Expense Management – Best-of-Breed or Best-of-Suite?
When you invest and implement new software and applications for your business, you’re probably also working through the classic consideration between two different strategies:
Best-of-Breed, which refers to a strategy of buying in software and applications based on a viewpoint that you want the best tools at your disposal to solve given tasks.
Best-of-Suite, which refers to a strategy about buying in software and applications based on a viewpoint that you want to consolidate most of your engagement with one vendor.
Best-of-Breed – pros and cons
If you pursue a Best-of-Breed strategy, you buy in to the idea that there are tools out there which, within a specific functional or niche area, deliver the most refined functionality along with an unparalleled user experience. In other words, the “Best-of-Breed system” terminology refers to “the best solution within a given category or niche area”.
When you choose the Best-of-Breed path, you’re probably focusing your technology stack around a finance system as a central hub and from there you’re connecting other systems and tools, which fulfills against business demands and requirements within different niches and process categories. In this way, it’s possible to get your hands on the tools that excel within their respective areas. Don’t underestimate the value of this.
The main advantages of Best-of-Breed is to one part a large degree of flexibility to choose the best solution and to another part independency between the tools. If one component goes down, the rest will still be working.
One of the disadvantages (or attention areas) with Best-of-Breed is that your technology stack can become extensive. This means that you should be alert around how you choose to tie it all together. If you’re unsuccessful in getting the data to flow efficiently between systems, then reporting, consolidation and enrichment will quickly become difficult to deal with. Apart from that, you’ll have multiple vendors and contracts to manage. Therefore, integration is a keyword if you go for a Best-of-Breed strategy. And the integration part can get complicated if you have a stack that’s made up of many different tools for just as many different processes. Fortunately, there are answers to this. Martin N. Brynnum from Bizbrains has got a few interesting angles on this in this blog post (sorry, it’s in Danish, but use Google Translate to capture the essence).
Best-of-Suite – pros and cons
If you head down the Best-of-Suite road, you buy in on the idea that a single engagement with one large supplier will deliver most benefits. A lot of ERP solutions offer, through add-on modules, extended functionality which accommodates other business processes. However, the reality is that almost no suite-based systems can fulfill all the requirements in your organization.
The advantages of going for a Best-of-Suite strategy is that you only need to relate to one supplier. Hence, it’s easier to manage the relation and the contracts. On the technical side, it can be easier to troubleshoot if something doesn’t work. Apart from this, you and your users will most likely work with a common user interface rather than switching between multiple interfaces. However, you need to be aware that this doesn’t necessarily gives the best user experience.
The disadvantages with Best-of-Suite is that you, in most cases, will have to compromise on features and functionality that comes with add-on modules to the ERP system. In addition, there are also risks related to consolidating your engagement with a single supplier. If something breaks down, it can impact a lot of users. You will also sacrifice flexibility, as Best-of-Suite solutions often are very rigid.
Which strategy should you follow within the expense management area?
Within our field of expertise (or niche area), travel and expense management, we often see that ERP or salary systems suppliers offer add-on modules with functionality to handle employee expenses. Sometimes this is even offered free of charge. The phrase “free of charge” can often seem captivating, especially if you already pay for a Best-of-Breed tool within the given area. It is, however, important that you remember to assess the hidden costs that will fly under the radar, if you choose a free (or almost free) tool with limited functionality. Price is typically one parameter that the ERP or salary supplier play on, and a tight and simple integration is often the other parameter.
When you’re assessing the real TCO, hidden costs and long-term benefits included, it often becomes somewhat blurry which benefits a Best-of-Suite approach on the expense management area brings. ERP and salary system suppliers have their primary focus on their core product and in terms of a travel and expense module, you won’t see innovation capabilities on the same level as what you’ll find with a Best-of-Breed developer. You’ll experience that features like foreign VAT reclaim, policy compliance, robotics and artificial intelligence capabilities, advanced approval flows, complex allocation options, dimension splits etc. isn’t supported by an ERP or salary system module. Apart from that, access to new features will often follow 6- or 12-month release cycles, whereas Best-of-Breed suppliers operates with far more frequent releases. This will provide much quicker access to new features for the customers.
The direct costs associated with acquiring an add-on module for your ERP or salary system might, as mentioned, seem low. However, we’ve pointed out that in most cases, such a module will not provide the same level of automation and functionality compared to a specialized piece of software. This implies that costs (related to process time) cannot be reduced to the extent that’s possible with a Best-of-Breed solution. Also, functionality related to analytics and controlling, if present at all, most likely won’t be able to provide enough insight to the spend patterns of an organization. This limits the opportunities to both optimize and detect fraudulent behavior within the area.
Within our area we’re also seeing that credit card suppliers are beginning to offer add-ons, in the shape of applications with functionality to manage and approve employee expenses. This is comparable with Best-of-Suite, as described above, and it’s probably the credit card supplier that will see most benefit from this by locking you in tighter. If you, at some point in time, want to change payment cards, then you’ll suddenly also have the hassle of changing expense system. Ask yourself whether that’s desirable? Instead, do yourself a favor and look for credit card suppliers, that work close together with independent Best-of-Breed vendors.
In the end it’s of course all about the requirements of your organization related to process of managing travel expenses. As an example, we have customers that require the ability to attribute expenses to more than 30.000 dimensions across their customers, cases and projects. You won’t find an ERP or salary system add-on that can handle this. Also, neither an app from a credit card provider that can. There are, of course, organizations with very basic requirements related to expense management. They can probably do fine with an add-on module to their ERP or salary system. When you’re doing the assessment, however, you’ll always need to bear in mind that requirements in your business is a subject to constant development and changes. That’s why it will pay off, if you put on the full-beam headlight when you consider Best-of-Breed versus Best-of-Suite.