Enterprise resource planning (ERP) systems are robust business administration solutions that streamline core organizational functions, including financial, customer relationship, and supply chain management operations. Implementing an ERP solution is an expensive investment and a strategic step that can reshape a company's business processes. Therefore, organizations must dedicate time and effort to defining the optimal solution for their needs before making a decision.
One of the key challenges is choosing between ready-made ERP software and a custom-built ERP system. This article provides helpful insights into how to select ERP software that will work best for your company.
7 Factors to Consider When Choosing an ERP
- Alignment with business processes.
- Implementation timeline.
- Costs.
- Integration.
- Scalability.
- Security.
- User training.
Off-the-Shelf Vs. Custom ERP Software
So, what kind of factors should you consider when evaluating potential ERPs?
Alignment with business processes
Out-of-the-box ERP solutions serve a wide range of companies with standard, well-established processes. Their limited customization capabilities may overlook specific operational needs required by particular businesses in various domains, however.
On the other hand, such software can include excessive features and functionalities not applicable to a certain business. This redundancy can result in a cluttered interface, confusion among users, and additional maintenance efforts.
With custom ERP development, businesses can address all the unique requirements that off-the-shelf solutions cannot adequately cover. Extensive customization is crucial for industries with complex, multi-step, and highly specialized processes.
Implementation timeline
Off-the-shelf ERP software comes with pre-built modules and features, so it’s ready to deploy as soon as a company acquires it. ERP vendors have established implementation processes based on their internal quality management best practices and methods. A tried-and-true process streamlines the implementation, making it predictable and efficient.
By contrast, implementing a custom ERP system is more time-consuming because the development of a complex solution from scratch or heavy customization of open-source software, tailoring it to your needs, will require more effort and resources. Iterative development and testing, which are both vital for seamless ERP implementation and user adoption, contribute to the extended timeline.
Costs
Ready-made ERP solutions require lower entrance costs because vendors mostly offer their software for a subscription fee. With transparent licensing costs, organizations can easily budget for their ERP solutions. Thanks to quicker implementation, businesses can realize the benefits of the ERP system sooner, which potentially means a faster return on investment. Off-the-shelf solutions may have hidden costs for maintenance, upgrades, and security, however, as well as high fees for any customizations and advanced support services.
Custom ERP solutions typically involve higher initial costs due to the development of tailored features and functionalities. In the long run, however, they enhance productivity and reduce operational expenses, fostering financial growth. In particular, custom ERPs can incorporate diverse capabilities and extended functionality, minimizing reliance on external tools, and thereby saving on licensing and maintenance costs of additional third-party software. Besides, a custom solution’s flexibility allows for easy adaptation to new business requirements without significant additional expenses.
Integration
Out-of-the-box ERP solutions typically offer pre-built integrations for commonly used applications. These standardized connectors simplify the integration process, making things accessible for businesses without extensive technical expertise.
Custom ERP systems often come with customizable APIs, simplifying integration with third-party applications. Your ERP implementation provider can also build a tailor-made solution already integrated with all the necessary corporate and external systems to meet the most deliberate business requirements and ensure smooth data flow between the ERP system and other applications.
Scalability
Although many ERP vendors actively enhance the scalability of their solutions, it can come at a cost for their customers. Usually licensed to customers for a particular plan presupposing a certain number of users, scaling the solution to include more seats can become expensive.
Custom ERP software offers the advantage of tailored growth planning. This means businesses can design and implement features that precisely align with their unique scalability requirements, making them ideal for dynamically growing companies.
Security
Security is a shared responsibility between the ERP vendor and the user. Although the ERP vendor ensures the security of the core system, users must manage access controls, user permissions, and other configuration aspects. Reputable ERP vendors invest in robust security measures to protect their systems and customer data. They also release regular security updates and patches to address vulnerabilities.
In the case of custom development, a company must conduct thorough security assessments itself and ensure everyone follows best practices during development and maintenance. On the bright side, custom ERP solutions allow for advanced, tailored security measures addressing specific business cyber risks.
User training
Vendors of ERP systems usually provide customer support, including training materials and help desks. What's more, due to the widespread use of many off-the-shelf solutions, customers can often find a wealth of community forums, online tutorials, and third-party training resources. Besides, such ERP systems often have interfaces that are consistent with the best industry practices and familiar to many users. This familiarity can reduce the learning curve for users who may have experience with similar systems.
In the case of custom ERP solutions, developers train users on functionalities directly relevant to their roles and the organization’s unique workflows. These training materials must be created specifically for the organization, however. Besides, custom ERP systems may have unique interfaces. Though this can enhance user experience in the long run, it might result in difficulties during the initial adoption stages.
How to Choose the Right ERP
First, you should identify and document your business processes, operational requirements, and specific challenges.
Second, define what you aim to achieve, whether it’s improving efficiency, enhancing customer service, or gaining better insights through data analytics. Businesses should consult key stakeholders from various departments to understand a company's needs comprehensively.
Third, clearly define your budget for ERP software implementation, including upfront costs and ongoing maintenance expenses. Be realistic about what you can afford and consider the long-term return on investment. Additionally, you can engage ERP consultants to guide you through the selection process and help you make the best decision.
In general, out-of-the-box ERP software is likely to be the optimal choice for businesses with:
- Standardized processes and straightforward operations
- Time and budget constraints
- Slow to moderate growth patterns
- Popular software applications in use
- Common security needs
In contrast, companies should consider custom ERP development in the case of the following:
- Complex and unique workflows
- Rapid growth or dynamically changing business requirements
- Extensive and complicated integration needs
- Advanced security requirements
Make an Informed Decision
Choosing between off-the-shelf and custom ERP systems is a strategic decision requiring a clear understanding of your company’s current and future needs as well as your budgetary constraints. You should analyze how well ERP software will fit your business processes and consider the implementation timelines, costs, and flexibility.
Though out-of-the-box ERP solutions offer quicker deployment and initial cost advantages, custom development solutions provide tailored ERP functionalities crucial for industries with unique or complex workflows. Thorough consideration of each option’s pros and cons, ideally coupled with ERP expert advice, will help you invest wisely in your company’s IT ecosystem.
