What’s the difference between EDW- Centric and ERP-Centric architecture?
Let’s first define each idea.
An EDW-Centric architecture makes the data warehouse the focal point for analytics and detailed reporting. While the ERP system still serves as the ‘books and records’ source for statutory reporting and aggregate balance information, detailed data lives in the EDW and is accessible by analytic and reporting tools.
An ERP-Centric architecture makes the ERP system the source for all organizational reporting and analytics. Typically source system data must pass through ETL or middleware tools that standardize and aggregate transaction data. Data may also be exported out of source systems onto a spreadsheet, manually manipulated and uploaded into the General Ledger.
The challenges of an ERP-centric architecture
Although ERP systems can create significant transaction processing benefits, they do not typically improve finance’s ability to address current analytical challenges. This is because considerable quantities of insight-provoking granular data (such as profitability, operational and risk drivers) reside outside the ERP system, in transactional source systems, data marts, or within analytical modeling engines. When companies try to bring this type of detailed data into the ERP system, it often compromises processing power and leads to confusion and required manual interventions. ERP solutions are not designed to handle all data produced by an organization’s source systems.
For example, a large US organization is using their PeopleSoft General Ledger as the primary source for very detailed reporting and analytical requirements across all user communities. The resulting proliferation of chartfield values, often used inconsistently across the organization, has made it very difficult for finance to have a view of detailed balances for the purpose of core financial reporting. They are now exploring a finance architecture that would centralize detailed data in a sub-ledger and Finance EDW, keeping their General Ledger unburdened to handle the summarized reporting it was meant to do.
A better way to centralize data
While the ERP system might not be the best place for detailed data, Finance teams absolutely need to retain that transaction and balance level data for reporting and analytics purposes.
An ideal finance IT architecture fosters transparency between aggregate General Ledger balances and the underlying transactional data that generated them in a clear, auditable manner that can be queried and reported upon. A Data Warehouse offers a centralized repository that integrates transactional, ERP, sub-ledger, and other data. It enables data sharing, which supports external statutory and regulatory reporting as well as internal management reporting and analytics. It also provides transparency between externally reported results and the transactional drivers of those results and can handle hundreds of millions of transactions to harness exploding data volumes.
Progressively transforming finance
Lack a single integrated finance data warehouse? You are not alone – a recent study found 32% of organizations surveyed rely on their ERP as a primary source of data PLUS disparate, unconnected systems (source.) That’s a lot of organizations with only a partial view of business data. Now may be the time for your organization to move toward an EDW-Centric environment to gain valuable business insight, effectively balance risk and operate with true reporting transparency.
Looking for more information? See how our Accounting Hub can help you transform financial, management and statutory accounting and move to an EDW-Centric architecture.