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I had an interesting discussion with a prospective client the other day about the pros and cons of customization during an ERP implementation. As we outlined in a recent blog, most companies customize their enterprise software to a certain degree, which can elevate implementation cost, duration, and business risk.

However, this person had an interesting counter-point. Despite the potential risks and downsides of customization, there are upsides as well. Companies with true competitive advantages in their industry are likely to have one or more key business functions that are not addressed by leading ERP software vendors. The added costs may be immaterial compared to the potential upside, especially for a larger high-volume company. Therefore, customization can become somewhat of a necessary evil.

However, there are a few caveats to this perspective. First, as with any indulgence, customization can be acceptable only in moderation. ERP implementation failures often over-customize to accommodate an endless array of user requests, so it is important to have strong project governance and controls in place to ensure you are only customizing functionality that is absolutely necessary.

Second, don’t let customization be an excuse to choose the wrong software. An effective ERP selection process should weed out the software solutions that are not a good fit for your operational needs, which will minimize your need to customize the software.

Finally, customization should not be a surrogate for leveraging the best-practices embedded in your ERP solution. If the functionality in question is not a core competency or competitive differentiator (think G/L or procurement), then carefully consider the processes that are built into the software. It may be difficult to change your business to fit the software, but it may be the lesser of two evils in such instances.

Just how does customization affect ERP implementation results, such as cost, duration, and overall satisfaction? Read our 2010 ERP Report to learn more about the results of over 1,000 organizations across the globe.