In each case, determine which system is the authoritative source of truth. List the various elements of ERP that matter most to your business: customers, vendors, items, general ledger accounts, open orders, inventory balances and so on. Domain owners should be directly involved; this is not an IT-only initiative.

For each of those categories, list the touchpoints with external systems, along with the events that should trigger a data exchange. Evaluate your need for low latency. General ledger transactions, for example, can often wait for hours or even days, whereas updates to inventory quantities must usually happen immediately. Decide how errors should be handled. Who should be notified when a vendor invoice fails to land properly? What constitutes a business exception versus a technical retry?

Once you map out these requirements, look for an iPaaS platform that fits your needs. In most cases, that means an iPaaS tailored to your particular ERP system. An SAP or Oracle landscape, for example, might be best suited to that vendor's native integration tools. A multi-ERP or highly fragmented environment might be better off with a vendor-neutral iPaaS.

This is a good time to plan your iPaaS operating model as well. Who can publish new workflows? What are the documentation requirements and how are approvals and audit logs handled? The answers to these questions could impact your choice of iPaaS platform. It's worth considering them before you commit to a specific vendor.

How ERP iPaaS benefits companies

iPaaS offers ability, speed and visibility, but over the long term, iPaaS also generates cost savings and operational efficiencies—significant benefits to the bottom line.

Getting started with iPaaS is relatively easy, especially compared to old-school custom integration. Pre-built connectors generally offer no-code or low-code capabilities. After the first few connections are up and running smoothly, subsequent integrations generally get easier and less expensive to produce and maintain. If customer, item and vendor mappings already exist, for example, attaching a new e-commerce channel or a newly acquired subsidiary is a matter of replicating and modifying pre-existing templates. Organizations that approach iPaaS strategically can expose the same customer or inventory services to multiple consumers without recreating the same ERP interface over and over again.

iPaaS compresses cycle times, particularly when the new platform is replacing batch-mode integrations. Order-to-cash and procure-to-pay processes, for example, are no longer reliant on periodic updates or overnight processes. Planners see inventory changes in near real time. Customer-facing portals display order statuses immediately. Vendors respond promptly and deliver product faster.

iPaaS also lets line-of-business users develop and maintain integrations. Low-code mapping doesn't eliminate the need for IT, but sophisticated end users can initially prototype and review integration flows, taking some pressure off the IT department. Given proper governance standards, user-developed workflows can deliver value faster and with greater attention to detailed requirements.

The limits of iPaaS

iPaaS automates the flow of data, but it can't necessarily compensate for poor data quality. If the CRM system lacks a common naming convention for customers, for example, an iPaaS workflow might not recognize duplicate records, potentially creating a new customer record where a valid one already exists. Likewise, customer payments could potentially be integrated back to the wrong record in CRM, making it hard for salespeople to evaluate open credit lines accurately. In other words, automated integration has the potential to amplify existing data quality issues.

CIOs must convey the security and compliance implications of iPaaS for ERP. A central hub concentrates credentials, payloads and personally identifiable information in one place. That's an improvement over unmanaged scripts, but it merits close oversight from IT security and compliance experts. Data-sovereignty rules apply, so understand where the data resides, who can see payloads in error queues and how quickly a compromised connector can be revoked.

Costs can add up, among them, connector licenses, message volume and premium endpoints. An inexpensive pilot that syncs a few hundred orders a day can potentially drive much higher costs during peak periods. Evaluate the total cost of ownership for your iPaaS platform and understand the implications over the next three years and beyond.

Is iPaaS right for your company?

Ultimately, the IT department will determine whether iPaaS for ERP is the right fit. The CIO makes the call, but the CFO is an essential stakeholder and should have a substantial voice in the decision.

To that end, CFOs should underwrite the economic case and understand the strategic implications of iPaaS adoption, including improved agility, speed and transparency. iPaaS is usually a good fit when multiple enterprise systems must stay in sync, when integrations cross business units or legal entities or when the cost of operational failures is high.

ERP iPaaS benefits are greatest when the platform is viewed strategically and when key stakeholders insist on proper governance.

James Kofalt spent 16 years at SAP working with SME business applications and was a product manager for integration technology at Microsoft's Business Solutions division. He is currently the president of DX4 Research, a technology advisory practice specializing in ERP and digital transformation.