Customizing ERP: Advantages and Disadvantages
“No customization” is one of the most common mantras we hear about ERP systems among our global client base. However, as ideal as a zero-customization ERP implementation might sound, the unfortunate fact is that most organizations must customize their ERP systems – at least to some degree. While most executives want to manage their implementations by simply using basic configuration, setup and personalization of the software, an overwhelming majority end up making fundamental changes to the source code.
Two things are clear: 1) Most organizations fear customization, and 2) most fail to implement ERP software without customizing it. While it is possible to customize any ERP system to some extent, it isn’t always necessary—or the smartest way to go about getting what you need. Before you purchase an ERP solution or consider customizing the one you have, keep in mind these thoughts about the concept of ERP customization:
Disadvantages of ERP Customization
ERP customization can create problems during implementation. Most executives have read the horror stories of ERP failures largely attributed to over-customization of the software, so it’s only natural that they would err on the side of “no customization” to mitigate the associated risks. Customization is hard to manage, can break your implementation budget, and can indicate a reluctance to change inefficient processes rather than taking the opportunity to review processes to see how features offered out of the box by today’s ERP systems can be improved or even eliminated. Perhaps most concerning, however, is that customization is sending your organization down a path of relying less on proven, out-of-the-box functionality, which should be a big concern for any CEO, CIO, or implementation project manager.
ERP customization can create problems after implementation. Upgrades become more difficult since the code often needs to be rewritten to support newer versions of the software, which often leads organizations to defer upgrades – sometimes indefinitely. When we look at trends of our newer clients, most are looking to replace their old ERP systems largely because they’ve customized the software so much that they can’t (or aren’t willing to) take advantage of newer versions of the software because of the associated risks. So, the more you customize, the farther away you veer from the natural evolution of the software—which means missing out on all the great advances it offers.
Advantages of ERP Customization
As much of a no-brainer that “no customization” might seem given the above two points, there are advantages to customizing your ERP.
“Vanilla” ERP systems can create strategic disadvantages. The main challenge with ERP is that, no matter how good it is, it cannot address 100% of your organization’s needs. ERP systems cannot do it all; therefore, they involve tradeoffs: flexibility versus standardization, one single system for all functions/departments versus a best-of-breed approach, and a host of other compromises. Once you add your organization’s areas of competitive advantage to the mix, you suddenly have some pretty compelling reasons to customize at least a handful of areas in your ERP system.
“Vanilla” ERP systems can create even more organizational change issues. Each and every ERP implementation involves fairly significant organizational change management issues, but these challenges are even further magnified when the organization is making little to no change to the software to accommodate the current realities of the business. While this “pure vanilla” approach might be the best route to pursue for some organizations, it is a reality that needs to be addressed via more dedicated focus on a comprehensive organizational change management plan. A good rule of thumb is that only areas of competitive advantage should be even considered for customization.
It’s Not Black and White, but Here’s a Game Changer
Unfortunately, there is no black-and-white answer to this issue, and there are very compelling arguments to support both sides. At ArcherPoint, we find that most mid-size to large organizations need at least a minor amount of customization to protect areas of competitive advantage and mitigate change management risks. This, in and of itself, isn’t a bad thing, provided those organizations are able to contain and isolate the level of customization via effective project management and governance, while effectively addressing change management issues.
If you’re considering a new ERP system, be sure to get a firm understanding of how much customization it will require—and make sure the task of customizing is as easy and cost-effective as possible. For example, Microsoft has made it significantly easier to address the issue of customizing Dynamics 365 Business Central. With Events and Extensions, tailoring Business Central to meet your specific needs is much simpler and faster, making the decision of “to customize or not to customize” much easier. Read more about Events and Extensions, and contact the ERP experts at ArcherPoint to discuss your ERP needs.