ERP vs. Best-of-Breed: Finding the Right Balance for Today’s CFO

When enterprise resource planning (ERP) systems first gained mass market adoption, they were envisioned as the all-encompassing solution for large companies. The original promise was simple yet powerful: a singular system that could handle nearly every business process. Whether it was accounts receivable and accounts payable, payroll, human resource management, customer relationship management, budgeting, planning, financial reporting, supply chain management, or manufacturing, the ERP was designed to do it all. Companies gravitated toward this vision of integration, centralization, and efficiency.

However, the tech industry had other ideas, and over the years, we’ve seen a steady trend of fragmenting what the ERP was meant to unify. Rather than relying on a single ERP system to perform all these functions, businesses today are increasingly adopting specialized systems for specific processes. CIOs and CFOs are leading the charge in building an enterprise architecture made up of multiple business applications rather than sticking to a monolithic ERP. Now, we have dedicated human capital management (HCM) systems for HR, customer relationship management (CRM) platforms, corporate performance management (CPM) tools for budgeting and forecasting, separate solutions for expense management, travel management, and e-commerce—the list goes on.

This raises a key question for today’s CFO: Is this fragmentation a step forward or a step back? On the one hand, these "best of breed" systems offer agility, specialization, and deeper functionality than an all-in-one ERP system can provide. By focusing on specific business areas, these applications are often more dynamic, keeping pace with rapidly evolving technology and business needs. For example, a dedicated CRM might offer more advanced customer segmentation or predictive analytics than an ERP’s built-in CRM module. Similarly, a corporate performance management tool may provide more nuanced forecasting capabilities than an ERP could.

For CFOs, this offers flexibility. They can choose the best software for each function, tailoring their enterprise architecture to meet the specific needs of their business. The ability to pick and choose means that companies are not locked into a single vendor’s ecosystem. This can reduce reliance on a singular system that may not evolve quickly enough to stay competitive or align with the company’s growth trajectory.

However, the downside of this approach is becoming more apparent. With so many specialized systems in play, data fragmentation has become a significant problem. As companies implement more and more tools across different departments, data ends up siloed in multiple systems. The once unified ERP, which served as the central repository of business data, is now replaced by a patchwork of applications that don’t always communicate well with each other.

This has led to an explosion in demand for data management platforms, with companies like Databricks and Snowflake emerging as key players in solving the integration challenge. These platforms offer ways to consolidate and analyze data from disparate systems, but it’s not always a seamless process. The more systems in play, the greater the complexity in maintaining data integrity, ensuring consistent reporting, and making sure that insights from one part of the business align with the rest.

So, what is the right answer for today’s CFO? Is it better to keep more in the ERP, or deploy dozens of dedicated systems? The answer may lie somewhere in between. For certain core processes, it may make sense to stick with the ERP. Financial management, supply chain operations, and core HR processes are areas where the integration and stability of an ERP can still shine. These are foundational processes that rely on having a single source of truth, and the risks of data fragmentation or process inefficiency may outweigh the benefits of using specialized tools.

However, for other areas—especially those that are customer-facing or highly dynamic—CFOs may find that specialized systems are the way to go. Sales and marketing teams may benefit from a cutting-edge CRM, while finance and operations teams might prefer a corporate performance management tool that offers superior forecasting capabilities. The key is finding a balance that allows for flexibility without creating so much complexity that it becomes unmanageable.

Ultimately, the decision comes down to the specific needs and goals of the company. Some businesses may prioritize the deep functionality that comes from using best-of-breed applications, while others may value the simplicity and centralized control that an ERP provides. As the technology landscape continues to evolve, it’s likely that the most successful companies will find ways to blend both approaches—maintaining the ERP as a core system while layering in specialized tools where it makes sense. The challenge will be ensuring that data remains integrated and actionable, no matter how many systems are in place.