Introduction to Business Intelligence and ERP Integration
The concept of sharing information across organizations dates back to the Decision Support Systems developed in 1960. This evolved through the 1980s with computer models for decision-making and data insights, leading to modern Business Intelligence (BI) (Hosack et al., 2012, p.317-319). Modern BI systems go beyond this, combining business analytics, data mining, data visualization, and best practices to facilitate data-driven decisions. The advent of BI has revolutionized how organizations interpret data, providing a deeper understanding of business dynamics and performance metrics.
Integrating BI capabilities into ERP systems significantly enhances their value. While ERP systems excel in data collection and process automation, BI adds a layer of intelligence that enables organizations to derive insights from the vast amounts of data generated (Olaoye and Potter, 2024, p.3).
Business Intelligence (BI) refers to the use of data analysis tools and techniques to convert raw data into meaningful information for decision-making (Sharda, Delen & Turban, 2020). BI tools are commonly employed in large organizations for reporting, data visualization, and predictive analytics, allowing businesses to uncover trends, forecast outcomes, and make informed decisions.
Recent studies show that combining ERP and BI improves business performance by seamlessly integrating operational data and analytical insights (Holsapple, Lee-Post & Pakath, 2014). However, while large corporations readily adopt these systems, SMEs often face financial and technical barriers in implementing BI tools alongside ERP (Ha & Ahn, 2014).
Several open-source ERP systems, such as Odoo and ERPNext, offer basic BI functionalities, but these are often not as robust as enterprise-grade solutions (Litt, 2024). Moreover, they have a large learning curve, particularly for first-time ERP users, often leading businesses to invest in expensive ERP solutions.
It's necessary to determine which Business Intelligence tool will be useful for a specific business, as every business has its own model, even within the same category. The integration of ERP and BI aims to combine transactional processing with analytical insights to improve decision-making across business functions (Elbashir, Collier & Sutton, 2011). BI systems leverage enterprise system databases using analytics and performance management concepts to provide core business insights.
Several research studies have emphasized the benefits of this integration. Hwang and Xu (2013) found that ERP-BI integration improved operational efficiency, enhanced organizational agility, and facilitated better decision-making processes. They also investigated how ERP makes the supply chain efficient and evaluated the benefits of ERP from the supply chain partner's perspective, proposing how an organization could enhance supplier capability using ERP.
Despite these advantages, there are challenges related to the integration of ERP with BI, such as data inconsistency, complexity in system architecture, and high implementation costs (Watson & Wixom, 2007). Additionally, most ERP systems lack built-in BI capabilities, making external BI integration necessary, which further complicates the overall system architecture.
Importance of Integrating BI with ERP
The convergence of ERP and BI systems represents a transformative approach to business management. Integrating BI functionalities within ERP systems ensures that data is not only captured and managed but also analyzed and utilized to its full potential. This integration facilitates a comprehensive view of the organization's operations, linking transactional data with analytical capabilities. As a result, businesses can transition from reactive to proactive decision-making, thereby enhancing agility and responsiveness.
Integrating Business Intelligence (BI) with Enterprise Resource Planning (ERP) systems is crucial in transforming raw data into actionable insights, significantly improving business decision-making, operational efficiency, and organizational performance. This integration creates a synergy between ERP's transactional data processing and BI's analytical capabilities, enabling businesses to not only record and manage processes but also to analyze them in real-time. This is particularly beneficial for small and medium-sized enterprises (SMEs), which often lack the resources to employ large data analytics teams but still need access to meaningful insights for decision-making.
Enhancing Decision-Making and Operational Efficiency
A key output of ERP-BI implementation is the ability to improve decision-making. ERP systems alone provide a wealth of transactional data related to various business processes, but without BI, organizations may struggle to analyze this data effectively. By combining ERP data with BI's analytical tools, companies can generate real-time reports, dashboards, and key performance indicators (KPIs) that provide insights into business operations (Kilic, Zaim & Delen, 2015). For example, BI can assess inventory levels, forecast demand, and adjust procurement processes accordingly, which prevents out-of-stock events and increases sales, ultimately leading to more profit. SMEs, which often have limited cash flow and storage capacity, can particularly benefit from such streamlined processes, allowing them to compete more effectively with larger companies (Davenport, 1998).
BI tools enhance operational efficiency by automating the process of data gathering, analysis, and reporting. Instead of relying on manual methods, which can be time-consuming and prone to error, BI tools integrated into ERP systems allow for real-time monitoring and analysis of critical business processes. This not only reduces the likelihood of human error but also provides decision-makers with immediate access to accurate, up-to-date information (Elbashir, Collier & Sutton, 2011). Ultimately, companies can quickly respond to changes in market conditions, customer preferences, or internal inefficiencies. This feature provides organizations with extra confidence because they know the correct sales trend. Moreover, BI gives the ability to make these data-driven decisions quickly, which leads to profitability (Hwang & Min, 2013).
Improved Data Analysis and Reporting
Integrating Business Intelligence (BI) into Enterprise Resource Planning (ERP) systems enhances data analysis and reporting capabilities by providing a unified platform for gathering information from various departments, such as finance, procurement, sales, and human resources. This integration enables organizations to break down data silos, facilitating better cross-departmental analysis and decision-making (Hendricks et al., 2007).
For Small and Medium Enterprises (SMEs), which often face constraints in resources and analytical capacity, this data integration allows for more agile business operations. By having a single source of truth, SMEs can make faster, more informed decisions, thus improving efficiency and responsiveness to market changes (Benitez, Ray, & Henseler, 2018).
BI provides real-time data insights even if the system is running. These tools offer real-time visualizations of key performance indicators (KPIs), such as sales revenue, operational costs, and customer retention rates, making it easier for decision-makers to monitor business health at a glance. Customizable dashboards enable users to tailor data views according to their specific needs, empowering employees at all levels to access and analyze critical business data. This fosters a data-driven culture, where insights are readily available for day-to-day operations, which is particularly beneficial for SMEs with limited analytical expertise (Wamba, Gunasekaran, & Akter, 2020).
Strategic Planning and Competitive Advantage
The integration of Business Intelligence (BI) with Enterprise Resource Planning (ERP) plays an important role in strategic planning. Using the organization's data, BI can forecast future trends in sales and marketing and also analyze customer behavior. These insights help the ERP-BI user to make proper and confident decisions, thereby gaining a competitive advantage compared to non-ERP-BI users. While too many market fluctuations can be difficult for SMEs to handle, taking advantage of BI can give them a competitive advantage (Martinsons, Davison, & Tse, 2007).
Additionally, BI-ERP integration enhances customer insights by enabling deeper analysis of customer data, including segmentation, purchasing behavior, and preferences. This detailed segmentation of data allows SMEs to design their strategies, targeting specific customer segments with customized offerings. These actions can drive improved customer satisfaction and increase revenue. This is crucial for SMEs, as they often rely on a smaller customer base, thus ensuring steady growth and sustainability in a very short time (Alshamaila, Papagiannidis, & Li, 2013).
Furthermore, BI tools integrated into ERP systems aid in supplier management, allowing businesses to monitor supplier performance, assess potential risks, and make informed procurement decisions. These capabilities ensure that procurement strategies are aligned with broader strategic goals, thus reducing risks related to supply chain disruptions and enhancing overall business resilience (Croom & Brandon-Jones, 2009).
Benefits for SMEs
While large enterprises typically have the resources to invest in standalone BI tools, the integration of BI into ERP systems makes advanced data analytics more accessible to SMEs. ERP systems with embedded BI tools are often more cost-effective and easier to implement than separate, standalone BI solutions. Integrating BI into SMEs is crucial for them to remain competitive, even without the budget of large enterprises. To benefit from their data and stay relevant in the industry, they need BI (Nah, Lau & Kuang, 2001).
Integrating BI with ERP systems is a game-changer for businesses, especially SMEs. By offering real-time insights, improved decision-making capabilities, and enhanced operational efficiency, BI-ERP systems enable businesses to remain competitive in today’s data-driven market. This integration is not only beneficial for large enterprises but is also essential for SMEs looking to improve their operational processes and remain agile in an increasingly competitive environment (Seethamraju, 2015).
Review of Existing Literature on ERP Systems and BI Integration
The integration of Enterprise Resource Planning (ERP) systems with Business Intelligence (BI) tools has been the subject of extensive academic research, highlighting the potential to improve decision-making processes and operational efficiency.
Academic Research on ERP and BI Integration
Nah, Lau, and Kuang (2001) identified critical success factors for ERP implementation, stressing the importance of integrating BI capabilities to support better-informed decisions. This integration allows organizations to leverage the massive amounts of data processed by ERP systems, converting it into actionable insights through BI tools.
Gattiker and Goodhue (2005) explored the impact of Business Intelligence (BI) integration on plant-level operations, emphasizing that real-time data visibility from BI significantly enhances operational outcomes and decision-making efficiency. Their study reveals that integrating BI with ERP systems allows for more effective tracking of performance metrics, leading to improved production efficiency and optimized resource allocation.
Botta-Genoulaz, Millet, and Grabot (2005) conducted a thorough survey of ERP literature, revealing that integrating Business Intelligence (BI) tools addresses key limitations of ERP systems, especially in managing large datasets. Their research highlights that sectors such as manufacturing and retail, which handle extensive data, benefit significantly from BI’s advanced data processing capabilities. This integration overcomes traditional ERP data management constraints, leading to enhanced operational performance and improved decision-making in data-intensive industries. The study underscores the value of BI in augmenting ERP systems to better manage and utilize complex data.
Akkermans and van Helden (2002) reviewed critical success factors in ERP implementation, highlighting the growing necessity for Business Intelligence (BI) tools to complement ERP systems by improving data interpretation and reporting. They argue that aligning ERP with BI systems strategically can provide firms with competitive advantages through enhanced analytics and forecasting capabilities. Their study emphasizes that the integration of BI with ERP systems is crucial for leveraging data effectively, thereby supporting more informed decision-making and strategic planning within organizations.
Davenport (1998) examined how integrating Business Intelligence (BI) tools with ERP systems supports organizational learning by significantly enhancing the ability to collect, analyze, and apply data. He emphasizes that organizations utilizing BI-enhanced ERP systems are better positioned to adapt to market changes with greater speed and precision. Davenport’s study underscores the strategic advantage gained from combining ERP with BI, leading to improved responsiveness and competitive positioning in the market.
Wieder et al. (2006) investigated the integration of ERP and Business Intelligence (BI) tools within the framework of strategic performance management. Their study found that companies incorporating BI into their ERP systems see notable enhancements in financial reporting, performance measurement, and resource allocation. They emphasize that BI tools are crucial for tracking key performance indicators (KPIs) and enabling real-time adjustments to strategies. This research focuses on using BI to help organizations improve performance by taking timely insights.
González, Gasco, and Llopis (2002) studied ERP implementation in small and medium-sized enterprises (SMEs) and concluded that integrating Business Intelligence (BI) tools is crucial for SMEs to fully leverage ERP systems. They argue that utilizing manual ERP data cannot provide much insight. By integrating Business Intelligence, they can get accurate information, which is essential in this competitive market. Their study highlights that BI integration enables SMEs to better analyze and utilize ERP data, enhancing their decision-making capabilities and operational flexibility.
According to Ram, Corkindale, and Wu (2013), integrating ERP with Business Intelligence (BI) enhances supply chain visibility, especially in multinational organizations. Their study reveals that combining ERP's extensive data management capabilities with BI's analytical strengths can significantly optimize supply chain management. Without the integration of BI, it is not possible to predict sales, which leads to poor stock management and detrimental supply chain management.
Elbashir, Collier, and Davern (2008) focus on performance management and decision-making by integrating ERP and BI. Their study found that organizations with integrated ERP and BI systems are better equipped to analyze operational data and make informed adjustments to their strategies. This capability can help the organization to make perfect decisions. The research underscores that the synergy between ERP and BI significantly improves an organization’s ability to manage performance and adapt to changing business conditions effectively.
Chaudhuri, Dayal, and Narasayya (2011) discussed broader trends in Business Intelligence (BI) and its role in complementing ERP systems by offering advanced analytical capabilities. They argue that as ERP systems grow in complexity, BI tools become essential for interpreting the vast amounts of data they generate. This integration is particularly valuable in industries that require detailed reporting and forecasting. The study highlights that BI tools enhance the ability to make sense of complex data, thereby improving decision-making and strategic planning in organizations with sophisticated ERP systems.
Kanellou and Spathis (2013) investigated the impact of ERP systems on accounting practices, emphasizing that integrating Business Intelligence (BI) tools is essential for converting raw ERP data into actionable accounting information. Their study reveals that real-time financial data analysis through BI tools offers a substantial advantage in financial planning and control. The research highlights the critical role of BI in enhancing the utility of ERP-generated financial data.
Rikhardsson and Yigitbasioglu (2018) reviewed the impact of integrating Business Intelligence (BI) into ERP systems on organizational decision-making, emphasizing the growing dependence on real-time data for strategic planning. Their study concludes that organizations with integrated BI and ERP systems are better equipped to adapt to evolving market conditions and changing customer demands. The research highlights that the real-time insights provided by BI tools enable more agile and informed decision-making, thus enhancing an organization’s ability to respond effectively to dynamic business environments.
Klaus, Rosemann, and Gable (2000) investigated the challenges associated with ERP implementation and highlighted the critical role of Business Intelligence (BI) tools in addressing data management issues. They concluded that integrating BI with ERP systems provides the necessary analytical capabilities to interpret the vast amounts of data generated by ERP systems. This integration leads to enhanced decision-making and more efficient resource optimization. Their study underscores that BI tools are essential for maximizing the value of ERP data and improving overall organizational performance.
Industry Reports on ERP and BI
Enterprise Resource Planning (ERP) and Business Intelligence (BI) integration is not a new concept. Industry publications, whitepapers, and case studies emphasize the strategic benefits of integrating these two systems, showcasing real-world applications across various sectors.
An article by SAP Insights (n.d.) explores the importance of ERP integration, highlighting how modern cloud ERP systems are evolving into central hubs for business operations. It explains the benefits of integrating ERP with CRM, BI, HR, project management, e-commerce, and more to streamline processes and improve data visibility. The piece also discusses various integration methods like APIs and iPaaS, emphasizing the advantages of real-time data, improved decision-making, compliance, and faster ROI. It ends with a checklist for starting ERP integration effectively.
Microsoft (n.d.) explores Microsoft Power BI and how it is suitable for retail, empowering businesses by transforming data into actionable insights, enabling enhanced decision-making through advanced data visualization. It provides real-time analytics to help organizations respond quickly. With seamless integration across various data sources and systems, Power BI streamlines data consolidation and automates reporting, ultimately boosting operational efficiency and supporting business growth.
Oracle (n.d.) discusses business intelligence (BI) technologies and highlights how their solutions support data-driven decision-making through advanced analytics, reporting, and customizable dashboards. The platform integrates various data sources, including cloud and on-premises systems, to deliver comprehensive insights and real-time data analysis, enhancing both operational efficiency and strategic planning. These effective features, such as predictive analysis and other BI tools, are developed for analyzing data movement, finding trends, and suggesting business intelligence to help the organization.
Gaps in Current ERP Systems
Despite the advancements in ERP and BI, several challenges and limitations persist in current ERP systems.
Difficulty of Adoption
Although ERP systems are widely adopted, learning this software can be difficult. First-time ERP users could face some difficulties. To get the full benefit, the end user of ERP must use it properly (Sternad, 2009, p. 31). To overcome this situation, training is often the only option to increase the expertise and knowledge level of people within the company.
Insufficient Business Intelligence Capabilities
SMEs often possess large amounts of data, but due to insufficient BI capabilities, they may not realize its importance, and this data can be ignored. Handling these excessively large volumes of data can be significantly problematic. Moreover, a lack of information and knowledge makes these situations even worse. In order to make timely decisions, the managers of SMEs mainly rely on their experience, which implies a high risk of failure. Business Intelligence (BI) can play a significant role. Using this technology, they can gain data insights, which brings many advantages and benefits to businesses. However, like any technology, it is accompanied by some limitations that must be overcome to help businesses develop (Papachristodoulou, Koutsaki & Kirkos, 2017).
Open Source ERP Limitations
Open-source ERP has some benefits, but its disadvantages cannot be ignored. A lack of support is common in these systems; they do not offer enterprise ERP-like solutions such as Oracle, nor do they typically get professional support. This support is often on a voluntary basis, so those who work on these open-source ERP companies do not provide enterprise-level support. Moreover, a limitation of open-source ERP is that it sometimes cannot be integrated with other systems. Most of them don't support API connections, and often they lack access to mobile apps and e-commerce functionalities. This makes the selling system one-dimensional (Wang and Wang, 2014).
High ERP Implementation and Managing Costs
Big ERP companies like Oracle, Microsoft, and SAP are not only difficult to implement but also hard to maintain because the cost is significantly high and day by day it is rising. This is particularly difficult for SMEs. These systems often require high licensing fees and extensive support for implementation, which can be prohibitive for SMEs (Fulford, 2013).
Current ERP systems face several challenges. They are often difficult to adopt, affecting both open-source and enterprise solutions. Crucially, without robust Business Intelligence capabilities, organizational data becomes underutilized or useless. Many ERP software solutions have limited or no BI capabilities, forcing organizations to rely on experience for decision-making, which carries a high risk of business failure. While open-source software can be a good choice for SMEs, their lack of API compatibility makes integration with other software difficult, and support is often uncertain. Conversely, enterprise-level companies like Oracle offer excellent support but are often too expensive for SMEs. Furthermore, the absence of e-commerce integration in many ERP systems is a significant drawback in today's market.
Method to Develop a Solution
To address these problems, the proposed solution involves building an ERP software with integrated Business Intelligence capabilities. The software interface will be designed for ease of adoption, providing an optimal user experience. Minimal training will be required to use this software, as its interface will be intuitive; for example, every transaction page will be similar (e.g., salary payment and supplier payment interfaces will share a similar layout), allowing users familiar with one function to easily navigate others.
Business Intelligence features will be implemented, including sales forecasting, customer behavior analysis, and employee performance analysis, to improve the organization's Key Performance Indicators (KPIs). Additional BI features will also be incorporated.
The system will be scalable and capable of handling API requests, enabling integration with mobile applications and/or other web-based applications.
Crucially, an E-commerce system will be integrated into this ERP system. This is an essential feature in today's market that will significantly increase sales.
