Out-of-the-box, configurable or customized ERP?
ERP system’s lifetime makes in average 10 to 15 years. As a rule, customized systems are being used much longer, that’s why they’re gaining popularity among customers.
Currently, only 25% of companies install 80% out-of-the-box systems. One third of customers prefer not more than 60% of standard functionality. At least 20% of clients customize 60% of the software, and so forth.
Business should correspond to the dynamic environment with flexibility.But first let’s clearly define the basic types of the ERP systems.
- Standard (/out-of-the-box/vanilla/ready-made etc.) is the ERP system delivered by vendors. Functionality can be configured with tools and templates provided by them.
- Configurable ERP system is the software with functionality that can be elaborated with tools shipped by the vendors. Usually is compatible with vendors’ future software releases.
- Customized (/custom/customizable etc.) ERP system is the one developed according to customer’s requirements to create brand new functionality, either with standard vendors’ tools or without them.
Let’s briefly compare the solutions mentioned above.
- Cost. Customization seems to be more costly at the first glance. In fact, on the contrary – customization of an open source solution is usually much cheaper than cost of the out-of-the-box system license.
- Integration. Implementation of a standard solution gravely influences organization, rewiring its workflow and other processes. Whereas customized software is flexible enough to adapt to company’s requirements, needs of project teams or even certain employees.
- Functionality. Standard solutions offer many elements, functions and processes, useless or even harmful (distracting, confusing) for employees. Customization leaves only the functionality indeed necessary for the company’s activity.
- Reporting. Flexibility of reports is directly related to system’s flexibility. Thus, within the standard ERP system users receive much irrelevant data, and might pass over important information, which is unacceptable in terms of dynamic and highly competitive market environment.
- Development. Both market and companies are constantly changing. The ERP system is supposed to correspond to these fluctuations. In case of standard solution obviously new software should be installed every time. Customized system is much more likely to comply with the development of business processes.
- Innovation. Vendors of standard ERP systems would release bug fixes and functionality upgrades throughout the year. However, important improvements are usually reserved for new product releases (i.e. new licenses required). It is much easier to implement or upgrade features within custom software, with closer relationship between a customer and a developer. But the important point here is to carefully pick the developer in the beginning.
With no doubt, standard software represents current best practices within an industry, by this preventing from making typical mistakes. First, it draws upon certain industry standards. On the other hand, it’s based on the previous experience of the company’s peers. Let’s not forget: initially, out-of-the-box system used to be customized projects successfully trialed on various customers to eventually become a standard solution. Customized systems might sometimes ignore these aspects, risking becoming divorced from reality.
Selection of an ERP system, whether it is an out-of-the-box or customized solution, depends on specific requirements of a customer. But lately customized software has been gaining popularity among customers because it usually satisfies company’s individual needs, and is able to immediately respond to market’s fluctuations. Nevertheless, there’s an ongoing debate: still, what is considered as an essential advantage in one case, can yet turn out to be a drawback under different circumstances.