HRMS or ERP: Is It Really an Odd Question?

It may seem a little odd to even ask the question: HRMS or ERP? After all, they perform different functions; surely they’re complementary systems? But that doesn’t necessarily mean you need both for your business. Increasingly, as each new business intelligence software release strives to become the ultimate all-singing, all-dancing solution – packing in more and more functionality – so HRMS and ERP begin to overlap. On a basic practical level, you may only have the budget to invest in one major IT system this year and on that basis alone, it may be an either/or choice. So, what are the broad advantages and disadvantages of HRMS and ERP packages and do you really need or want both?

In terms of their starting points, HRMS and ERP evolved from very different angles. HRMS came from a need to computerize the management of employee data and better handle processes such as payroll, time and attendance, performance records, benefits management, and so on. ERP on the other hand, was driven by the competitive advantage that comes from efficient management of stock, production, finances and supply chain management.

Convergent Evolution

Over time, the evolution of HRMS and ERP appears more and more convergent. ERP systems have modules to handle employee information, manage recruitment, pensions and payroll; and HRMS systems tap into production and resources data and cross-reference it to the people-related information to produce sophisticated analytics. Add CRM into the mix and surely the end result will be a single, do-it-all system that handles everything?

But, despite the integration claims of some vendors that provide HRMS and ERP, we’re not there yet and if you want to maximize your business efficiency wth IT, then you’ll probably be opting to have both, leaving you with some integration issues and some choices over which system handles what. For example, do you run your payroll from your ERP or your HRMS?

Sometimes a best of breed purchasing strategy is more favorable; just factor in the work needed to overcome the integration challenge.

On the integration front, the issues include data quality and access, and self-service. So, if for example, you decide to use the ERP for payroll, it will need easy access to the time and attendance data in your HRMS. This is when it can be tempting to just believe the vendor’s sales pitch and buy the whole setup from a single source. However, behind the hyperbole lie endless stories of integration breakdown between HRMS and ERP. Sometimes a best of breed purchasing strategy is more favorable; just factor in the work needed to overcome the integration challenge.

For self-service functions, the issue is one of user experience. Employees and managers may be dipping into the HRMS for pay data, scheduling, training management, etc. and the ERP for production data, resource management and so on. While these functions are completely separate and easily distinguished, from the user point of view, the ideal is a single access portal with a uniform feel for everything. There may be two (or three) systems beneath the surface but what the user wants (whether a factory floor employee or a c-suite director) is the ‘appearance’ of a single system via a common interface.

Ultimately, it depends on what you need the system or systems to do for your business. You may well find an ERP that has sufficient functionality in its HR module to keep you happy . If you want something a little more sophisticated on the people side of things, you may need to consider a separate HRMS. What is certain is that if you do end up with the “both” option, then for optimum functioning, they should be linked, integrated, and dealing with common data as far as possible.

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Dave Foxall

About the author…

Dave has worked as HR Manager for the Ministry of Justice for a number of years, he now writes on a broad range of topics including jazz music, and, of course, the HRMS software market.

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Dave Foxall