Functional Architecture is a term that originates out of enterprise architecture. It deals with how systems function to carry out end-to-end processes in order to maximize efficiency. Like most topics involving ERP systems, there are a few schools of thought when it comes to systems design. In this blog, I’m going to walk you through the advantages and disadvantages of a functional approach to ERP architecture.
Functional architecture is an architectural model that identifies enterprise functions, interactions, and corresponding IT needs. At its core, is a design paradigm. When you have information, processes, or different solution modules and need to organize them into an enterprise system, you can use functional architecture as a framework.
Through a business lens, we can use this design paradigm to organize and interface all sorts of things from an end-to-end process perspective enabling functions like — inventory, customer or vendor management, logistics, human capital management, finance, mobility, and data capture to support an enterprise-wide ERP system.
Systems design is an important step to execute before jumping straight into ERP implementation. It allows you to think about how the components of your business relate to one another in the grand scheme of things. Because an ERP system connects to accounting, warehouse management, logistics, etc., laying out a system that allows you to quickly understand the relationship between these components can be incredibly valuable.
Let’s walk through an example. Say we’re designing a mousetrap. We can look at the pieces through an objective approach: a piece of wood, a spring, a place for bait, and a metal bar. From a functional perspective, we can see that the metal bar functions as a restraint and must be pulled back by the spring in order to deliver the fast action to retain the rodent. To function properly all of the pieces must function effectively, and bait must be placed in order to lure the mouse into the correct position.
In the example above, merely obtaining all of the parts needed is not enough. They must be assembled with regard to the other pieces, and to do that, it’s best to consider the function of each individual piece and the role it plays in the overall mousetrap. When applied to ERP and other business technologies, you can see how the picture gets more complicated. With the introduction of new technologies, diverse products, and different vendors, using a functional approach to ERP systems can save you a lot of headaches and help you build a better mousetrap, so to speak.
Taking a functional approach to your ERP system has a few benefits. The first is that it gives you a better view of how different aspects of your business connects. By outlining how each input and output of your ERP system functions, you can get a better grasp of how different conditions may affect your business overall.
Another benefit of functional architecture is that it saves you work in the long run. By examining the relationship between modules and end-to-end processes, much of the foundational work you put into a functional system will remain evergreen. You can alter the pieces, but for the most part, the way things relate to one another tends to stay the same from the functional perspective.
This is beneficial for businesses that want to remain up to date with new technology as it evolves, allowing investment to be targeted and value-driven instead of transformational each time an organization looks to upgrade technology platforms. The functional architecture will save you from doing double the work.
One last advantage of implementing functional architecture is consistency. This benefit comes into play when you have existing infrastructure and want to add additional technology to your system. Often, companies know exactly what their system is missing because they have identified a pain point, functional lapse process gaps and inconsistencies in some area of the business.
With a functional architecture, it’s easier to identify where that process will be impacted or improved within your system and fill it with a technology that fits the bill. To top it all off, you can be sure that you have all of the pieces you need with a functional approach and be sure that everything will fit together.
As with any school of thought, there are disadvantages to a functional approach as well. In instances where organizations have a silo-based approach to transition thinking to leverage functional enterprise architecture, significant transformation is required to implement enterprise operating models and significant organizational change.
If you are looking to do an ERP lift and shift update, a functional approach is just not practical. Some argue that the effort required to get humans to change from individual business unit thinking, which is difficult to overcome the resistance of employees to change.
A downside to the functional approach is that it can lead to operational silos within an organization. Sometimes, workers who are organized based on function become near-sighted and only focus on the specific functions of an ERP system that pertain to them. While this does promote specialization and ownership over particular technologies and workflows, this can also lead to overarching disconnect, which is a problem for most ERP customers.
Are you considering a functional architecture approach for your business? I hope this article has provided some clarity, no matter where you are in your digital transformation. If you’d like more customized feedback regarding a functional approach to ERP systems or if you have any additional questions in general – please reach out to me directly. Happy to be an informal sounding board for your digital transformation journey.