Enterprise resource planning systems (ERP) have become irreplaceable over the last two decades. As at 2017, 81% of organizations were either implementing ERP software or completed implementation. But due to the rapid technological changes, the issue is still pending for many companies. With the inevitability of upgrades, you, as a CEO or CIO may still hesitate if it is better to build your own ERP system or buy a prepackaged solution.
Why Companies Are Dissatisfied with Their ERP Software
Technological advances and economic changes influence the way companies estimate the efficiency of their ERP systems. And, unfortunately, these estimations are often not in the favor of the latter.
The very first reason for disappointment is the discrepancy between expectancies and reality. Overstated market promises turn into implementation backlogs, ill-fitting software, support lags, and staff dissatisfaction.
Old-fashioned ERPs are quite rigid and demand reorganization of the whole workflow to fit the software. It makes customization painful since every business has its unique logic — and this logic needs to be flexile and adaptive.
The shift to new technologies is backbreaking for old-line ERP vendors. Often, they put much effort in the support and maintenance of their products’ old versions and are not ready to re-platform and re-create their software to adjust it to the new digital realm.
It gives an advantage to smaller and newer vendors, as well as ERP developing teams who act towards new customer needs.
ERP Solutions: New Demands
To be competitive, modern enterprise resource planning systems can’t do without new technologies which are rapidly taking over in all industries. Implementation of these innovations gives big advantages. And those who begin earlier have a head start over those who still cling to the past. At the same time, as such novelties are themselves still developing, it means your enterprise system should be very flexible and self-contained to react quickly. These new ERP essentials include:
Cloud-based platform. Cloud-based solutions help to save on extra IT staff and hardware. It makes ERP software more affordable even for SMB sector. It also allows access to the system for any employee from any device. Such solutions are easily scalable in case of the company growth.
IoT feature. With IoT (the internet of things), the work of devices gets totally or partially automated via the internet connection. It ensures better interaction between devices. All data is accessed effortlessly from any connected device. It improves communication and speeds up decision making.
Big data processing and database consolidation. With the increasing amount of data and its growing influence on business performance, it is important that all company’s data are consolidated into a single database, available for all users and easy to access and analyze.
Integration with AI. Artificial intelligence boosts big data processing and predictive analytics. It helps to optimize workflow through the analysis of how members of the organization interact with each other on the daily basis. It can also be used for monitoring employee performance and digital assistance.
Learn more How new technologies influence modern business processes.
Switching to this new realm, again, gives rise to a dilemma: search for new ready-made options or choose custom developed solutions?
ERP Build VS Buy: How to Make a Right Decision
So, how to make a right decision? Chris Doig, an IDG contributor network advisor, proposes to start with building a comprehensive requirements list to evaluate your company’s needs for the software and to rate them for importance. There are techniques, like reverse engineering, which help to discover even the hidden needs (which is useful no matter whether you will decide to buy or build).
Analyze vendors’ options to check if they meet the requirements of your company. If the coincidence is less than 80% or if any important features are absent, then, it is better to think about custom ERP development.
Let’s look at some generalities which should be taken into account when making a choice between an in-house and off-the-shelf ERP options.
Off-The-Shelf ERP Software: Advantages and Pitfalls
When starting the investigation of ERP software options, you immediately come across dozens of ERP vendors, from such giants as SAP and Oracle to much smaller companies specializing in your specific field. With such a vast choice and seemingly fast closure of the question, it is easy to make an emotional decision in favor of a canned solution. In some cases, such a decision will be the only correct or even the only possible. But not always.
What is usually not on the surface is the duration and the cost of implementation and customization. Many CIOs mention that the largest difficulties and contingencies caught them off guard when it came to customization of the bought ERP to the real needs of their business. There are simply no prepackaged ERP solutions which would fit any organization even in one field.
Another problem area reveals itself when facing the future. If yours is a dynamic, evolving company, you want your software to adapt and grow with your business. And, as we have already mentioned, one of the significant weaknesses of prepackaged ERP software is its rigidness. The majority of canned ERP products will not allow meaningful modifications. Taking into account the technological spikes we deal with here and there these days, it may result in starting from scratch in some 5-7 years. Which will drop further expenditures and work delays.
When It Is Better to Build Your Own ERP System
Though more costly and tedious, building custom ERP solution can unlock a lot of benefits over time, and provide a high ROI.
Custom ERP software is designed to fit your workflow instead of attempts to fit your business processes into the ERP functionality. It also alleviates employees training due to the design tailored to their real practices. So, it will certainly fit you better if you are totally satisfied with your business logic and don’t want to change it in favor of a ready-made solution.
In-house solutions are unique and never come with unnecessary features. While most ERP vendors bundle up to 40 applications into their product. Taking into account that many companies don’t ever use 60 to 70 % of their canned ERP systems, it is a great waste to pay for a predetermined set of functions you will never need.
On the other hand, it is easier to integrate your custom solution with a wider set of applications and databases — those which you really need and use. Companies are complex and dynamic today. Different departments within your firm can have different planning needs and file the reports in a different way. Thus, they may need different ERP techniques. Building your own ERP allows creating one comprehensive platform instead of using multiple programs and platforms for various needs. It brings higher efficiency due to storing all data in one place.
And, actually, you may save while developing your custom ERP when you choose the right approach to the development.
How to Take Advantage from Custom ERP Development
Many negative statements about custom software development come out of bad previous experience. And the main problem is when the development team doesn’t understand the needs of the business. That’s why to build a great ERP system, you need a skilled development team ready to delve into the specificities of your workflow. A good team can even help you to modify your initial vision and reach better performance.
What you certainly win with is iterative development. That is, you may start small and deploy pieces of your ERT in iterations, testing each piece and doing necessary amendments on a course. It reduces immediate costs since your payments will also occur in iterations. And it will allow you to start using separate modules of the system (for example, accounting) earlier and get ROI much earlier.
Learn What else you should take into account when embarking on a large IT project.
Another important issue when dealing with a remote development team is the quality of code and documentation. It gives more opportunities to scale your solution or integrate new modules and features. And it leaves you free to cooperate with any development team in the future (or even introduce an in-house developing department) without the risk of starting from the very beginning because of the code nobody can deal with.
You may learn How to check the quality of IT company’s code here.
Conclusion
Software industry is facing rapid innovations these days. It influences ERP solutions, which are currently undergoing massive changes trying to comply with new business logic and technological advances. For many companies, it means that their old ERPs do not meet new requirements and should be replaced.
Despite the initial costs, developing custom ERP system is well worth time and money if you have in mind building a flexible and innovative business of meaningful scale. ERP tailored to your company needs helps to escape lots of workarounds and be open for new business opportunities.
The positive experience of dealing with the custom software depends on the right choice of the developing company. The main demands for the developers lie in the areas of willingness to understand your business logic, quality of code, iterative development practices, and readiness to work with leading-edge technologies.
Originally published in Stfalcon.