The pros and cons of systems integration for small businesses
A significant challenge with which every small business must wrestle is how to create the systems environment to grow and do business effectively. All too often the problem is that having bought computer systems as they’ve developed – for accounting, sales, inventory and e-commerce, for instance – small firms find their growth is being hampered by a tangle of separate, standalone, non-integrated applications and data-sources that don’t ‘speak’ to each other.
At some point, most small businesses must confront the issue of whether they should integrate these systems. But you might be surprised if I tell you that I don’t automatically say they should. It can often be quite a complex situation and small business leaders need to weigh up the benefits and risks of integration.
For me, there are four arguments in favour of tighter systems integration:
- Boosting productivity – dealing with several standalone systems can be time consuming, with employees manually inputting data into separate programs, which can cause problems if any of that data is entered incorrectly
- Better management information – it can be nigh on impossible to get a 360° view of how the business is performing when you run several different systems and there can be a time lag for managers knowing what’s actually going on until information is manually inputted
- Cost – the cost and time involved in maintaining and updating several systems can be big
- Greater customer satisfaction – having multiple systems means it can take extra time to fulfil clients’ orders or respond to their enquiries and complaints
You could say that systems integration launched my IT career, as my first experience came in the mid-1970s when I computerised the stock and sales systems in the automotive parts business which I then managed.
The older way of working was, to be blunt, murderous. If a customer came in for a particular car part, having first used a micro-fiche reader to verify the part number, then you had to consult the card-file system, which would tell you if it was in stock, and where it was kept.
After that you would have to thumb through lists to find its price. Then you would have to write out a multi-part carbon receipt, with the different-coloured paper slips going off in batches to the customer, the stock department, and the sales ledger team.
Using a multi-user mini computer and merging the sales and stock systems had an amazing effect. Our productivity improved and customer satisfaction increased almost immediately.
But efforts to create a totally seamless connection between all the systems foundered on the accountant’s objections. He refused to allow the sales system data to flow automatically into the accounts because he wanted to check the figures first before recording them manually in the general ledger.
At first, we thought he was an old fuddy-duddy, but eventually I realised he was at least partially right. And I understood that systems integration could bring new costs, burdens and risks as well as benefits.
The extra time spent manually entering figures from the sales ledger into the general ledger was minuscule compared to the hours that the accountant would have to spend if the accounts didn’t add up, poring over the figures to find, and then correct, the inadvertent mistakes that had occurred due to the much-vaunted systems integration.
Then, there are large security considerations. Today, if your systems are fully integrated and any one of them is hacked into, then the attacker can probably have almost unimpeded access to all of your company data.
Moreover, integrating them can actually create brand new vulnerabilities, because the gateways through which data flows from one system into another are the natural weak points that could be exploited by external hackers or disgruntled employees.
E-commerce is one of the current driving factors of system integration. Customers who are doing business with you over the internet want to see their account details, check the availability of a product and when it can be delivered before buying it online. But that means they need access to your customer relationship management, stock, sales and accounting systems online, thereby opening doors into your company databases. You need to be sure those doors have very secure locks on them.
All too often, companies think they need to bring their customer database virtually up to the front door of web access, to make it easier to do business online. But that creates a major vulnerability to hackers. I think we all need to understand – customers and businesses alike – that we take risks in doing business over the internet. There’s a balance to be achieved – do we want e-commerce to be as easy as we’d all wish, or as secure as possible?
Furthermore, if my online systems are part of an integrated supply chain, then if something untoward happens – whether a mistake, glitch or hacker attack – that could well have a ripple effect throughout the entire supply chain.
I’ve written before about the risk within integrated supply chains from ‘phishing’ attacks, where people inadvertently give away password information or download ransomware software because they are conned by phoney emails they mistakenly think comes from legitimate business contacts.
Integrated supply chains have an implied level of trust in them and the closer they are to each other then the smoother the supply chain works. But that also brings an added layer of risk to keep in mind.
In the face of all this, businesses can benefit from cyber liability insurance and an enhanced understanding of the role such policies play in the event of a data breach. Make sure you’re clued up as soon as you hold sensitive data.
So what’s the answer?
Well, systems integration has huge upsides. Saving costs, bringing greater flexibility to the business, and providing better information to people throughout the company should, if they’re done right, improve customer service and, therefore, loyalty.
But systems integration also has some major potential downsides, concerning the accuracy and security of the data that flows between your systems. For me, there are three key questions to ask before integrating any more of your company systems:
- Is it really necessary?
- Does it bring clear benefits?
- How big are the accompanying risks?
There’s still a place for having systems that aren’t integrated, even within small businesses, or for having ultra-secure systems in place for your most sensitive data. It wasn’t so long ago, for instance, that we wouldn’t have dreamed of integrating the payroll system. That was always seen as best handled by a specialist computer bureau, providing a good and confidential service, with no undue risk.
We need to become much cleverer in the modern online world. Just because we need a client’s purchases to be posted to his account in “real-time”, does that have to mean that all the sales data need to be open to any intruder who barges in? Where are the “integration breaks” that would prevent all the client account records being stolen if a company was hacked?
It’s important for every business to remember that data is both your biggest asset and your biggest responsibility. So, to successfully integrate your business systems you need to make the most of the potential upsides, while doing your best to protect against the downsides.
Integration is good, but not at any cost!
At Hiscox, we want to help your small business thrive. Our blog has many articles you may find relevant and useful as your business grows. But these articles aren’t professional advice. So, to find out more on a subject we cover here, please seek professional assistance.