Why Are More Companies Customizing Their ERP Systems?

One of the common misconceptions of ERP systems is that they provide out-of-the-box best practices that can be easily implemented.  In other words, the idea is that there is no need to re-engineer business processes when you can simply use the pre-configured best practices and let those drive new workflows.  As a CIO looking for ways to simplify your ERP implementation and mitigate risk, this is exactly what you want to hear, so it must be true.  Right?

Based on new data that we are about to publish from our 2011 ERP Report, that doesn’t seem to be the case.  According to our detailed study of nearly 200 implementations across the globe, the number of companies that adopted vanilla ERP software with no customization dramatically decreased from 28% in 2009 to 15% in 2010.  In other words, companies are actually customizing their ERP software solutions more now than they were a year ago.  This fact seems to counter much of the industry’s messaging highlighting the simplicity of Software as a Service (SaaS), pre-configured industry solutions, best practices, and other tools meant to calm the nerves of CIOs under mounting pressure to do more with less resources.

So how can this be?  There are a number of forces at play here, which we outline in our forthcoming report.

First, expectations are more unrealistic than ever.  As we see from these and other metrics outlined in the report, expectations of CIOs are not aligned with reality.  Much of these unrealistic expectations are driven by the market itself – again, every CIO wants to hear that their ERP vendor will allow them to implement with ease, at a low cost, and with minimal risk.  However, companies are overly optimistic about their ability to do this, which leads to problems later on.

Second, companies are more complex and ever-changing than they were a year ago . Mergers and acquisitions are increasing, staffs are more lean, and companies are starting to grow again, all of which put pressure on the simplified vanilla ERP software model.  After all, if your organization is growing and trying to outperform the competition, you probably don’t want to use generic software that everyone else is using, except perhaps in non-differentiating areas such as accounting or procurement.

This isn’t to say that you should follow the market and start customizing your ERP system simply because other organizations are.  However, it is important to realize that most companies do in fact have to customize their software to some degree, even with pre-configured workflows and best practices.  The key is to have realistic expectations and plan and budget accordingly.

In the meantime, watch for our upcoming 2011 report in early February and register for our upcoming ERP webinar that will summarize results from the study.

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.

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One Comment

  1. Eric,

    Change management has such an impact on an ERP project, as you have written about previously. The risk of this element alone is enough to derail most projets. You’ve identified the reasons, quite clearly, that companies are increasing their modifications. It isn’t enough to have consolidated financials and one set of code to support. Business requires agility. Today’s markets are much faster, leaner and meaner and it is not possible to dither along with a “base” application that doesn’t fit your needs. So the customizations increase.

    By eliminating change, to the ERP, companies can begin to mitigate if not eliminate the risk. CIO’s can continue to adopt the rapid, agile changes that their users require without compromising the base/existing integrity of their current ERP. Single purpose Apps can be designed, executed and measured in a matter of hours – many in less than one week, that eliminate customizations to the existing system, protect against broad sweeping change by deploying simple, incremental, grass-roots innovations at the point of greatest opportunity. Users will be able to utilize the tools they already use: Browsers, Email and Excel. Mobile BabbleApps reside in the cloud, including on-premise, and meet the exact business requirements without disruption or delay.

    Customizations will continue and likely grow as the global economic impact of the past few years begins to straighten itself out. Opportunities to capture new markets, merge, or offer increase customer value innovation will accelerate. New regulations, compliance mandates and competitive threats will continue to demand more from a company’s performance in real time. There is no fighting change. Successful companies will leverage change as a competitive advantage by challenging the tried and true approach of ERP only systems support.

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