ERP – to customize or not customize – that’s the million dollar question. Part 1

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I am going to weigh in here on something that might seem a little off topic for Business Intelligence but isn’t at all.

Should you customize your ERP, a bit more than a little, to match your “Organizational IP” (OIP)? This intellectual property is your company’s identity - how it operates and works - it’s the “know-how” piece of the intangible asset - Goodwill.

Sadly, when it comes to ERP, one size simply cannot fit all and properly encapsulate OIP without customization.

Business done well means that “how” you do something is reflected in “what” you deliver to your customers. As a business, you must do some things that are important to others and which are important enough for them to pay and support you – that’s a given or your business is dead.

But when you find something that makes you relevant, how do you differentiate from others who have found the same thing?

OIP is the answer.

“How” you go about it, be that design, culture, how you communicate, what you choose to emphasize and what you choose to ignore, will make the defining difference in how you ultimately separate the value of what you deliver from others.

Think Apple and Microsoft or Oracle and IBM. These businesses overlap massively in many areas. In the areas of greatest overlap, it’s how they go about things that will enable their customers to make an aligned choice when the fundamental offerings are similar. That “how” is Organizational IP.

Coming back to an ERP focus then, ERP is about Enterprise Resource Planning - matching the resources available with the tasks at hand. That “matching” has an enormous amount to do with OIP. Given the many moving parts that come together to shape OIP, it’s as unique to a business as a fingerprint. Is it any wonder then that organizations, out of necessity, feel the irresistible urge to customize their ERP systems to reflect (and get full competitive advantage) from their OIP.

You’re in fairy land if you think a group of North American or European software vendors can produce a one-size fits all ERP that encapsulates your OIP to maximum competitive advantage. You can certainly implement these systems without customization if your OIP is low value. If it’s high value, you will feel a burning desire to make the software comply to your valuable processes and ways of doing things rather than the other way around.

There are several large, expensive, and unwelcome outcomes of customizing ERP systems. I want to highlight a couple.

Firstly, processes lose their agility. Good OIP is not entirely static. At the highest level, when things are going well, it’s generally an unshifting set of guidelines on matters of identity. However, as that translates through to the lowest level of processes, it becomes highly agile. Not fluid and in constant flux but processes that are able to tweak and shift according to changing environmental pressures in order to stay relevant and deliver on the higher levels of identity.

That agility begins to disappear when a change requires change in the ERP. This is even more so when large amounts have already been spent on customization as budgets disappear.

Responsibilities become blurred when things aren’t working as they should. Vendors stand away from customized products - sometimes rightly and sometimes self-servingly. When things aren’t working they explain that their warranties were only good for the product as it shipped, not for any subsequent customization. This has two damaging outcomes in both cost to rectify (for which there is no relief from warranty provisions) and in the friction in the process. High cost to achieve change means due diligence and blame shifting while time ticks on and windows of opportunity close. None of these things contribute to brand building and customer satisfaction. We know these 2 must be at the top of the daily to-do list but they get sacrificed.

Less direct but far more profound is the handing over of your capability to be agile. Your business agility becomes only as good as your ERP vendor’s ability to keep up and willingness to give priotity to changes in their products that will fuel your agility. These are large things to put at risk outside of your control.

Even if those required changes come through, generally long after they were needed, if you’re customized you are now at the whims of both vendor and implementer as the lengthy and costly process of upgrading a heavily customized ERP spins into motion.

So what to do and how can you use Business Intelligence applications help?

That’s coming in Part 2 which will be released in June.

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