By Robert Frost
When consulting firm Panorama Consulting Solutions shared their Top 10 ERP Industry Predictions for 2016, one of the topics predicted to feature in ERP discussions was whether or not to customize standard out-of-the-box functionality during an ERP deployment.
The Panorama report predicted that in 2016 ERP projects, which included elements of customization, would become more accepted by the mainstream. For a long time the word customization has terrified CFOs, CIOs and other executives. However, current ERP systems are making this concern a more acceptable and less risky form of implementation.
There are pros and cons to both customized and non-customized ERP deployments. In this article we take a look at what these are.
Horizontal or vertical ERP solutions
Choosing either a horizontal or vertically focused ERP vendor for ERP deployment can have a big impact on the amount of customization required, or even possible, the length of time it takes to deploy the desired solution, and the point at which a company can expect to see a return on its investment.
Horizontally focused ERP vendors can offer a solution that delivers a breadth of general functionality, such as manufacturing management, sales and purchasing or warehousing. These can be deployed out of the box, with only personalization changes such as company logos. In most cases, however, business processes will need to change to accommodate the way the software works out of the box. This can be advantageous as it presents an opportunity for the business to review and refine its processes to fit with the best practices provided by the software. In addition, a standard non-customized out-of-the-box deployment also means that users can start working with the software much earlier on in the project, increasing user adoption and minimizing resistance to change. Companies in this scenario will need to ensure the change management process is carefully thought out and impacted employees are kept informed and involved at all stages of the process.
Many organizations feel more comfortable selecting a well-known ERP vendor that can offer a strong brand name and backed up with impressive resources, services, and well-defined product roadmaps. Companies operating in niche or vertical industry environments, such as the food manufacturing for fresh food industry, will need to have this base software customized to meet their industry-specific or unique operational requirements. Although this can introduce more risk, cost and time to deployment, careful selection of the correct software vendor and best practice project management techniques can mitigate to control these adequately.
In a vertical industry environment it makes much more sense to choose a vertically focused ERP vendor. A vertically focused ERP solution should already include the niche industry functional and process requirements straight out of the box. This means that any industry-specific customization will be greatly minimized, leading to a smoother, quicker and more cost effective implementation, and faster return on investment.
It’s important that the chosen vendor understands the industry when deploying ERP in a niche or vertical industry. According to Panorama, more than 57 per cent of ERP implementations take longer to complete than originally expected. One of the main reasons for a project delay is the time it takes for the vendor to understand a business at the outset. A horizontally focused ERP vendor will have a much steeper learning curve to achieve the required level of understanding of a niche company’s processes and operational requirements. A vertically focused, industry-specific vendor will already know how a business works and have proven expertise in deploying solutions to similar businesses. With an industry specific vendor, chances of project delays are diminished and deployment time is optimized. This also means a company will start seeing its return on investment sooner.
The world we live in today is fully customizable
Tomorrow’s business managers, or today’s graduates and apprentices, are very comfortable in a customizable world. They expect to be able to customize everything from their social media account or cell phone, to their morning coffee. As such, this younger generation of employees will be the most adaptable users. Indeed, they would find a rigid out-of-the-box, non-customizable solution very hard to accommodate. Businesses should embrace this thirst for customized and unique solutions and use it to their advantage.
Protect your competitive advantage
Why would two competing businesses in the same industry use exactly the same business management software, following the same rigid business processes, achieving the same results? A business that takes the time to review and optimize its business processes to be as efficient as possible in their use of time, money and resources can gain a huge competitive advantage. At the same time the business will enjoy improvement to its profit margin and increased customer service and satisfaction. All of these factors will ultimately help it win more business; achieve business goals and growth potential. ERP software is the tool that makes this possible. And, when the ERP software is unique to a specific company, it becomes a unique competitive advantage.
What is the right answer?
There is no right answer to this conundrum. Every company in every industry is different, and each must find a level of customization that suits their business and their trading environment. It is critical for a business to weigh factors such as the uniqueness of the business and the requirements of a particular industry, whether its processes are flexible and adaptable to change and how its employees would react to any process changes or to the introduction of new software. Is the business able to effectively manage any change? It will be if the right balance of customization and out-of-the-box software is found.
Robert Frost is CEO of LINKFRESH Inc. Contact him at [email protected], or visit www.linkfresh.com