As a child I always liked to build my own teddy bears – as the Build-A-Bear workshop slogan says, “I can make my own best friends,” because I can design what suits my preferences, and I can build what meets my needs. Wait! Isn’t this the reason people like to customize things? When the question comes to an ERP system, does customization apply to it as well?

Our recent study shows that only 25% of companies choose to heavily customize their ERP systems. While 28.3% of companies choose not to customize their ERP systems at all, the majority of companies tend to do at least some customization during implementation.

ERP systems are designed to provide a solution to improve business processes at the industry level. Very often there are differences between the functionality provided by the ERP solution and the unique requirements of the end users. When this occurs, some customization is necessary. It allows new processes to align with the organization’s existing processes, which enables not only a smooth transition from the old processes, but also a better fit between the ERP system and the end users.

However, customizing an ERP package is inherently expensive, complicated, and tends to delay delivery of the obvious benefits of an integrated ERP system. Since customization requires reprogramming the standard software functionality, it creates potential risks when companies upgrade the ERP system. In some cases the customizations will be overwritten during an annual upgrade and the original customizations will have to be reproduced. Therefore, companies may end up paying for customizations every time they upgrade their ERP system.

To customize or not customize? That is the question! The high rate of mostly vanilla customization projects (47.8%) indicates that limited customization is the choice for companies who understand the importance of the process but are trying to avoid the risks and delays resulting from heavy customization. That being said, one benchmark does not tell the entire story. In my opinion, it would be wise to determine the level of customization based on organizational needs and the organization’s original business case. A well-defined business case, which takes all the current and potential risks into consideration, would be significantly helpful in determining the optimal level of ERP system customization.

Blog entry written by Haoyan Sun, Research Analyst at Panorama Consulting Group.

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