I’ll explain what a point solution is, why they’re considered bad, and why that’s bunk. I’ll discuss what the real problem is with point solutions — it has little to do with the point solution itself and everything to do with how it fits (or not) into your larger systems picture. I’ll even argue that if you’re not using at least a few point solutions, you’re almost certainly missing big opportunities.
What exactly is a point solution?
The simple answer is that a point solution is a product or service that addresses one very specific need. It specializes in solving that one particular problem really, really well. It doesn’t try to boil the ocean. It boils one pot on the stove.
Point solutions are in contrast to larger, conglomerate solutions — often called suites or platforms or “clouds” — that aim to address many different financial management system needs with a single product, product portfolio, or service.
But there’s a difference between acknowledging this as a legitimate cost versus assigning a blanket value judgment that any such integration must be inherently bad. It’s simply a trade-off. Point solutions offer more specialized capabilities (a benefit).
Arguably, conglomerate solutions are one way of trying to simplify the integration points between their different capabilities within their suites or product portfolios. Of course, that only works if the “specialized capability” you seek is directly part of their offering.
Some vendors are trying to offer better APIs for third-party point solutions, becoming more open platforms. This often gives you many more choices for more specialized capabilities — you’re not restricted to just what’s hardwired into the suite. Good APIs are one of the primary reasons that integrations between different financial management system technologies are getting easier.
And still others push making integration easier by hiding the complexities of integration under professional services.
More importantly, an organization can expand its cohesiveness by crafting a clear technology strategy and applying good technology governance. This includes establishing a well-defined process for deciding which point solutions — and which conglomerate solutions — to implement and how to handle the integration points between them.
Seeing the forest for the trees, but in a Japanese garden
The reason why point solutions are disparaged is the belief that they encourage myopia. So the campfire story goes: a rogue executive runs around, buying different point solutions for different problems, never taking the time to see how the pieces fit into a bigger picture, and leaving a massive pile of steaming integration work for his or her successor.
Now, I’m not going to say this tale of woe hasn’t ever happened. It has.
But it is not a technology problem. It’s a management problem. It is not a failure of point solutions, but a failure of point management. To hack an old adage: Point solutions don’t kill financial management systems. Cowboy CFOs kill financial management systems.
Such point solution myopia is sometimes framed as “not seeing the forest for the trees.” I think that metaphor is helpful, but I’d like to take it further. Because the organizational fabric of a modern accounting department — and the technology infrastructure that powers it — deserves more nuance.
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| Picture of a Japanese Garden |
A forest implies a bunch of mostly similar trees, indistinguishable from one another, growing wild, not maintained or cared for in any explicit way.
Like the forest metaphor, the sublime beauty of the garden as a whole is missed if you only narrowly stare at one plant or stone or goldfish at a time. In designing a Japanese garden, you want to think of the big picture, creating an integrated scene, to engage visitors and stir their emotions.
No two Japanese gardens are the same. They’re not random of acts of nature — i.e., not like a forest grown wild — but a hand-crafted, well-maintained experience. The best ones are highly memorable and worth paying to visit.
Could there be a better metaphor for a well managed enterprise?
You will not create a magnificent Japanese garden through myopic point management — spastically planting trees and dropping stones in a haphazard fashion, with no regard for the relationships between them. At best, the outcome will look disjointed; at worst, it will be truly hideous.
You need to think strategically and see the big picture as you’re planting.
But at the same time, you need to lovingly choose the right pieces for each spot. If you just go with whatever boxed set of plants happened to be on sale at your local grocery store — because that was most convenient — you’re unlikely to have the raw materials necessary to make your garden special. It makes a difference if you search far and wide for just the right Japanese maple and just the right stone lantern.
The Japanese maple and the stone lantern are point solutions. If they’re incorporated into a strategic design, they can elevate your garden to a glorious experience. On the other hand, if they were randomly scattered in a clutter of manic, myopic digging — point management — their potential would be wasted.
Point management (that is; siloed management) is always a recipe for disaster — in financial management systems and landscaping. But point solutions, when managed strategically, can be immensely impactful. It’s true, they often require a little more effort to find and implement. But the right ones, applied in the right context, can lift you from the ordinary to the extraordinary.
Let’s step back and remember that, in the big picture, financial management is not about technology. Financial management is about addressing enterprise efficiency patterns, concentrating focus, and creating desired financial performance results in every touch point in your organization.
Financial management system technologies — point solutions, conglomerate solutions, custom solutions — are merely means to that end.
There are two requirements to achieve that grand mission:
- Meeting (or exceeding!) the expectations of those responsible for the performance of enterprise assets.
- Differentiating yourself from your competition.
That is actually a pretty big challenge.
You pick the technologies that best help you achieve your strategy. You seek to minimize cost — integration costs included — but you also seek to maximize impact.
And a few choice point solutions will likely be a part of any good, high-impact strategy.
Why conglomerate solutions still need point solutions
Don’t get me wrong. Conglomerate solutions can be wonderful. They can give you many different capabilities, all bundled together, without having to connect those different pieces yourself. As stated previously, they give you a broad reach — and that’s quite valuable.
If you can adopt one or two conglomerate solutions to implement the majority of your technology strategy, that’s terrific. Conglomerate solutions can serve as the backbone of your technology infrastructure. Other things being equal, the fewer different software packages you have to integrate and manage, the better.
However, other things aren’t always equal. There are two reasons why you would want to supplement those conglomerate solutions with point solutions to achieve greater impact:
- The capability you want isn’t included in your conglomerate solution.
- The capability you want isn’t differentiated enough in your conglomerate solution.
I will wrap this up with one last point: conglomerate solutions and point solutions are typically more complementary than competitive. This is not an either/or choice.
To be sure, conglomerate providers are usually large companies, and they often acquire or develop point-specific features — mostly to compete against other conglomerate solutions. And in the zero-sum game that is your technology budget, everyone is competing for a slice from the same pie. So there is always some inherent competitive tension.
But more often, point solutions are beneficial to conglomerates. They resolve the two of the biggest objections that potential conglomerate customers could have: (1) a capability the customer wants isn’t included; and (2) a capability the customer wants isn’t differentiated enough.
This is why so many conglomerates are aggressively pursuing point solution providers for their “partner” programs. This is why so many conglomerates are expanding their APIs for third parties, to become more open platforms rather than closed suites.
Enabling point solutions to be more plug-and-play bolsters a conglomerate’s claim for being the backbone of a customer’s technology ecosystem. It is also helpful for point solution providers, as it addresses the number one concern that their customers have — how easy will it be to integrate with a particular conglomerate.
It’s win-win. And most importantly, it gives enterprises more freedom to assemble the right technology configuration to execute their unique strategy.
