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3 reasons for considering ERP Configuration over ERP Customization

06 Mar

3 reasons for considering ERP Configuration over ERP Customization

ERP implementation is a huge change for all the organizations regardless of their size. It is not just because of the costs that make the selection of ERP software difficult but there are various other considerable factors also. One of those factors is the potential of the system to modify according to the expected outcomes of the organization. It is not as simple as it looks because there are multiple solutions available in the market that have this potential but are still incapable of becoming productive for the organization. That is where the fight between customizable and configurable ERP starts!

Before proceeding further, it is important to understand the difference between these two types of ERP.

ERP Customization

The customizable ERP are those that have the flexibility of modifying or extending a feature in accordance with the specific working standards and needs of a company. Customizing an ERP is referred to adjusting views as well as information i.e. coding of the system particularly for a company.

ERP Configuration

Configurable ERP is referred to as the systems that are already modified but require minor changes in the components for operating properly in a company. These changes include adjustment of language, time-zone, currencies and etc.

So, Which one to choose?

It is difficult to say that one is better than other but there are few reasons making configurable ERP an obvious choice for most of the companies. Three of them are discussed below:

  1. They Are Experienced And Understands Your Industry More Than You

Majority of the configurable ERP software solution have market experience that makes them mature. This is one of the most important reasons to be considered. Let me explain you with an example, an ERP with standard accounts, sales and inventory module cannot be productive in both sugar as well as the retail industry. Instead, a sugar ERP that has been already deployed in one or two sugar mill will understand the specific work procedures and requirements of the industry. In comparison, ERP customization will be time-consuming and involves a high risk of support as well. The experience gained by operating in the relevant industry makes it easy for ready-made solutions to answer the occurring issues in a relevant company.

The other main reason for considering configuration over customization is their understanding of the industry’s workflow. A customized ERP could be meeting the specific needs of your business but it usually fails to understand the standards and requirements of the industry. And this understanding can only be gained through experience because even companies fail to understand the minor important considerations of an industry. In other words, configurable ERPs offer the solution of all the identified as well as unidentified issues to a company while a customized ERP offers the flexibility of complete programming of the system.

  1. They Are Cost Effective

Although it seems like customization is the better choice because you can modify the system to a greater extent making it completely specific to your company’s operations. But in reality, it has been evident that companies have gone bankrupt because of the expense of customization. This is because there are long-term issues and bugs that have taken years to get resolved. While these additional customizations and maintenance costs are the unexpected expense that usually goes out of the company’s budget. Whereas there is estimated time given for customization but in the majority of the cases, those deadlines are of no use.

In comparison, configurable ERP software solution cost the same as budgeted because they are already tailored to the specific needs of the industry. Whereas the minor changes in the ERP components are made in the deployment phase therefore, there are no unexpected or extra costs. Other than this, the deployment scheduling is usually accurate as compared to customizable ERPs that make it easy to predict accurate budgets. Customizations in ERP usually results in unexpected bugs and issues that automatically increases its cost.

  1. Understands And Support Future Modifications As Well As Updates

Regardless of the industry, every company needs to modify and update their system on regular basis. That is the reason, companies are suggested to conduct detailed research and follow a complete screening process before investing an ERP. What does it actually mean to invest in an ERP system rather than buying it?

Whether you opt for configurable or customizable ERP, you need to regularly update it according to the changes in the industry and technology. For instance, you choose to invest in a configurable ERP that is also being used by your competitors or by companies with similar working standards. All you as a company needs to do is review their solution in order to analyze whether the system is meeting your organizational goal or not and research on the database of the software. You can have that solution in the exact predicted budget while in case of any updates after the implementation, the cost is negligible and you also do not require to exert any extra efforts for making the IT consultant understand those changes of the industry. This is because these consultants are already connected with the industry and understand the changes on their own.

Whereas, if you choose to have a customized ERP solution then firstly you need to be well-informed about your industry and have to present the solution to the IT Company/person you have chosen. Assuming that they have understood your specific needs and have deployed the software, any changes or updates after the deployment will cost you comparatively more and you still need to make them understand the importance of the update from the scratch. But you know what frustrating makes companies frustrated at this stage? That is the inability of your IT specialist of critically reviews the situation and provides a productive solution. And in most of the cases, the customized solution fails to support the on-going updates of the industry.

Concluding this discussion with the example of Hewlett-Packard (HP), one of the top Tec Company. It lost almost $160 million in the year 2004 because of implementing customized ERP solution. The main reason for this failure was the immaturity of the software to predict the possible issues that might occur after this shift. This also made it difficult for HP to respond to the crises and handle the situation. The lesson that can be learned from this example is that a company needs to predict and plan for the possible problems that might occur due to the implementation of an ERP. Other than just having the experience, the configuration of ERP is far cheaper than customizable ERP therefore; they are affordable by different sized companies.

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