/ 7 May 2008

Pre-integration — a bad idea

There has long been an argument relating to integration, between best- of-breed products and pre-integrated systems, for which one size fits all.

The lines are blurring and today you do not have to opt for best of breed or pre-integration — but the argument hasn’t died.

Paywell has been in the payroll business for decades and has seen a steady erosion of its clients to the big brand names — but the decision, says director Dave Teron, is typically made by board directors, and rarely by the people who count — those who use the system.

“Over the past 10 or so years, many larger corporations have migrated their application software to entreprise resource planning (ERP) solutions.

“There are a number of global software houses that are leaders in this field and they have been extremely successful in the marketing of this concept — almost always targeted at the top directors of companies.

“These directors are typically highly knowledgeable in their own business and its operational requirements and the concept of total integration finds a ready audience with them,” says Teron.

“What they don’t understand is that payroll is not an online real-time system — there is no such thing as a ‘work in progress’ payslip.”

Multinationals such as Microsoft, Oracle, SAP and PeopleSoft are the big names to be found in this space.

What is rarely anticipated is the enormous amount of work that is required to design, modify and implement the changed business processes that come with an ERP system.

Teron says: “The directors are generally not aware of the actual amount of work and the cost implications of this momentous change, nor the length of the installation process.

“ERP systems generally require systems analysis and design, plus re-engineering to fit them into most organisations.”

Paywell operates in the large-company space, where the most complexity lies.

Teron argues that payroll systems really only integrate with an ERP system once a month – when the payroll is complete — and it cannot be done any other time.

“Payroll systems are defined to the nth degree — they are extremely rules based, because if a person is paid the wrong amount, there are serious problems. Payrolls have to be paid correctly and on time.

“Also the timing and flow of data to and from the payroll is well defined and is very accurate. The problem with integration is that other systems are not like this.

“Therefore many companies implement an ERP system but retain their legacy payroll system and integrate them — which is what we do,” he says.

“Many of these large corporates are finding that pre-integrated systems are not all they’re cut out to be,” adds Teron.

“Big ERP systems work fine for almost all functions — except payroll, which doesn’t really fit into the day-to-day system.”

One problem with pre-integration is that if the entire system collapses, the business cannot pay its people. In addition, when adjusting any rule relating to pay — a frequent occurrence — it affects the entire integration, says Teron. He says he has seen integrations that take 12 and even 24 months.

“To buy an ERP system in which the payroll is already integrated is the cause of a lot of problems. This is only the case for large companies with complex payrolls and the difficulty originates from the trend to centralise a payroll function that used to be decentralised.