Business Intelligence versus Enterprise Resource Planning. Which tool is better?

Since its conception in 1997, Business Intelligence (BI) has long been compared to a number of analytical tools; from spreadsheets, to Customer Relationship Management (CRM) systems to Enterprise Resource Planning (ERP) software.

For some analytical tools, BI tools win by a mile – yes we're specifically talking about spreadsheets. For others, there’s no clear winner. Some ERP systems already have built in business intelligence tools such as standard dashboards for tracking key performance indicators (KPIs) and metrics so it’s easy to think that your business has already ‘got’ a BI solution. But this isn’t the case, as although they’re connected, ERP and BI tools serve very different purposes.

In this blog, we discuss the key differences between ERP and BI software to help you determine where you might have gaps in your business’ current reporting and analytics capabilities.

But first, let’s get a better understanding of each of them.

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 (and the business data stored within them) into a single, integrated software program that runs off a centralized 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."

It continues “ERP applications automate and support a range of administrative and operational business processes across multiple industries, including line of business, customer-facing, administrative and the asset management aspects of an enterprise.”

Examples of different ERP software providers include Epicor, Infor, Kerridge Commercial Systems, Sage and SAP.

ERP systems such as these don’t just help your business manage financials, inventory, customers and other key factors — they’re also a wellspring of data. There are a wealth of insights in your cloud ERP data that could be used to make more timely and informed decisions, address new opportunities and improve your operations over time.

Examples of how an ERP system might be used in a business

Integrated financial management

Use case: A builders’ merchant uses an ERP system to manage accounting, budgeting and financial reporting

Benefit: Streamlined financial processes across different departments and branches, ensuring consistency and financial compliance

Supply chain management

Use case: A food and beverage wholesaler uses an ERP system to manage its inventory, procurement and supplier relationships

Benefit: Improved coordination and visibility across the supply chain, leading to better inventory management and reduced lead times

Human resources management

Use case: A large organization uses an ERP system to manage payroll, employee records and recruitment processes

Benefit: Centralized HR data helps in efficient management of employee information and payroll processing, ensuring compliance with labor laws

However, the in-built business intelligence tools within ERPs are often difficult to customize to your business’ specific needs, and extracting complex data into spreadsheets to manipulate can be time consuming and error-prone. That’s where BI can help.

What is Business Intelligence (BI)?

Business intelligence (BI) is a set of methods and tools that help companies analyze their data to make better decisions. It involves collecting data from various sources, organizing it and then using it to create reports, dashboards and other visual tools like charts that make the information easy to understand. BI helps business leaders, managers and employees see patterns and trends in the data, which can help to streamline decision-making.

The main purpose of BI is to turn raw data into valuable insights. It enables companies to discover important trends, spot potential issues early and get a better grasp of their overall performance. This helps them operate more efficiently, increase profits and stay competitive.

Interestingly, BI is not just about technology; it's also about how companies use data to make decisions. For BI to be successful, it needs to be integrated into your company’s culture and processes. This means all stakeholders in the organization value data and use it to collaborate and make decisions. When done right, BI can improve strategic planning, streamline operations such as supply chain management and human resources, and drive business growth.

Examples of how a BI tool might be used in a business:

Sales analysis

Use case: A nationwide retailer uses BI tools to analyze customer purchasing patterns

Benefit: They can identify which products are selling well and which aren’t, allowing them to inform inventory management and change marketing strategies accordingly

Customer insights

Use case: An e-commerce wholesaler of electrical goods uses BI tools to analyze online customer behavior and preferences

Benefit: They can better tailor digital marketing campaigns and improve customer satisfaction by better responding to customer needs and trends

Inventory optimization

Use case: A manufacturer of car parts uses BI tools to analyze production data and identify bottlenecks

Benefit: By pinpointing inefficiencies, they can streamline processes and remove unnecessary costs throughout the supply chain

When BI software is integrated with Financial Planning and Analysis (FP&A), operational data and financial data are united; creating a single source of data truth for even better decision-making. Phocas combines financial capabilities with analytics to bring you a comprehensive business planning and analytics platform.

What are the key differences between BI and ERP?

OLAP vs. OLTP system

The software world does love a good acronym doesn’t it? Introducing these four-lettered beauties, OLAP and OLTP. As technical as these might sound, they are the fundamental difference between BI and ERP software so let’s take a moment to understand what they mean.

What is an OLAP system?

BI is built as an Online Analytical Processing system (OLAP), to provide robust analytical capabilities, such as high-speed access to real-time 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.

OLAP systems like Phocas are designed for complex queries and data analysis; enabling users to perform multidimensional analysis of large volumes of data. OLAP systems allow users to quickly analyze data from multiple perspectives, such as time, geography or product. They support operations like roll-up, drill-down, slicing and dicing, which help in summarizing, detailing, and viewing data from various angles. OLAP databases used in BI are optimized for read-heavy operations and are used for tasks such as trend analysis, financial reporting and forecasting.

What is an OLTP system?

An 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.

OLTP systems are designed to manage and process a large number of short online transaction requests. These systems are used for day-to-day operations of businesses, handling tasks such as order entry, financial transactions and customer relationship management (CRM). OLTP systems are optimized for write-heavy operations and are designed to ensure data integrity so that each transaction is processed reliably and accurately. Typical features include real-time processing, quick query response times and support for numerous concurrent users.

In summary, the key difference between OLAP and OLTP systems lies in their purpose and optimization:

• OLAP is geared towards data analysis and complex queries, optimized for read-heavy operations, and used in decision-making processes.
• OLTP focuses on managing day-to-day transactional data, optimized for write-heavy operations, and ensures fast processing and high data integrity for operational tasks.

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, from financial (revenue, profit and growth), to operational (daily sales performance, inventory and headcount). 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.

An 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 isn’t built to perform trend analyses, give you high-level overviews or provide actionable insights. It is a tool centred around delivering operational insights.

Where an ERP falls short is the system does not provide easy access to real-time data and insights, since gathering information from the ERP involves manual time and effort.

A data analytics system like Phocas Analytics seamlessly integrates with a range of ERP solutions and other systems, presenting all your business’ data sources in more visual and accessible formats.

In Phocas, building your own dashboards and scorecards is straightforward. But what really sets Phocas’ cloud data analytics apart is the ad hoc analysis layer, which is called ‘The Grid’. Often likened to a giant pivot table or data cube by Phocas customers, it comes pre-populated with all your business’ real-time operational and financial data sets which can then be sliced and diced to create an infinite combination of dashboards and visualizations. At any point, Phocas users can jump back into ‘The Grid’ to access the transactional-level detail if they need to query certain KPIs and metrics.

Agility vs. efficiency

BI systems are for agility

BI software is designed to be flexible, allowing businesses to quickly adapt to changing needs. This flexibility comes from features that let decision-makers easily access, analyze and visualize data from many different sources. BI tools have user-friendly interfaces, customizable dashboards, and on-the-fly reporting capabilities, making it easy for anyone to get insights without needing technical skills. This helps businesses respond quickly and accurately to new market trends, customer demands and competition by making data-driven decisions based on real-time information.

Over the past years, there has been a shift of focus in BI as organizations move from simply reporting on historical data to budgeting and forecasting. 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 systems are for efficiency

On the other hand, Enterprise Resource Planning (ERP) systems are designed for efficiency.

They streamline and automate business processes across the organization, integrating functions like finance, human resources, procurement and inventory management into one platform. This integration ensures smooth data flow between departments, reducing duplication and errors. ERP systems help businesses optimize resources, cut costs and improve productivity by standardizing processes and centralizing information.

ERP systems also support the long-term operational needs of a business, providing stability and consistency. They require careful planning and customization to match a company’s specific workflows. Once set up, ERP systems help maintain control and coordination across various functions, making sure business operations run efficiently. This focus on efficiency is vital for large product-orientated companies with complex processes, ensuring they can grow sustainably.

To sum up, BI software focuses on being flexible and providing real-time insights for quick decision-making, while ERP systems prioritize efficiency by integrating and automating core business processes. Both systems work well together, with BI offering unique insights that help leaders to establish the business strategy and improve the efficient operations managed by the ERP.

So, BI versus ERP - what’s the verdict?

It’s hopefully become apparent throughout this blog that BI tools and ERP systems serve completely different purposes. It really isn’t a case of one or the other. Ideally, your business needs both solutions in order to survive and thrive.

If you purely need to deep dive into your operational data to drive business efficiencies, such as identifying areas in your business for potential cost savings or making changes to your pricing, your ERP is the primary tool you need.

But, if you already have an in-depth understanding of your operational performance via your ERP and other systems, but want to break down data silos across departments and make better business decisions, then BI software like Phocas Analytics is what you need to obtain strategic level insights into your business performance.