Customization is a way of life for most ERP implementations. Only 10% of ERP implementations report no customizations and over 25% report significant or extremely customized ERP environments
The goal is tailoring systems to business needs and sometimes build a customer-specific platform on which to standardize company-wide processes. The end results, however are anything but standardization. Driven by a need to address a hodgepodge of ad-hoc business specific requirements with country by country variation in many cases, many customers end up with a footprint that doesn’t have any resemblance to industry best practice and in many cases results in a forced reimplementation or a large expensive upgrade to a more standard solution.
ERP implementations as recently as a few years tended to focus on an aggressive approach to customization. Faced with the argument that ” current best practice only meets 80% of what we need to run the business and no immediate cost impact – it was just too easy. Rather than adapt the process to meet out of the box, it was change the box to meet the as-is process.
It was just easier to deploy resources to meet the requirements, kept organizational change management considerations to a minimum and kept the army of consultants and support staff occupied with continuous upkeep tasks that added little to drive growth but kept increasing the complexity in small steps, hence the “feed the beast” phenomenon.
A vicious cycle of growing customizations resulting in an ERP environment that becomes cost and resource prohibitive to keep current and increasingly unresponsive to the new digital demands.
- All customizations stay unless you re-implement. Rarely does IT conduct a customization study to “weed out” minimally used customizations. Over time, the customization inventory continues to grow
- All customizations need to be carried over if you upgrade. A significant portion of an upgrade costs is related to evaluating the impact of existing customizations, regression testing, user testing etc. : money, resources, time that could be spent elsewhere
- Customizations beget more customizations. Once an organization veers away from vendor provided best practice, getting back on the highway for new and improved practices get that much more difficult. Changing business conditions require new and modified customizations creating a vicious circle.
Many customer engagements have shown that only 20% of all modifications in an ERP implementation might be used and trying to determine which customizations are no longer being used is nearly impossible
While not immediately visible to the business, these costs are not confined to IT alone:
Business (or indirect) costs of customization
- Decreased competitiveness: In today’s fast changing digital world, companies must be able to continually improve business capabilities without fear of disrupting entire systems. A complex, customized system stands in the way of such confidence.
- Speed to market: Consider a consumer goods company considering a move to enhance its product offering with digital services (such as moving from a subscription to pay as you go) model . This company cannot take months and years to change a highly customized order management and billing systems when a digital-born competitor can do that in days or weeks.
- Less responsiveness from IT innovation: With continued IT focus on “maintaining the beast” and limited resources, business continues to look elsewhere for innovation further widening the chasm between business and IT
On the flip side, it is not realistic that customizations can be avoided completely. The secret sauce is to limit the customization only to those processes which are differentiating and adopt best practice process in those that are not.
A modern approach to customization is one that offers a high degree of flexibility while maintaining the integrity of the core. Developing customizations on a development platform that is tightly linked to the core application capabilities yields the same benefits as customizations yet does not disturb the integrity of the core so necessary to ensure continuous innovations get delivered at the pace of business. All new modern SaaS based applications follow this approach. This extensions and platform based approach to customization enables companies to provide an “agile edge” without disrupting the core. Companies can continue to add new capabilities that reflect their uniqueness in the marketplace without having to customize their core ERP code and lower ensuing risks and costs. A win-win in all regards!