Week 05

Why many experienced ERP implementers recommend the organizations to not customize their ERP systems?

As discussed in the week three blog entry, companies have two choices when coming to implementing an ERP system, ERP system customization or organizational adoption (business process reengineering) (Zach and Munkvold, 2012). As a matter of fact there is a strong debate among ERP experts about organizations to avoid customizing their ERP packages, they believe that organizations should undertake business process reengineering (BPR) to adopt an ERP and not modifying the software packages (Sharma et al., 2012). They list some of customization disadvantages as:

  • Update/upgrade the customized system is difficult and cost the company time and money
  • Customizing an ERP system requires coding, so it seeks skilled programmer/developer
  • Manipulating/modifying the original code can cause disturbance in the system functionality/operation
  • Customization can use the vital resources of the company which may be required in the other sections

But we should bear in mind that any organization adopting an ERP system may need to do some customization, because it’s quite impossible to implement pure vanilla ERP system and get the desired functionalities from all the modules, In a report done by Panaroma Consulting (Sharma et al., 2012) they claim that only 23% of companies implementing ERP systems using vanilla ERP packages with no or few customization, so the level of modification is different; in fact vendors cannot develop a system which covers all the business processes and fulfills the needs of all companies.

So organizations should try to avoid crossing the system boundaries set by the vendor (which leads to high customization)

Although many researches indicate that highly customization can be a main factor of system failure, some authors believe the opposite way. As Liang and Xue (2004) argue that the ERP system should be customizable in different levels with minimal need of BPR (Zach and Munkvold, 2012).

What are the risks of the ERP system customization?

Here is the summary of ERP customization risks (BABIC, 2009):

  • Go-Live – customization is a time consuming process, so it can delay the Go-Live stage of the system and the more it takes, the less the organization gets benefit of ERP.
  • Official support (Help) – Usually vendors are responsible for the standard package they offer, so extensive amount of customization can terminate the support of the vendor.
  • Upgrade – Normally ERP development lifecycle is 2-3 years, whereas ERP implementation lifecycle can takes between 5-10 years, so upgrading in the middle of implementation phase for highly customized systems would be a big problem.
  • Regression – An ERP package consists of different business processes and functionalities, so customizing module A of the package can cause incorrect functionality from module B, so the greater the customization the higher the risk of malfunction in other modules.
  • Know-how – There is always people with the knowledge of the standard ERP systems to hire
  • Vendor lock-in – One of the advantages of a standard ERP system is that the organizations are able to switch between their partners easily

What does a need to customize say about the willingness of an organization to affect BPR?

For some organizations the unique business process is their competitive advantage to the others, so it is quite impossible for them to adopt their business process to the ERP system (BPR) (Sharma et al., 2012). This is mostly common among small or medium size companies which majority of them only implements some modules/elements of the ERP system in order to facilitate their business operation. So they prefer to take the risk and customize the ERP system. In fact the research done by (Zach and Munkvold, 2012) shows that openness of the ERP system in order to implementing it is one of the key selection criteria.

There are also other reasons for organizations to customize their ERP packages that we can divide them in two stages (Zach and Munkvold, 2012Rothenberger and Srite, 2009):

1-      Prior to Going-Live

  1. Resistance to change
  2. Unique business process
  3. Specific organization structure
  4. Functional misfit
  5. Ownership type (mostly applicable for small/medium size companies which owner is the CEO)
  6. Motivation of the ERP implementation (Technical Vs. Strategic)

2-      After Going Live (post ERP implementation)

  1. Stage of growth – business is dynamic and companies are growing, so more functionalities needed by time
  2. Maturity of the ERP system – mostly applicable to local vendors

Other authors (Rothenberger and Srite, 2009) also include some other elements in the list such as shortage of IT competence, or lack of knowledge and experience with the ERP system, but these problems influence the customization indirectly, because they can be avoided with the help of consultants working along with the system implementation team.

References:

BABIC, V. 2009. Top 7 reasons why to avoid (much) customization [Online]. navigate Into Success. Available: http://navigateintosuccess.com/blog/top-7-reasons-why-to-avoid-much-customization.

ROTHENBERGER, M. A. & SRITE, M. 2009. An Investigation of Customization in ERP System Implementations. IEEE Transactions on Engineering Management, 56, 663-676.

SHARMA, R. R. K., PATIL, S. M. & TANDON, A. 2012. CUSTOMIZATION AND BEST PRACTICES MODEL FOR ADOPTING ERP SYSTEM: AN ANALYSIS. International Journal of Business Strategy, 12, 1-9.

ZACH, O. & MUNKVOLD, B. E. 2012. Identifying reasons for ERP system customization in SMEs: a multiple case study. Journal of Enterprise Information Management, 25, 462-478.

Leave a comment

Filed under Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s