ERP Software Customization: The Ultimate Sin of Enterprise Software?

Customization is one of the most controversial topics surrounding ERP software.  A majority of our clients have every intention of leveraging vanilla, off-the-shelf software during their software selection process.  However, as project teams get into the details of the software during the implementation cycle, requests to make one or more customizations to the software are inevitable.

According to our 2008 ERP Report, only 23% of organizations implement vanilla ERP software with little to no customization.  The remainder of organizations in our study customized their software, with 34% indicating that they heavily customized their software.  According to our same research, large companies with over $500 million in annual revenue are even more likely to customize their software, as are companies in the aerospace, defense, and government industry verticals.

In addition, an organization’s propensity to customize software seems to be at least partially driven by the specific ERP solution being implemented.  For example, as outlined in the below table, SAP and Microsoft Dynamics implementations tend to involve customization at a higher rate than Oracle EBS or Tier II solutions.

ERP Software Vendors Average Rate of Customization

Heavy CustomizationModerate CustomizationVanilla Implementation
Oracle EBS34.40%40.00%25.60%
Microsoft Dynamics32.80%42.20%25.00%
Tier II ERP Software Packages23.50%48.10%28.40%

The reason for the controversy around customization is threefold,  First, it increases the complexity and risk of an implementation, while at the same time making it potentially more difficult to upgrade software in the future.  Second, it in some ways undermines the best practices built into the software, which software vendors often spend significant R&D developing.  Thirdly and finally, customization is often a symptom of bigger problems, including a solution’s mismatch with a company’s requirements or a lack of project controls during implementation.

So what to do?  Here are three tips to help manage customization of ERP software implementations.

Three Tips to Help Manage Customization in ERP Software Implementations

  1. Understand the difference between software customization and ERP package configuration. Configuration is the normal set-up of the software, such as parameters, fields, and workflows.  These changes are a normal part of any implementation and do not require changes to the source code.  Customization, on the other hand, requires changes to the source code and also requires a higher level of technical sophistication.  Often times, business requirements and objectives can be met via configuration and set-up instead of customization.
  2. Ensure clear, company-wide definition of business requirements. One of the primary drivers of customization is lack of direction regarding business requirements.  If business requirements are not well-defined, it is more likely that a project team will bastardize the software to meet requirements as they are defined.  In addition, clearly defined business requirements will ensure you choose the right enterprise solution during your ERP software selection process.
  3. Establish solid ERP project controls. Without strong project controls and project governance, a project team is more likely to customize every item on the users’ wish list without prioritizing, rationalizing, or identifying potential solutions within the core functionality of the system.  The executive steering committee and project manager need to clearly define criteria for potential customizations, including conducting a cost-benefit analysis of the customization to ensure that you are only customizing where is provides the company with a unique competitive advantage and where there is so viable workaround within the system.

Every company is unique and no single ERP solution is going to meet 100% of a company’s requirements.  However, keeping these three tips in mind and finding the right ERP software with the best functional fit will ensure that your customization needs are minimized.

About Eric Kimberling

After 15 years of ERP consulting at large firms including PricewaterhouseCoopers and SchlumbergerSema, Eric realized the need for an independent consulting firm that really understands ERP. He began his career as an ERP organizational change management consultant and eventually broadened his background to include implementation project management and software selection. Eric’s background includes extensive ERP software selection, ERP organizational change and ERP implementation project management experience. Throughout his career, Eric has helped dozens of high-profile and global companies with their ERP selections and implementations, including Kodak, Samsonite, Coors, Duke Energy and Lucent Technologies. In addition to his extensive ERP experience, Eric has also helped clients with business process reengineering, merger and acquisition integration, strategic planning and Six Sigma initiatives. Eric holds an MBA from Daniels College of Business at the University of Denver.

Related Posts


  1. Eric – we are nearing go live on schedule and under budget. How do you define customization? Is it % of Z codes? We believe we are very vanilla with only 4% of t-codes being customized. But, i’d like to understand how we benchmark on your scale.

  2. Customizations are like a drug.

    Some customers use it to dull a pain that they are having as they get used to the new system, which is fine and even expected, if it is done responsibly.

    Others use it to solve every minor ache and pain that they experience because they want to keep on doing exactly what they did in the past with their old software system, not realizing that it’s the old practices that are causing the problems, and just changing their bueinsess lifestyle a little would help them get healthier and fitter without the use of system altering drugs. Eventually though they will hit rock bottom – usually when a release comes out that they want to move to, and they realize that they have pinned themselves into such a corner that they are unable to upgrade because of all of the modifications that they have made.

  3. With 17 years of ERP implementation experience I have found that a lot of companies actually truly believe that they are so different / unique in their business processes that they feel there is a necessity to “customise” their ERP solution to handle these processes. I just don’t agree with this basic point of view.

    “It can’t be done otherwise!” is a much heard phrase. I have fought many boardroom battles and stood my ground on this issue.
    Sure, certain companies have business processes that can not be handled the way standard package configuration will do. Many organisations I have visited however also feel this way even with standard purchasing or sales processes. It is like the previous commenter mentioned: “let’s put old wine in a new bottle and keep doing what we have done for years.”

    A lot of it has to do with expectations. Expectations that come from end-users but also from management.
    And just maybe, we all, as software implementors and ERP buyers, should be much more focused on handling these expectations and be a lot tougher on customisations.
    But then again: customisation are obviously a large part of the earnings of the implementor. Just look at the figures presented in your study.

    Future ERP buyers: maybe you could look at it as a suit. Try to fit your requirements in a standard suit of the shelf and choose your size.
    Do not have the tailor sell you a tailormade suit upfront UNLESS it is standard package customisation.
    And if it still doesn’t fit: maybe you should consider slimming in the waist or tighten the belt a little.

    Take some time to think about this. Many organisations were shocked to see that their, paid for, customisations needed a lot of re-doing when it was time to upgrade. Double costs hence unhappy customers.

    And if, after due consideration, you still decide that customisation is needed:
    Put this outside of your ERP domain and integrate with up to date technology. Dynamics , SAP and others have integration tools available which are working fine these days. Reliable and fast.
    Last but not least: discuss and agree with your ERP vendor / implementor on a prolonged warranty for a perfect fit after upgrades of your main ERP. They will be reluctant but keep pushing.

    John Aalders

  4. All great comments and I agree with everything here.

    Gary, your level of customization would fall in the middle “moderate” level consistent with 40.6% of SAP implementations. Nothing unusual, but there are organizations out there that are able to implement with less changes to the software.

    Murray, I really like the drug analogy. In addition to providing a humorous analogy, it is also very true. It always starts with a single gateway customization – “we’ll just do this one customization and that’s it.” The next thing you know, you’re in rehab trying to figure out what happened and to fix all the damage you’ve done to the system.

    John, all great points. I like the suit analogy. Most reasonable people that don’t have extraordinary clothing budgets will agree that finding a suit that fits and making slight alterations is preferable to a completely tailored suit.

  5. Is there a common methodology for calculating the ongoing cost of a customization? I know most every company will determine the initial cost in hours or dollars but I have yet to find a best pratice for determining the ongoing cost of customizing a delivered application.

  6. I would like to followup on Eric’s point for determining the percentage of customization. You indicated that he in in the moderate level so can you explain how you put him at that level. We implemented hr/payroll about 2 years ago and have about 250 custom reports/interfaces/enhancements with 8 mods to the system. I curious to know where we would fall in the percentage.

    “Eric – we are nearing go live on schedule and under budget. How do you define customization? Is it % of Z codes? We believe we are very vanilla with only 4% of t-codes being customized. But, i’d like to understand how we benchmark on your scale”

Leave a Reply

Your email address will not be published. Required fields are marked *


Enter Text From Image Above