What is the connection between business intelligence and ERP?

Since its conception in 1997, Business Intelligence (BI) has been compared to a number of analytical tools, from spreadsheets, to Customer Relationship Management (CRM) tools to Enterprise Resource Planning (ERP) software. For some analytical tools, BI wins by a mile – yes we're specifically talking about spreadsheets. For others, there is no clear winner.

In this blog, we’d like to discuss ERP and the connection with BI  to help you determine what works for your business.

What is Enterprise Resource Planning (ERP)?

Every department within an organisation typically has its own computer system, optimised to suit the way that department operates.  ERP essentially combines these multiple systems into a single, integrated software program that runs off a single database. Of course, the one integrated software is then divided into software modules that are replicas of their older standalone counterparts.

Gartner states, “ERP tools share a common process and data model, covering broad and deep operational end-to-end processes such as those found in finance, HR, distribution, manufacturing, service and the supply chain”.

What are the key differences between BI and ERP?

Strategic-level vs. operational-level analytics

BI tools are typically leveraged by analysts for high level discussions which involve strategic decisions. A BI tool accesses all of the data in your data warehouse, both strategic and (financial; revenue, profit and growth), and operational (daily sales performance). BI tools enable you to conduct in-depth analyses to generate comprehensive information that can deliver high-level insights. Essentially, BI is a step towards a companywide view of information.

ERP, on the other hand, is an operational system chock full of operational and transactional data. It will give you an exact view of your business from an operational perspective, but it is not built to perform trend analyses or give you high-level overviews. It is a tool centred around delivering operational insights.

OLAP vs. OLTP system

BI is built as an Online Analytical Processing system (OLAP), to provide robust analytical capabilities, such as high-speed access to reports, dashboard management and the development of balanced scorecards. BI also comes with advanced analytical features that allow you to view data from different sources on one page, and in the format or perspective you need.

ERP, on the other hand, is an Online Transaction Processing system (OLTP), used to record transactions as and when they take place. The data architecture of ERP software is designed to provide high-speed transaction recording, while keeping data space utilization at a minimum.

Agility vs. efficiency

Over the past years, there has been a shift of focus in BI - organizations are moving from historical reporting to forecasting and forward planning. Through these future-centric capabilities, BI can make organizations become more agile, allowing them to make strategic-level decisions that take advantage of future conditions.

ERP software, on the other hand, is built to deliver efficiencies to an organization. These efficiencies come in many forms: better interdepartmental communication, IT cost savings and business process efficiencies. Both Gartner and CIO.com believe that proper ERP implementation can improve an organisation’s overall performance.

What does this mean for you?

Before you begin choosing tools, first determine your organisation’s objectives. Once you know what you are trying to achieve, you can identify the right approach to help you achieve it.

If you have an in-depth understanding of your operational performance, then look at BI to obtain strategic level insights into your performance. While if you need a better understanding of your operational performance and need to make operational improvements, ERP is the tool you need.

Ultimately, both tools are geared towards business improvement and can deliver significant results.

To learn more ERP systems and BI, download your eBook: ERP + Business Intelligence = results