Monday, 22 October 2012

Can Accounting Systems be TOO Integrated?


Systems like SAP, Oracle Financials and PeopleSoft attempt to integrate all aspects of a business, regardless of the number of countries, industries, product lines they operate in.  They address all areas of the business, from accounting, to manufacturing, to planning, to human resources, to management.  There is no question that large corporations have benefited from this integration, but is it possible that we’ve gone too far?

The larger the computer system, the higher the cost of change.  For example, one of my clients was an international oil company which wanted to experiment with a new subsidiary.  The company found it cost effective to do a whole installation of Microsoft Dynamics (and throw it away when the experiment proved to be a success) than to integrate the new subsidiary into their main system right away.

But, more importantly, large systems become increasingly complex, reducing their ability to adapt to change.  I don’t have an inside track, but I have noticed that my telephone company’s billing system seems to be unable to keep up with changes in cellphone services and fees.  In any competitive industry, even large companies need to be nimble and respond to changes in the marketplace quickly.

Finally, there is the “best of breed” problem.  You may have the biggest, most integrated system, but there are other systems that handle specific functions better.  You then are faced with the choice of the one-vendor-solution versus assembling a system from the best of breeds by several vendors.  So, you get your basic General Ledger, Accounts Payable, Banking and Accounts Receivable from one vendor, your Point-of-Sale system from another and your document imaging from a third.

A good example of this type of thinking was a client who wanted to connect his ordering system to his web site.  Both systems claimed to be able to handle the sales tax, but in testing, the engine in the accounting system proved to be more robust than the web site.  The client decided to process the order in the web site, but have it pass the information to the accounting engine to calculate the taxes and send the result back to the web site.  The result was a better system with no tax discrepancies.


8 comments:

cameron said...

integration is key to getting an overall picture of your business, but they as you rightly say - do not coer all the needs nor arre they ablet change to the dynamics of the business easly or quickly.

you need to kno what you are trying to achieve or what the business actually needs rather than just integrating.

DigiClayInfotech said...

One of the large-scale advantages of accounting software is that they can do computed results mechanically, so they are less prone to fraud and cheating.
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Jack said...

It's certainly an interesting conundrum, integration of accounting has saved so much time and many resource expenses for businesses, yet as you point out the trade off is loss of flexibility. It seems to be the norm of the modern condition, it is so often cheaper to buy something new and use it as a disposable item than fix something old.

Rakesh said...

Wow, never thought about this side of integration. Working with medium sized clients, this was never an issue but now that you've explained it, I think there is a lot of truth there.

As you rightly pointed out, managing change becomes very difficult... and as we all know, changes are happening quite rapidly all around us.

Rakesh said...

Wow, never thought about this side of integration. Working with medium sized clients, this was never an issue but now that you've explained it, I think there is a lot of truth there.

As you rightly pointed out, managing change becomes very difficult... and as we all know, changes are happening quite rapidly all around us.

buhalterine apskaita said...

Almost all information wasn't new for me, but the fact, that the larger the computer system is, the higher is the cost of change - was new for me ant I liked the way it was argued :) I was glad to read something new :)

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