The Right Balance: How Much Business Intelligence Should an ERP System Include?

The debate over how much Business Intelligence (BI) functionality should be embedded within an ERP system is far from new, yet it remains as relevant as ever. ERP systems serve as the central engine of business operations, generating a wide variety of data: financials, HR, logistics, and more. Naturally, these systems come with standard, must-have reports—balance sheets, profit and loss statements (P&L), and cash flow analyses—that are crucial for day-to-day operations. But as specialized BI systems like Tableau and Power BI have grown in popularity and capability, the question emerges: should ERPs try to match these tools in flexibility, or focus on core reporting? And how can AI bridge the gap between the two?

The Power of BI Tools and Their Limitations

Leading BI tools have evolved to offer robust, self-service reporting and analysis capabilities. Business users, even without deep technical expertise, can manipulate data, create custom dashboards, and extract valuable insights from them. However, this flexibility comes at a cost—namely, overwhelming richness of features and functions. And, while these tools are incredibly powerful, they are not data producers. They rely on external systems, often leading to challenges with data integration, data quality, consolidation, and delta replication. In many cases, companies introduce some kind of data warehouse technology (e.g. Snowflake, Databricks, Redshift, Big Query,...) in between, driving additional complexity, indirection, and cost.?

In contrast, ERP systems are the primary source of business data. In essence, they are the "production unit" for business transactions, and all of the essential data originates here. This gives ERP systems an inherent advantage in reporting and analysis; they have access to data in real-time, without the need for replication or complicated integration processes.

ERP Systems: The Case for Standard BI

The key advantage of an ERP system is its direct access to the data it generates. Therefore, it makes sense for ERP systems to offer embedded reports, analyses, and dashboards, especially when it comes to standard metrics. For example, a SaaS ERP system can—and should—offer out-of-the-box metrics like Monthly Recurring Revenue (MRR), Customer Acquisition Cost (CAC), Churn Rate, and other standard SaaS metrics. These are not just well-documented; they are also (mostly) reliant on data that the ERP produces itself. By delivering standardized dashboards for these key performance indicators (KPIs), the ERP system can provide immediate value without the need for external tools.

This is particularly valuable for businesses that don’t have complicated data needs beyond what the ERP system already generates. In these cases, the necessity of BI systems diminishes, as an ERP system with robust reporting capabilities can handle most day-to-day needs. And for those who don’t want the complexity of a fully-fledged BI design environment, these pre-built dashboards are a perfect fit. Of course, there will always be a desire to define calculations differently or visualize the data in other ways. On the other hand, setting a standard can be a value too. In many cases, it’s the development over time (am I improving?) that is more important than the actual values.?

The Limits of ERP-BI: Flexibility and Customization

The limitations of ERP-based BI quickly become apparent when you consider more complex custom requirements. While ERP systems may excel at providing standardized reports, they often struggle when it comes to customization, e.g. driven by industry-specific reasons. Some ERP systems do integrate BI creation and design tools, but these tend to be less flexible and user-friendly compared to standalone BI platforms.

As a result, even if the ERP offers a BI tool, business users often find it too cumbersome to navigate and turn to consultants for implementation and design. This setup makes ERP BI tools less dynamic—once a report is set up, it is rarely changed by the end-user. Therefore, rather than mimicking a BI tool within an ERP, a proper API-based interoperability is the better direction to go.?

Enter Generative AI: A Game Changer for Custom Reports

So, rather than trying to replicate the complexity of a leading BI tool within an ERP system, there is a more efficient path forward: leveraging generative AI to create or modify reports and dashboards. Imagine a scenario where, instead of requiring a deep understanding of report design, a business user could simply prompt the system in natural language:

“Show me a comparison of MRR across the last three quarters, broken down by customer segment.”

This request would trigger a generative AI model to create or modify a dashboard on the fly, eliminating the need for a full BI design tool within the ERP. This approach keeps the system simple yet flexible, empowering users to make changes as needed without an overwhelming user interface. It might not offer the full pixel-perfect design capabilities of a dedicated dashboard creation environment, but is that really needed in so many cases?

AI can not only help to generate UIs, it can also be the tool to dynamically edit and execute the corresponding calculations. E.g. if there is a need to customize the formula for MRR, an appropriate prompt to the AI framework will make this happen - given the underlying ERP is flexible enough to handle this.?

A Standardized Approach for SaaS Companies

For SaaS companies, which rely heavily on well-defined business metrics, an ERP system could deliver standardized reports and dashboards right out of the box. The literature on SaaS business metrics is extensive, and many of these metrics (such as MRR, LTV, CAC, and ARR) are based on data that the ERP produces.

The key benefit here is that SaaS companies often share similar reporting needs, which allows an ERP system to define and deliver standard dashboards. This approach eliminates the need for constant report-building and offers immediate insights, reducing the burden on the business to invest in a separate BI tool. Private Equity firms tend to standardize their way of looking at the performance indicators across the portfolio companies (at least those in the technology sector). And also across PE’s there is a widespread agreement on what and how things should be reported.?

The Role of External BI Systems

So where do specialized BI systems like Power BI or Tableau fit in? These tools shine when businesses need to consolidate data from multiple systems or analyze data from sources outside the ERP. In these situations, BI tools are invaluable because they can handle data warehousing, integrations, and complex analyses that go beyond the ERP’s capabilities.

However, if your business primarily relies on a single ERP system for its data, out-of-the-box analytics is highly appreciated. In this case, the most efficient path would be for the ERP to deliver robust out-of-the-box reporting with the flexibility to handle ad-hoc queries through AI-generated reports.

Conclusion: Finding the Right Balance

There’s no one-size-fits-all answer to the question of how much BI should be embedded into an ERP system. It ultimately depends on the complexity of the business and its data needs. For businesses with relatively simple requirements or those that predominantly rely on ERP-generated data, robust embedded reporting and generative AI capabilities can offer a powerful, cost-effective solution.

For more complex businesses that need to integrate data from various sources, specialized BI tools still have an important role to play. The future, however, might see ERP systems leveraging AI to blur the lines between static reports and fully customizable BI environments, giving users the best of both worlds: simplicity, flexibility, and immediate insights.

The whole story, by the way, holds true also for planning and budgeting tools. That’s even more intertwined with finance / ERP processes as we are talking about write-back transactions.????

In a forthcoming blog, I will write about the most important metrics for SaaS businesses and how they can be calculated and visualized within an ERP system.?