Making Your ERP Dance: Data Exchange Through Middleware

• By: Monique
• /
• May 31, 2023

Background 

Enterprise Resource Planning (ERP) systems are essential software platforms that help businesses manage their day-to-day operations, ranging from orders, billing, inventory, and supply chain optimizations. A significant function of the ERP system is financial management, including general ledger, accounts payable, accounts receivable, financial reporting, and cash budgeting and forecasting.

ERPs are powerful yet costly systems that significantly benefit an organization’s operations. However, these systems are typically tailored to meet the unique needs of a particular organization and require extensive customization, often resulting in lengthy and costly implementation projects. Unfortunately, despite these investments, ERPs may still lack critical capabilities in highly specialized accounts receivable functions like deduction management, cash application and trade promotions management.  In these examples, automated workflows and visibility of very specific receivables tasks are critical to filling the gap.

Addressing the Gap

Often these functional gaps are addressed through the use of cloud based Software-as-a-Service solutions that exchange data seamlessly with an ERP – an organization’s most trusted source of information!

No matter which system you use, such as SAP, Oracle, JD Edwards, Microsoft Dynamics, or others, optimizing the accounts receivable function is essential for any business. One way organizations streamline this process is to leverage Software-as-a-Service (SaaS) cloud platforms such as Carixa, which may bring a higher level of functional competence that augments ERP operations and work seamlessly. Achieving this requires a significant integration and synchronization of data between the two systems.

Synchronization of data and seamless operations across two systems can be particularly challenging for organizations that rely on supplemental data feeds from additional external sources  (e.g., third party shippers or customer AP portals), which must be of high quality and accuracy to be usable within the ERP system. This process is complex and requires considerable manual effort on the part of accounts receivable professionals with time-consuming manual and assisted operations that are slow, non-scalable and error-prone.

Further Defining the Problem

With many ERP systems available, each structured and customized differently, and with the possibility of multiple instances for some global organizations, synchronizing data exchange with a cloud SaaS solution can be challenging. Intra-day transaction posting from the ERP is crucial to keep the SaaS platform and the ERP systems synchronized. Furthermore, a wide variety of payment and remittance data from banks and other sources, like customer’s portals, necessitates flexible data communication architecture with flat file batch exchanges as well as real-time API data exchange. The quality and accuracy of the business process rely heavily on the timeliness and quality of data, as well as the availability of easily digestible, standardized data.

The Core of the Problem

The crux of the matter goes beyond merely integrating ERP and SaaS platforms in the cloud. To solve the AR problem effectively involves consolidating information from multiple data sources for use in workflows and reporting for receivables. Integrating information from these various sources is not just a technical complexity but a business problem where data formats, normalization and availability schedules need to account for daily closing balances, adjustments and write-offs to the General Ledger. Various solutions exist for tackling this integration challenge, ranging from a straightforward bolt-on approach to a more advanced and adaptable middleware approach. Our current partner, Oracle Integration Cloud (OIC) has begun to lead this segment in the market with simple tools that enable two systems to seamlessly exchange data in the cloud.

Broadly speaking, data exchange between an ERP and Cloud system could be either: a batched file-based approach or an API based approach. Irrespective of the approach, it is essential to consider two key aspects: the communication channel and the information being exchanged.

Taking the Bolt-on Approach

A bolt-on approach is essentially a point-to-point method where two systems, which we will refer to as the source and target, must understand each other’s data format and file or API requirements.

In file-based data integration, data is transferred between different systems, and both ends need to establish the data structure and implement bolt-on processes at both ends to interact with the exchanged data files. Critical aspects of this approach include 1) scheduling when the data transfer will occur, 2) data formats as mentioned above, and 3) ensuring the security of the data while in transit.

API integration, on the other hand, enables real-time communication and data exchange between systems, providing real-time synchronization. This approach eliminates the need for batched file transfer and requires a thorough understanding and accurate documentation of the APIs to enable error-free communication between systems.

Bolt-on approach implies dropping native code on both systems, including using certified third party partners to deliver and maintain it. This intrusive process becomes unsustainable for an enterprise IT organization with more integrations, greater customization of the ERP code environments, hindering maintenance, upgrades, monitoring, and scaling of the solutions. In reality, global organizations often have multiple ERPs, as well as cloud-based AR systems such as Carixa, and various other sources like bank portals, customer portals, and EDI sources. To put it mildly, handling such a situation is a nightmare and can take several months to make even a small change due to the ripple effects it may cause across the entire system.

A Better Way – The Middleware Approach

A middleware approach addresses these issues by creating a hub and spoke model for integration as the number of data sources increases with various data formats requiring transformation, normalization and incompatible schedules.

Middleware acts as a bridge between different applications, systems, and services, allowing them to communicate and exchange data. It essentially sits between the disparate system as a central hub, facilitating seamless communication and data transfer between them. Middleware improves system interoperability and enhances overall system performance. In addition, middleware offers the capability to transform data during exchange between systems, and to batch data across connected systems. This level of flexibility between systems empowers businesses to concentrate on their core business problems, rather than grappling with the complexities of technology.

Middleware vs Bolt-on

Adopting a middleware strategy offers several advantages, as all systems independently connect to the middleware, and the central hub acts as the conductor responsible for data transformation, security, staging, and scheduling. Here are a few high-level advantages of adopting a middleware strategy:

• Increased Interoperability: Middleware enables systems with different architectures and data formats to communicate and exchange data seamlessly, increasing interoperability across systems. Effectively, systems usually communicate in their native formats and schedules, middleware is responsible for transformation and staging so that it is available to other systems appropriately.

• Flexibility: Middleware provides flexibility to integrate new systems or make changes to existing systems without disrupting the entire integration architecture. This makes connecting and disconnecting easy, as well as straightforward software and API updates.

• Data Exchange Flexibility: Middleware enables real-time, staged, and batched data exchange between systems, unlike bolt-on integration approaches that mandate a fixed exchange mode as designed.

• Data Transformation: Middleware provides the capability to transform data between systems, enabling data to be translated into the required format and structure allowing systems to change and evolve independently of other systems in the ecosystem. 

• Scalability & Agility: Middleware solutions can evolve and adjust seamlessly, requiring minimal interaction with integrated systems. This enables the integration layer to achieve remarkable agility and efficiency, making it highly resistant to target system changes, network issues, and system failures. In stark contrast, intrusive bolt-on solutions that utilize APIs and file batches can potentially be a source of problems affecting the target system due to other system failures, integrated system changes, or network issues. Middleware offers scalability and adaptability without disrupting the existing infrastructure.

• Easier Maintenance: Middleware provides a centralized location for integration management between two organizations, making it easier to maintain and troubleshoot integration issues.

• Data Ops & Dashboards: It is essential to ensure that your data operations can provide confirmation that the transfer was successful. A critical step in this process is implementing a dashboard layer to complement your data operations, which can help you monitor and verify if your systems are working as expected.

“Overall, middleware offers an integration solution that is a more robust, scalable, and flexible business solution as compared to bolt-on approach that is merely a technical solution addressing connectivity between two systems.”

Summary

By leveraging Software-as-a-Service (SaaS) cloud platforms such as Carixa, organizations can streamline their accounts receivable process and accelerate cash recovery. However, integrating ERPs and SaaS platforms in the cloud requires flexible data communication architecture leveraging middleware for increased interoperability, flexibility and better data exchange flexibility. Delivering on this promise is how you can make an ERP dance!