The Advantages and Disadvantages of Single Source vs. Best-of-Breed

In larger ERP engagements in the Dynamics world, a prospective client will typically have many ERP vendors to choose from. Some vendors only quote their own products as part of a Single Source solution, or they quote some of their own products and use the best 3rd party products to complete an integrated Best-of-Breed solution.

So which approach is better? Or, stated more objectively, under what conditions is one approach more successful than another?

Single Source

The fact of life in the ERP marketplace is that no one vendor can cover all the functional scenarios of every customer. The breadth and depth of ERP customer requirements makes this expectation an “improbable dream.” Throw in specific industry verticalization and you have an even more unrealistic expectation. So why then do Single Source solutions still work in the marketplace? Ironically, it works for some of these already stated reasons. Simpler ERP solutions, where complexity is low, can be handled by most vendors. When complexity is high and enterprise ERP solutions are in play, a high enough budget may enable a vendor to customize a solution for these complex needs. So we see that Single Source selection can work in extreme situations, both large and small. If a vendor then has a particular vertical they are strong in, the Single Source becomes an even more desirable choice.

Single Source vendors, apart from their areas of strength highlighted above, have other cards to play to their advantage. Many still argue that the Single Source solution is superior to the Best-of-Breed solution. This argument is usually based on the belief that Best-of-Breed solutions may not integrate well and third-party vendors are less likely to become involved should a problem arise. Twenty years ago this argument could have had some merit. But in today’s evolved marketplace with easy-to-deploy integration tools and strategic relationships being the lifeblood of all Best of-Breed integrations, these objections are now outdated. Accordingly, Single Source vendors must now prove to customers that they have the best functional solution versus differentiating their solutions over Best-of-Breed solutions using risk and fear tactics.

The weakness of most Single Source vendors is that they can’t be everything to everyone. They have limited development resources and can’t be the “feature” leaders in every area they cover or maintain expertise in every vertical area. A perfect example is in hospital healthcare; many vendors go to market with vertical as well as base ERP modules, yet they are usually weaker in the base ERP functions of General Ledger, Accounts Payable, Bank Reconciliations, etc. Additionally, with the financial pressures in healthcare multiplying daily, more robust ERP backbones are needed in most healthcare settings.

Best-of-Breed

Best-of-Breed is the approach of the Microsoft Dynamics channel. Providing customers with options for offering the best feature sets from an array of solutions and letting them decide.

So where does Best-of-Breed work best? It works best for customers who need optimized performance in areas due to complex, financial or competitive marketplace needs. Using the hospital healthcare scenario above, healthcare providers that require tight integration and Best-of-Breed functionality between Accounts Payable and Purchasing cannot live with functionality that is not bleeding edge. In this scenario, not working with a Best-of-Breed solution suite could result in losing thousands of dollars of discounts. Progressive IT departments where system change is not feared or considered as risk averse is another essential success factor in implementing Best-of-Breed solutions.

Best-of-Breed vendors, therefore, argue that Single Source vendors will always be at least a step behind them in functionality and that these customers may have to wait years for said functionality if they see it at all. The financial implications are then centered on opportunity cost – what is the opportunity cost of not having this functionality now versus in the future? Quantification of opportunity cost can sometimes be a compelling argument.

In conclusion, both approaches have strong cases to present. Depending on the customer’s situation, one approach may be preferential over another. It really comes down to working with your customer and carefully and thoroughly analyze their needs. There is no ‘one-size-fits-all’ solution in the ERP world!