What happens after your customers place orders online? Good things? All the time?
Let’s get a bit more specific. Are you ever running into post web order submission issues like late shipments, cancellations due to out-of-stock inventory, or returns due to product fulfillment errors?
Online sales channels offer the opportunity for increased revenue, but they also present major challenges. Customers expect a personalized experience and smooth provisioning of their orders.
- Delays in data exchange between your systems can keep purchased products in your warehouse when they should be out the door and on their way.
- A miskeyed manual order transfer might leave a customer wondering why they received an item other than what they paid for.
- Stock count discrepancies between systems can saddle you with the uncomfortable task of informing your customer of a cancelled order.
The devil is in the details, and recent research has shown that reducing customer defection rates by just 5% can lead to a 25% to 125% increase in profitability. (Leading on the Edge of Chaos, Emmett Murphy and Mark Murphy)
Dean Pagliaro is the Web Practice Director at Net@Work. Dean has spent the last 7 years helping online sellers ensure their ERP and e-commerce systems are integrated sufficiently to meet rising customer expectations. Net@Work is a technology consultancy and one of the largest Sage ISV’s in the country. They also are integrators of Magento, NetSuite, and many other well-regarded business software systems.
I spoke with Dean recently and he had a ton of great information to share about e-commerce and ERP integration best practices. Here’s a rundown of the topics we touched on:
- Best-of-breed e-commerce vs. ERP with embedded e-commerce
- Customer portal vs shopping cart integration
- Implications of open source
- Enabling e-commerce integration via middleware
- Real-time vs manual/batch integration
- Integration benefits by business department
- Integrating with other business software systems
- e-commerce API comprehensiveness
- Bringing website analytics into BI reporting applications
- Payment gateway integration
- Recapping the choices available to businesses
Are you seeing increased customer demand for strong integration between ERP and e-commerce platforms?
Yes, we’re constantly talking to our customers about their integration needs. In fact, there’s a long-standing debate about what’s best: multiple best-of-breed systems integrated with one another or a single ERP solution with embedded e-commerce.
Let’s talk about integrating an ERP program with a best-of-breed e-commerce system. For instance, here at Net@Work we use an e-commerce system called Magento.
The #1 advantage of using a separate e-commerce solution, is that it basically allows the best software solution to be selected for a particular set of problems, goals, and audiences. This is critically important because the choice of e-commerce platform will have a dramatic impact on a company’s online revenue stream.
So, by selecting a best-of-breed system—one that’s designed specifically for e-commerce—you’re getting 3 major advantages.
One, you’re getting the most cutting edge features and functionality required for online marketing, promotions, customer engagement, interactivity, and so on. And, these features and functionality are updated regularly by the publisher. Our experience with Magento is that they upgrade their Community Edition software every few months and they upgrade their Enterprise Edition software once or twice a year.
Two, you’re talking about flexibility in terms of customization. So, if you have your own e-commerce platform that you own and control, you can deploy rapid updates related to your business, industry changes, or online marketing goals.
Third, a standalone e-commerce platform allows for scalability. If you’re a small business and want to grow to a mid-sized company or if you’re mid-market and want to grow to enterprise, it allows for the scalability to go from, say, a $3M online company to a $200M online company—which is something one of our clients did.
These benefits are obviously important for B2C websites—rich feature sets, online marketing capabilities, promotions, and, one of the things you’ll be hearing more about these days, omni-channel capabilities to support online marketplaces like Amazon and eBay so you can open up new channels for the business.
What are the benefits of a full ERP with an embedded e-commerce platform?
Let me explain that first, before we make any recommendations regarding which ERP or e-commerce software to select, you really have to look at the current business operational requirements, as well as the long-term sales and marketing goals, as it relates to the growth strategy for the online channel.
The first type of solution is a customer portal. The second type is a shopping cart. And, the third type is a shopping cart and a customer portal.
In general the goal of a customer portal is to create an online experience for an existing B2B customer—or new B2B customers who are signing up. Customer portals allow for full transparency into an ERP solution in regards to things like customer information, ship-to addresses, order histories, invoices, credits, and so on. Generally, in addition to providing the viewing capability, they are oriented toward having a quick order system, so that instead of browsing and kind of exploring like on a B2C website, B2B customers can quickly find what they are looking for and add it to the cart and check out. These type of portals are generally for existing customers who know what they want and are likely to repeat past orders. They tend to be oriented toward regular customers. It’s very beneficial to sellers because it offloads a lot of the time associated with processing orders that might instead come in via phone, fax, or email.
A customer portal is generally the most advanced type of integration when it comes to integrating with ERP software. It requires the most touchpoints with an ERP system, so we’re talking about sales, catalog, inventory, pricing, status updates, credits, and returns. The level of integration is the most sophisticated because not only does it need to come from the website to the ERP system, it also needs to go from the ERP system to the website—so the integration is bi-directional.
The second type of e-commerce solution is a shopping cart. Shopping carts are designed and marketed primarily for B2C sales. They’re really custom from a user experience standpoint. They have a lot of whiz-bang functionality—which looks great and generally allows a customer to add items to their shopping cart, explore more product options over a longer period of time, and they tend to be less complex from an integration standpoint. The reason why is they normally just need to push information from the web to the ERP system. That information usually includes sales orders, customer information, and status updates in terms of touchpoints. Now, the sales orders tend to be pushed from the web to the ERP—the customer information as well. Inventory information and status updates (such as the order being shipped) are pushed from the ERP to the web. Overall, the level of integration is much less.
The third type of e-commerce solution is one that combines a B2B customer portal and more of a B2C shopping cart. In this scenario, we’re facilitating all of the touchpoints that I discussed previously and all the processes related to B2B are also being facilitated. So, this is the most powerful e-commerce set-up, with the highest number of integrations. A combined customer portal and shopping cart is the most complex because not only does it need to be sexy and look extremely good, but it needs to be highly custom in terms of features, functionality, and processes. It also needs to integrate with the ERP seamlessly.
With all of that context in mind, for clients that require an on-premise solution as opposed to cloud, we really only recommend an ERP package with native e-commerce functionality embedded, if and only if, the online e-commerce site is focused on B2B and the solution doesn’t require much in the way of design, feature, or process customization. The reason this has been the case is that most ERP embedded e-commerce modules are focused on B2B, rather than B2C. Also, they are extremely difficult to customize. With that in mind, some things have changed. Now that we have cloud ERP systems like NetSuite, we’re able to actually recommend an ERP solution that has embedded e-commerce that has both a strong B2B customer portal and a strong B2C shopping cart, with the ability to be highly customized. So, that’s the major thing that has changed: the rise of cloud ERP solutions with embedded e-commerce.
You mentioned the importance of flexibility with e-commerce customization. Is Magento an open-source platform?
Magento actually comes in two flavors. It has a free community edition which is extremely popular and widely implemented. It’s the number one platform in the world today. It has about 32-33% market share of e-commerce sites. Then there is also the commercial version which is called Magento Enterprise Edition. I believe that that starts at $17,000 nowadays.
Technically, they are both open-source. The code is available and not encrypted and they accept feature commits from 3rd parties. It’s just that the Enterprise Edition does have the cost associated with it.
Is the primary reason for the flexibility advantage of best-of-breed solutions over ERP solutions with embedded e-commerce related to the closed nature of the code base in most ERP packages?
Right, so, if we’re not able to edit the code, that’s a critical limitation because we’re not able to develop on it. That becomes a critical choke point in terms of being able to make customization in a timely manner. It’s technically possible to go back to the publisher and make requests for features to be added, those requests are optional for the publisher to address and if they are implemented at all, it takes a great deal of time to get them turned around. In terms of how fast e-commerce is today with the need to make changes to respond to market changes, you generally want something that you can adapt and evolve at will.
It sounds like in the majority of cases you’d be looking to pair a best of breed e-commerce solution integrated with a separate ERP.
Yes, that is almost always what we do. We’ve developed a middleware program called ConnectPoint, which allows us to connect ERP systems with a standalone e-commerce system—as well as other software systems.
You can think about ConnectPoint as a wheel, where each spoke in the wheel is connecting to a different system. We have the capability with ConnectPoint to integrate an ERP system with a website—and vice-versa—and/or we can also connect with channels like Amazon or eBay. So, ConnectPoint allows us to have a hub of sorts from a technology perspective for a client. A lot of our larger clients, for instance, have multiple systems that all need to talk to each other. Instead of creating point-to-point integrations, these clients are able to literally integrate with one application. This is very useful because things change with technology over time. One day, a client may want Magento, another day they may want Hybris or Demandware. When that changes happens—if it happens at all—you don’t want all of the other integrations, reports, and processes that you’ve built out over the years to have to be recreated from scratch. The way we envision it is that you can replace any spoke on the hub when you need it from an organizational perspective. The idea is to allow for two things: extensibility—the ability to add and remove systems, and scalability—the ability to have a platform that can facilitate all the transactional needs for the next decade or more.
One of the other distinguishing factors of ConnectPoint is that it was designed for enterprise clients, so it is extremely powerful and robust and is very focused on performance. So, some of the clients that use ConnectPoint on a given day during a holiday may be selling $10-$20M of items online and all that data needs to be pushed to the ERP system. A company like this needs to ensure that their integration between their ERP and e-commerce solution doesn’t go down. We literally built ConnectPoint so that it can do billions of transactions at any given time, for dozens if not hundreds of clients simultaneously. While we designed it to be more of a cloud solution for ourselves, what we’ve ended up doing is actually deploying it for clients as a connector so they can use it as they need it.
What type of business issues do you see when companies require real-time integration but don’t have it?
There are several key business or operational issues that companies without real-time integration between systems will often mention.
One of the issues is inaccurate inventory. A lack of real-time integration can lead to inaccurate inventory data being displayed online. When this occurs, customers end up placing orders for items that are not in stock, which can lead to cancelled orders. That was a challenge we saw facing one of our clients. The customers for that client became very frustrated and essentially it was an issue that clogged up their customer service. These are issues that often result in lost customers, when a customer gets frustrated and goes to another competitor. Even if they remain as a customer though, there can be negative consequences. They may shop less frequently on the site or they may purchase a smaller amount of items. There are some extreme cases where this happens, but generally it’s just something to be mindful of.
Another challenging situation without real-time integration is when there are growing order volumes. The turnaround time it takes to import orders from the web to ERP system tends to be a bottleneck and tends to be error-prone. Sometimes info may even need to be rekeyed. This opens the possibility for errors which can lead to fulfillment issues like delayed shipments and so forth—and these things hurt customer satisfaction, which may then have a net impact on sales for the site.
Another issue when real-time integration is missing is increased operational cost and decreased efficiency. Without automated integration, there’s generally some manual process. It could be triggered by someone in the IT department or some kind of script. We have clients who still do this and basically the problem is that it’s not scalable. When that developer leaves, what is the client going to do? A lot of our clients in this area are growing tremendously year-to-year, so what tends to happen is they have to add more labor for this work to mitigate the errors that are inherent in manual transfers. From a business perspective, this hurts the bottom line because you are adding resources and operational costs to process this growth. It cuts directly into margins and profitability. So that alone tends to be one of the reasons why customers justify the investment for an automated integration.
Now, obviously, there’s a bunch of other things. Data errors are an example. Manual errors are costly. In many cases, I’ve seen data transfers with the wrong fields—so mapping issues are common. I’ve seen the data not translated correctly, where the format from one system to another is not the same, which then causes issues. Generally, it’s just a repetitive task, so it doesn’t make sense for a human to do it. People aren’t designed for repetitive tasks that a machine can do better.
Another problem is the creation of information silos. Nowadays, people need timely, complete, and accurate information in their ERP system. It’s critically important to a business. Without a complete data set being synced, businesses don’t have the right analytics for reporting in their system of reference to make sound business decisions. Manual integration tends to be partial integration. Most companies tend to just bring over what is minimally required to complete a certain process. But there’s a slew of other information that is missing or never passed to the ERP system that could be critically important to different divisions of the company.
So, these are a number of the issues, but there are actually many more. But I think those are at least the highlights. With automated integration, most businesses will be able to improve turnaround time, effort, and expense related to order fulfillment which then leads to fewer missed shipments, returns, and cancellations—which is, at the end of the day, what a business should seek to achieve for their customers.
Manual vs. real-time e-commerce and ERP integration
|Integration attribute||Manual integration||Real-time integration|
|Comprehensiveness||Tends to be partial integration||Bi-directional exchange of all relevant data|
|Timeliness||Data not always consistent, due to syncing delays||Up-to-the-second data synchronization between systems|
|Accuracy||Involves opportunities for manual data errors||Automatic integration prevents manual data entry errors|
Are there specific improvements that tend to be responsible for the majority of cost improvements?
What I would say is that there are different important benefits that are relevant to explain for each role within a company. If you’re speaking to a CEO or president, they’ll be more interested in reducing labor costs, reducing errors, and increasing profitability for the business as a whole. If you’re talking to an IT director, they’re responsible for manual process and removing the requirement for the grunt work associated with manual integration is appealing. If you’re talking to the marketing director then late shipments, returns, and customer shipments are generally what they want to discuss.
What happens if a client wants to integrate with a system that isn’t yet supported by ConnectPoint?
Since we’ve been Sage focused as an ERP provider and work primarily with Magento, the majority of integrations that ConnectPoint supports are in that area. But as we have new requests coming up, we generally facilitate them by adding new connections to ConnectPoint.
For instance, we have a client that needed integration with a custom, kind of ERP system that uses FileMaker. It works fairly well. It’s functional, if not totally scalable. What we did for them was we extended ConnectPoint for them. They were already using it for a connection with Magento. We designed a new integration for them. It was actually a two part integration. When you’re dealing with systems that aren’t web services capable or don’t have APIs, you have to then get creative in terms of how you are implementing them. You’ll see this with a lot of older systems. So with FileMaker it didn’t have web services or API capability. So what we did was we developed an automated import/export of almost data to and from. It basically created a staging table on their ERP server. Instead of directly integrating ConnectPoint with FileMaker, we integrated with a staging database on their file server. This allowed us to get access to that information and send data back and forth.
We have another client who wants to integrate a new POS system. We didn’t have integration natively set up already. What we did is we talked to the POS company and we’re developing out the integration in collaboration with that POS company. They’re actually building out an integration to our ConnectPoint hub and we’re facilitating and assisting them in terms of what web services and what format they need.
Are you finding that clients are interested in integrating their CRM software or other types of core business systems?
Well, the CRM side is not my space specifically. But we do have a dedicated team that handles our CRM integration work. I know they are doing quite a bit of work with integration between the CRM products and the other Sage ERP products. So that’s generally what has been occurring for our existing client base.
When I’ve encountered folks that are on other existing CRM systems such as SalesForce, we have done direct integration with them in the past between the website and the CRM software where there wasn’t intermediate software like ConnectPoint. The integration tends to be pretty basic. It’s mainly pushing leads and customer information to and from. So, it’s nothing too advanced from an e-commerce perspective. It’s more about capturing the information in a form and pushing it to the CRM software.
Are the web services and APIs in most e-commerce platforms sophisticated enough to bring over all of the transactional information that you’d want to transfer?
It depends on the system of course, but the answer is usually “yes.” In terms of the e-commerce systems that we work with, they have made major advances in terms of the comprehensiveness of the APIs. The only thing to note is that there is sometimes a level of customization that is more complex. The reason for this is usually that the business model is more unique in terms of workflows and requirements from a process standpoint that need to be baked into the logic of the integration. So it’s not necessarily about the touchpoints or the data passing back and forth, it’s more about how the data is flowing and what the workflow is for most activities.
That being said, we’ve designed ConnectPoint to work with the three types of integration. If we’re working with an older program that isn’t web services capable or doesn’t have an API—such as the FileMaker example I mentioned—we can do file based integration or direct database integrations. Our goal was able to make ConnectPoint support 99% of the possible integrations that could exist. To do that we made sure that it was able to support file integration, database integration, and web services integration.
Have you had customers express interest in pulling website analytics data into business intelligence programs in order to combine it with financial KPIs to assist with making business decisions?
It’s definitely technically possible and that type of request has become a lot more common in the last number of years—especially for enterprise size clients with advanced e-commerce systems and marketing needs. There are two important things to discuss in regards to this topic.
What we generally do is try to use ConnectPoint as the system that actually generates the reporting. In some cases, what we’ve done is pulled the relevant information from the e-commerce system and the ERP system and generated the report from the middleware directly—because it is pulling data from both systems. The reason we’ve done that is because the ERP system is generally not designed to adequately contain the additional data from the e-commerce program. Also, the ERP system usually won’t provide the ability to adequately visualize the data that’s been pulled from the website.
In other cases, we pass more information from the ERP system and from the e-commerce system to a business intelligence program that the client has installed natively. The BI program then is customized to pull the reports.
What happens is we usually push the information into the database directly, rather than creating an interface directly to the ERP system. What happens is the BI system will just basically query the database in order to generate the required report.
The third type of scenario is where we work with more of a 3rd party service. There are some websites out there that are actually an analytics platform by themselves. So they can integrate with any system. Just like ConnectPoint has the capability to integrate with any system, they can do the same thing as well via pre-built connectors, a database integration, or API integration. What they end up doing is creating a data warehouse that hosts all the relevant data to support the reporting.
If I’m understanding correctly, ConnectPoint also has some BI reporting capabilities. Is this correct?
That is correct. Because we wanted to create a redundant, robust system, we designed it to store the vast majority of the data that passes through it. We’re able to actually archive data. By having that data, we’ve been able to bridge the gap between both systems from a reporting standpoint. One of the features we’ve developed is the ability to generate reporting on that data. Additionally, we also have various dashboards that communicate to a customer or client the health of the e-commerce system and if it is noticing an issue with the e-commerce system.
So for instance in the holiday season, while ConnectPoint has been able to withstand the performance requirements necessary for all the transactional data, sometimes the e-commerce has not. We found it useful to our customers to give them metrics in real-time on how their website is performing. When the e-commerce website gets to a point where it has technical issues based on attempting to process too much info too fast and the amount of data is overwhelming the database, we’ll be able to have a red-flag. The reason we built this into ConnectPoint is that you want to have an outside monitor that’s not being affected, so you can see if there is any downtime or other performance issues.
What’s the next evolution in terms of feature improvements that will facilitate better e-commerce and ERP integration?
Well, what I would point out is that the one area related to financial management we’ve come across time and time again, is when an e-commerce site uses a payment gateway that is not supported by the ERP software. That’s where we tend to run into issues—especially for B2B companies that are doing credit cards on file or vaulting for their wholesalers. We try to make sure that the client uses the same payment gateway, Sage Payment Solutions for example, on both the ERP and e-commerce systems. This way the integration is seamless and the tokens related to the payment can be passed back and forth to ping or charge the credit card on file.
In cases where it hasn’t been possible to use the same payment gateway on both systems, we’ve done the reverse. In one case where a client was using a payment gateway on their website that wasn’t supported in the ERP system, we had our ERP team develop a custom integration to that payment gateway to facilitate the B2B, credit card on-file transactions. That is the one area I can think of that we run into frequently. And, by frequently, I mean a few times a year.
Thanks so much for your time and all of the information you’ve shared, Dean. Are there any other integration topics I haven’t asked about that you’d like to hit on before we wrap up?
I think we’ve hit on the most important things that folks considering ERP and e-commerce integration need to know. I do think the debate about best-of-breed needs to be answered. Nowadays we have a lot of options. We can go with best-of-breed systems and integrate them with ERP software in a robust way. Or we can go with cloud ERP systems like NetSuite that support e-commerce functionality natively. There’s a lot of options for business decision makers. Part of our role is to help guide them through this process to make sound business decisions based on the technical requirements that they have. That way at the end of the day, what they’re actually selecting makes sense short-term and long-term.
For more great insights on e-commerce and ERP software, make sure to follow Net@Work on Twitter.