What Is ERP Integration?

In many ways, businesses are like giant puzzles in which each department represents a different piece. For business managers to see the complete picture, each piece — manufacturing, marketing, sales, finance, human resources, customer service — must connect seamlessly. Enterprise resource planning (ERP) systems are one of the most effective approaches for making those seamless connections, often natively integrating all those pieces, and more, in a single database that supports unified business processes, workflows and insights. And ERP integrations are an ideal way to extend the efficiency and productivity advantages of ERP systems to third-party applications, including independent applications and in-house-developed proprietary systems.

Integrations can be tricky, however. Connecting multiple systems, for example, sometimes creates a level of interdependence that triggers a domino effect should one system crash. But with a thorough understanding of the pros and cons of ERP integrations, as well as the options for implementing them, companies can navigate the ERP integration landscape. This article explains the ERP integration process, including some of the most common integrations companies seek. It also discusses the challenges and benefits of ERP integrations and multiple best practices that help to ensure success.

What Is ERP Integration?

ERP integration refers to the process of connecting ERP systems to other software, either home-built or sold by a supplier other than the ERP vendor. These may be ecommerce platforms, HR software, customer relationship management (CRM) systems or project management systems — anything, really. The point is that they’re either applications the company has used for a while and doesn’t want to give up, or else they’re new programs that provide comprehensive capabilities that the business requires.

Third-party ERP integrations typically involve data, processes or both, each with its own level of complexity, depending on the business and its needs. For example, data integration might be done once from one system to another (known as migration), or it could involve real-time data exchange between two systems. Process integration involves automating workflows between two or more systems based on an action. For example, by using integrated processes operating across an ERP system and an ecommerce platform, an online order can trigger automated processes for real-time inventory management and order fulfilment. The more systems and actions, the more complex the integration.

It’s important to distinguish ERP integration from a separate, but related, term: integrated ERP. The latter refers to comprehensive ERP systems that already include prebuilt, native integrations with additional modules, often for finance, HR, CRM, supply chain management (SCM) and manufacturing. ERP providers bake native integrations into their solutions, so data and processes flow seamlessly among modules.

Key Takeaways

• While ERP systems typically include multiple integrated functions, such as finance, HR and CRM, companies may also want to integrate their preferred applications.
• ERP integrations can improve data efficiencies and extend functionality and automated workflows, optimising a company’s operations and improving customer experiences.
• Common ERP integrations link an ERP to CRM, HR, accounts payable (AP) automation and business intelligence (BI) applications, among others.
• Good integrations require experienced integrators. Otherwise, a company risks breaking data flows and exposing itself to security threats.

ERP Integration Explained

ERP systems save time and money by automating manual business processes and workflows to increase efficiency and productivity. Integrating ERP systems with third-party applications can extend those benefits. Integrations also extend another core benefit of ERP systems: real-time insights into a wider range of company operations. That fuels sharper, more informed decision-making.

Consider the impact different ERP integrations might have on inventory management for a retailer with multiple warehouses. A single retail store may quickly sell out of a particular blender. But if the company integrates its ERP system with its point-of-sale (POS) system, the ERP’s inventory management system can receive automatic notifications from the POS, giving warning of an imminent stockout. A low-level threshold triggers the ERP to automatically send a purchase order for more blenders to the blender supplier. Thanks to the integration, the retailer keeps the right products in stock, at the right time, to meet customer demand.

Retailers can also manage inventory more effectively by integrating ERP systems with demand forecasting systems, which use historical sales data and other variables to gauge demand for products in the future.

Does Your Business Need ERP Integrations?

ERP integrations aren’t a requirement for all businesses. But as companies grow, they sometimes need to integrate third-party applications with their ERP system to maintain data accuracy and consistency, add needed functionality, smooth workflows, improve decision-making — or all of these. Whether to pursue ERP integrations depends on how companies prioritise certain factors, including:

• Business complexity: When companies add departments or business units, they tend to add new systems. Integrating those systems with an ERP can make for more efficient processes and reduce data inconsistencies.
• Efficiency and productivity: Efficiency and productivity are competitive advantages. As companies grow, however, both are put to the test when disconnected systems with different processes lead to broken workflows and poor collaboration. Integrating those systems with an ERP, however, can unify data and workflows, automate manual tasks, reduce errors and reestablish control of processes.
• Customer experience: For any company that prioritises customer service, integrating ERP and CRM is a must. In fact, many ERP systems include integrated CRM modules. For those that don’t, however, many companies integrate third-party CRMs with ERP systems to build a single view of customer interactions.
• Data accuracy: All companies want to maintain data accuracy, but companies that handle large data volumes, in particular, can benefit from ERP integrations that automate processes, reduce data errors and provide a single view into all critical company data.

Types of ERP Integrations

There are as many potential types of ERP integrations as there are applications to integrate. Although some ERP systems already include prebuilt seamless integrations to consolidate data and processes across most or all of the functions listed in this section, companies sometimes prefer third-party apps, including industry-specific software, because those apps are familiar and have features they like. Uprooting employees from systems they know is unnecessary when integrations let companies meet business requirements while allowing everyone to use the system they prefer. The apps below represent the most common ERP integrations.

CRM

There’s good reason to consider integrating ERP systems with CRMs: It creates a complete view of the customer. That allows sales, marketing and customer service teams to get real-time insights into the critical data they need to respond quickly to customers. For example, sales teams can access customer information and purchase history in a CRM, along with inventory levels and pricing information from an ERP, giving them real-time data they can use to confidently close deals.

Ecommerce

With so many companies conducting business online, ecommerce platforms are growing in importance. Integrating them with ERP systems can make processes for order fulfilment, inventory management and financial reporting more efficient. Integrating the two systems means online orders can automatically be sent to an ERP system for processing and fulfilment, which saves time and minimises errors.

Customer Service

Customer service agents live or die by their ability to resolve customer issues quickly. Integrating customer service platforms with ERP systems gives customer service agents access to the data they need to provide personalised service and increase first-call resolution rates. With an ERP-CRM integration, ERP systems can feed customer services systems information about order history, purchase details and shipment tracking to improve customer satisfaction rates.

AP Automation Software

Integrating AP automation software with ERP systems automates invoice and payment processes to reduce manual data-entry errors and lower payment processing times. Invoices received in an AP system can be automatically sent to an ERP system for processing and payment. It also makes financial closing easier by updating data in real time, automating workflows and improving data accuracy.

HR

Comprehensive ERP platforms often natively integrate HR modules, which makes sense because critical employee data is often housed in both systems. For companies operating separate ERP and HR systems, integrating them can significantly improve decision-making, consolidating data to give companies a more complete picture of each employee, including personal information, payroll, performance, attendance and benefits. It also helps companies forecast hiring needs by giving HR teams insights into business needs and trends.

Product Life-Cycle Management

Connecting ERP systems with product life-cycle management (PLM) platforms can create a powerful tool to improve product development and production processes, reduce time to market and improve product quality. For example, product design changes in PLM systems can automatically trigger ERP systems to update a bill of materials (BOM). This automates the production process and reduces errors when ordering components.

Project Management Software

Integrating ERP systems with project management software connects data and workflows from the two systems to improve project planning, budgeting and tracking — which leads to better decision-making. For example, pulling financial data from an ERP system into a project management system provides real-time visibility into project expenses and budgets, helping organisations avoid overspending. Also, integrating HR modules in an ERP system with project management software can automate the allocation of resources to projects based on availability, skill set and workload.

Business Intelligence Software

ERP systems are important tools for honing decision-making, and connecting them with BI software can make both even more powerful by strengthening reporting and analysis, forecasting and supply chain management, for example. Combining BI tools with customer data from an ERP system is another powerful combination. Adding external data, such as social media and web analytics, allows companies to analyse customer feedback to refine product design.

Electronic Data Interchange (EDI)

EDI systems help companies exchange structured documents, such as purchase orders, invoices and shipping notices. Integrating EDI and ERP systems can enhance communication between business partners, improving data accuracy, supply chain visibility and overall collaboration. It can also automate compliance with industry standards and cut down on errors.

Enterprise Asset Management (EAM)

EAM software helps companies maintain physical assets, such as equipment, facilities and inventory. Integrating EAM and ERP systems makes facilities management and planning, such as generating and approving work orders, as well as inventory management and procurement, much more efficient. For example, a transportation company could track its fleet’s maintenance history to better manage inventory levels for spare parts, automatically ordering replacements when levels run low.

Benefits of ERP Integration

When done well, integrating ERP systems with third-party applications is like building a well-oiled machine with a turbo boost. Not only does the integration allow work to flow more smoothly, but it increases the power of each system. Here are some of the key benefits of ERP integrations:

Better Data Efficiencies

Manual data-entry processes are time-consuming, inefficient and error-prone, leading to inconsistencies and duplication that hamper decision-making. Integrating ERP systems extends automated processes and workflows across the organisation to optimise data efficiencies and workflows. For example, a company could integrate its ERP system with a separate finance application for reporting and analysis. Data from the ERP system can update the financial software, reducing manual efforts and preventing potentially costly mistakes.

Improved Customer Experience

Cultivating great customer experience isn’t only about integrating ERP systems and CRMs. ERP-CRM integration is a great start, though: It has clear benefits, such as giving service agents a complete view of customer interactions and purchases to improve response time and customer engagement. But thinking further, in an ERP-ecommerce integration, for example, inventory information from the ERP system could be supplied to the ecommerce platform so that customers get real-time inventory updates. Then, when a customer places an order, an integrated ERP with inventory, order management and warehousing modules could automate the entire process from that moment through to delivery at the customer’s doorstep.

Optimised Value Chain

When companies automate or otherwise polish production processes, such as design and development, procurement, manufacturing or distribution, they can reduce costs and raise quality and efficiency. Ultimately, that puts more value in customers’ hands. Multiple systems could be integrated with an ERP system to do that, including SCM, CRM and warehouse management systems (WMS). For example, an ERP system can provide real-time inventory data to an integrated SCM system to make sure materials are always available, speeding production and boosting on-time deliveries.

Added Software Features

Integrating with third-party software can add functionality to an existing system. For example, an older accounting system might have an outdated user interface (UI) but also contain customisations that would be costly and disruptive to replace. Integrating the accounting software with a new ERP system preserves the data and customisations but lets users access them through the ERP’s newer UI.

Automation of Manual Tasks

Manual tasks in any organisation are a time-consuming and error-prone process that ERP integrations can eliminate. For example, integrated ERP and CRM systems can streamline manual order-management processes. When customers submit orders on a website, the CRM captures that data and shares it with the ERP system, which initiates order fulfilment by generating a sales order, picking list, packing slip and shipping label.

A Single User Interface

By integrating data, processes and features from third-party systems into ERP systems, companies not only create a single source of clean, accurate data but also give users a single interface to use that data for multiple purposes. Employees no longer need to switch between systems and interfaces to manage processes. For example, a company could use its ERP system to manage inventory, order processing and invoicing. Separately, it uses an SCM system for demand planning, production scheduling, transportation management and warehouse management. With integration, they can use a single ERP interface to manage inventory, order fulfilment and shipping processes.

Operational Accuracy

Businesses have a lot of moving parts, and accuracy is essential — from data entry to manufacturing to consistently delivering the correct product or service to customers. Consolidated data and automated workflows resulting from ERP integrations make such operational accuracy possible. For example, integrated ERP and logistics systems can work together to ensure accurate deliveries. Orders are created in the ERP and seamlessly shared with a WMS to process and prepare them for shipping. The WMS informs a transportation management system (TMS), which calculates shipping costs and optimises routes. Shared data and automated workflows eliminate manual data entries and make certain that deliveries are accurate.

Improved Workflows

ERP integrations can lead to improved workflows because they support the automation of manual tasks, the elimination of repetitive or otherwise unnecessary steps, and better communication/collaboration. When an organisation streamlines workflows, it frees employees to focus on more strategic work. Financial reporting and compliance workflows, for example, can benefit from an ERP integration with tax compliance software. Tax software can pull data directly from an ERP system to calculate tax rates and returns, automating workflows that would otherwise require people to manually reconcile data from multiple systems. Tax software can also automatically update tax regulations and adjust related calculations, reducing noncompliance risk.

Accelerated Sales Conversions

Several of the most common ERP integrations make excellent contributions to the sales process. Integrated CRMs can put crucial customer data in a salesperson’s hands when they need it for a close, and ecommerce platforms linked to an ERP’s inventory module can tell customers what’s in stock at the moment they’re ready to click “buy.” If a company integrates its marketing automation tool with its ERP, it can use purchase histories to automatically send prospects targeted messages based on preferences, interests and behaviours. That, in turn, is likely to increase engagement, strengthen customer relationships and foster repeat purchases.

Challenges and Risks of ERP Integration

The challenges and risks of ERP integrations increase as the size and complexity of companies grow, making it important to find the right integration solutions to suit specific needs. Companies should also be sure to conduct thorough assessments of the strengths and weaknesses of each system to be integrated, as well as any integration tools, to minimise risks. Assessing the following risk factors can help avoid integration challenges down the road.

Lack of Expertise or Resources

As ERP integrations become more complex, companies often need the help of experienced integration experts to make crucial decisions about integration methods and data migration plans, for example, as well as to ensure proper testing and maintenance of the work. Whether it involves hiring experts or seeking the help of consultants, such expertise is critical. Without the right resources — and enough of them — to support their ERP integration, companies risk cost overruns, broken systems and flawed security. Be sure to assess resources beforehand.

Poor Customer Support

Your chosen ERP systems vendor could be a great source of integration expertise — if it offers high-quality customer support. Many have deep experience with multiple ERP integrations. Before committing, make it a priority to vet potential ERP vendors for their integration experience — particularly, industry-specific experience — and the quality of their customer support.

Software Security Risks

Integrating ERP systems with third-party software is a great way to bring added functionality into an ERP, but be careful not to bring in unwanted guests, as well. Different systems often have different security protocols and vulnerabilities that can have huge negative consequences. If third-party software with a malware vulnerability is integrated with an ERP system, the ERP now has that vulnerability. Companies should maintain strong access controls and thoroughly vet third-party systems before integrating.

Poor ROI on Integration

Return on investment (ROI) refers to weighing the value of an investment’s benefits against its total costs. The more the benefits outweigh the costs, the better the investment. The same calculation should be applied to the costs of an ERP integration and the benefits the organisation expects to gain from it. Even when the benefits are clear, poor ROI can result from a clumsily designed integration or from rushing the process without understanding the implications. Companies should approach ERP integrations with a thorough plan that evaluates ROI and considers all options.

Choosing the Wrong Integration for Your Needs

Having an exhaustive integration plan and considering all options also helps companies avoid choosing the wrong integration for their needs, which can lead to downtime, inaccurate data and security risks. For example, integrating an ERP system with a third-party logistics system that doesn’t feature real-time data transfer can limit supply chain visibility, leading to stockouts and unhappy customers.

ERP Integration Methods

Companies have three main options when deciding how to integrate third-party software with their ERP systems. It’s important to conduct a needs analysis beforehand to determine which option makes the most sense. The choice is likely to depend on several factors, including the complexity of the integration (particularly with regard to data exchange), future scalability requirements, IT resources, budgets, security risks and vendor support.

Point-to-Point

Point-to-point integration links two systems without any type of middleware (specialised software that supports communication and data exchange between different systems). Point-to-point integrations are the most straightforward, the lowest-cost and, often, the fastest option. They allow for better customisation and control of the entire process. On the other hand, they can be difficult to scale, because each integration is a separate project and ultimately requires individual maintenance.

Enterprise Service Bus (ESB)

An ESB is a form of middleware technology, often on premises, that standardises communication and data exchange between two or more systems. ESBs typically handle multiple formats and protocols, so they can support more complex integrations. ESBs also offer greater scalability to handle larger amounts of data and transactions with real-time processing. Those features typically come at a cost, however. Not only are ESBs more expensive than point-to-point integrations, but they can also require more IT resources to build and maintain. Because they introduce another layer of technology, ESBs also introduce another potential point of failure.

Integration Platform as a Service (iPaaS)

iPaaS solutions are cloud-based integration platforms that have become popular recently. They offer an easy-to-use, scalable and affordable set of tools and services to manage integrations for both cloud-based and on-premises systems. Companies can use iPaaS solutions to manage multiple integrations through a centralised interface that allows them to easily scale integrations up or down to meet changing business needs. On the downside, iPaaS may limit customisations, and, because they expose data in the cloud, companies must be careful to maintain strict security protocols.

Which Integration Method Is Best for Your Business?

Choosing the integration method that makes the most sense will often depend on the specific circumstances of each company. Budgets, technical complexity and resources all factor into which method should be used. In general, however, there are some characteristics of each integration method that will make more sense for certain types of businesses than others. The following questions can help companies determine which method makes the most sense for them.

How complex will the integration be? Complexity varies, based on the number of systems affected, the amount of data involved and the degree of customisation. For example, data integrations between two systems are simpler than multisystem data and process integrations. The more data, the more complex the mapping and migration. Point-to-point integrations are ideal for simpler integrations. iPaaS can handle more complexity but not much customisation, whereas ESB solutions can handle complex integrations with customisation.

What is the budget for the integration? Point-to-point integrations generally cost the least, which is why smaller organisations often favour them. iPaaS solutions are slightly more expensive but still affordable. Because of their ability to handle complex integrations with customisations, ESB solutions are the most expensive.

How much customisation will be required? The more complex an organisation’s business processes and workflows, the more likely that customisations will be required in an ERP integration. Customisations also become necessary when third-party apps have limited integration capabilities, offering only prebuilt templates, for example. Point-to-point and ESB integrations offer higher levels of customisation, while iPaaS solutions provide the least.

How much data needs to be migrated? Integrating two data-intensive systems, such as ERP and CRM, adds to the complexity of the integration effort. Large amounts of data require greater effort to extract, scrub, dedupe and load. Both iPaaS and ESB solutions can handle larger data migration projects.

How quickly is the integration needed? iPaaS integrations, with their preconfigured connectors and automated APIs (application programming interfaces), are often the fastest route to getting an ERP integration up and running. Point-to-point integrations, because they involve only two systems, can also be fast but often involve more hand-coding. ESB integrations require more time and resources to complete and, as a result, aren’t suited for urgent integrations.

What level of technical expertise is available in-house? Some degree of integration expertise is required for ERP integrations, although iPaaS solutions often provide more automated, low-code options. Both point-to-point and ESB integrations require IT expertise, with the latter requiring the most advanced skill set. As a result, companies without a large IT staff often seek third-party assistance with ESB solutions.

Will we need to scale with more integrations? Companies that expect to build additional ERP integrations might consider ESB and iPaaS integration solutions. iPaaS offers the most scalability, making additional integrations, especially in the cloud, quick and simple. ESB solutions, on the other hand, require more intense effort with each additional integration. Point-to-point integrations, because they involve integrations between only two systems, are the least scalable option.

ERP Integration Best Practices

With so much potential — and risk — it’s important to get ERP integrations right. Consider the following best practices before embarking on ERP integrations.

Assess Your Integration Needs

In an ERP integration, each system may have its own data format, structure and APIs. Assessing those factors prior to integration helps reduce the possibility of lost or duplicated data, which can lead to inaccurate reporting and insights.

Have a Plan

ERP integrations are both technologically complex and also often involve multiple stakeholders and departments. They require a detailed project plan that envisions the project team, scope, data maps, testing and maintenance. Such a plan helps bring all stakeholders together as a team and, during the execution phase, helps the team avoid delays, unexpected costs and data errors.

Clean Your Data

ERP systems can’t magically clean data as part of an integration. Integrating third-party software with an ERP requires companies to carefully extract and standardise data from each system. This means identifying data errors and inconsistencies, mapping data, checking accuracy against source data, adding missing data and converting to a standard format.

Focus on Data Security

As companies integrate third-party software with ERP systems, the risk of a security breach in any one system threatens the security of the others. Prior to ERP integrations, companies should perform security assessments on each application. Applying access controls to limit who can view data, as well as using strong encryption, can help minimise security risks.

Inform Your Team

Depending on the complexity, ERP integrations can result in significant changes in processes and workflows. Teams that aren’t prepared for these changes are more likely to resist them, leading to errors and productivity declines. Building a communication plan for integrations can help. It should include a clear understanding of benefits, roles and responsibilities, timelines and training. Be sure to solicit feedback throughout the process.

Save Time. Choose an All-in-One ERP Solution With NetSuite.

NetSuite ERP is a comprehensive solution for running a business that includes seamlessly integrated modules for finance, HR, manufacturing, logistics and supply chain, CRM and much more. But in addition to its prebuilt integrations, NetSuite also makes integrations with third-party software simpler with NetSuite SuiteCloud. SuiteCloud is a platform that helps companies extend the capability of NetSuite to other apps, customise user experiences and integrate with third-party systems. SuiteCloud includes APIs that make it easier to connect NetSuite ERP with third-party apps to build custom workflows, dashboards and reports that are tailored to a business’s specific needs.

Building successful ERP integrations is a bit like conducting a symphony. The individual instruments may sound beautiful, but the magic happens when they all come together in perfect balance and harmony. Each company may have its own unique circumstances, but successful ERP integrations follow similar paths. Companies that carefully assess needs, build strong teams and visions, communicate those visions widely and involve all stakeholders in the process ultimately have the best chance of creating a masterpiece.

ERP Integration FAQs

Why would an ERP system need integrations?

Enterprise resource planning (ERP) systems don’t necessarily need integrations to work, but integrations can extend the capabilities of ERP systems to other applications and vice versa. By melding data and processes using ERP integrations, companies can consolidate data in a single database, leading to more accurate information, smoother workflows and better decision-making.

How does system integration work?

Integrating systems involves several steps, including evaluating how the organisation will benefit from the integration, assessing data needs and security risks, building an integration plan, cleansing data and testing integrations. Companies often use technologies, such as middleware and integration platform-as-a-service (iPaaS) solutions, to enable and manage the connections between systems.

How can businesses integrate processes and workflows with ERP systems?

Integrating processes and workflows with ERP systems is different from migrating data. Companies should start by mapping out ideal processes and workflows and identifying existing bottlenecks and dependencies. Processes and workflows can then be automated using the ERP system’s features.

What does an ERP Integrator do?

ERP integrators are third-party businesses that help companies plan and manage ERP integrations, offering services to configure and customise integrations to meet business needs. They may also help with training and support.

What are the 3 approaches to ERP integration?

The three methods for ERP integrations include point-to-point integrations, which connect two systems without the use of middleware; enterprise service bus (ESB) integrations, which connect two or more systems using a centralised middleware application to enable and manage the integration(s); and integration platform-as-a-service (iPaaS) solutions, which provide cloud-based tools and services to enable and manage the integration(s).

What is an ERP system example?

An enterprise resource planning (ERP) system is a set of software for running a business. ERP systems often contain multiple modules that integrate data, workflows and processes across multiple departments within an organisation, such as finance, human resources, customer relationship management, manufacturing and supply chain management.

What is ERP and types of ERP?

Enterprise resource planning (ERP) systems help companies integrate core functions across their business, such as finance, human resources, customer relationship management, manufacturing and supply chain management. ERP systems automate companies’ processes and workflows. They also consolidate important information across core functions into a single database that provides teams across the company with clean, consistent data for better decision-making. Modern ERP systems are offered as cloud-based solutions, where users access the software hosted and maintained by a third-party provider. Older ERP systems are sold as on-premises solutions that companies host and maintain themselves.