How heavy customization doom projects
Big firms such as Nike planned to go the whole nine yards ensuring that their ERP system would be absolutely custom fitted to their needs and desires. Sure, the additional modifications and
customisations would indeed add a few more thousands to their ever growing expenses, and the project may get delayed by a month or two, but in the end it would work out perfectly right? Wrong. The $400 million upgrade to the supply chain and ERP system resulted in the company losing $100 million in sales and their stocks crashed by 20% as a result of this fiasco.
The failure of the ERP system can wreak havoc for any company. Excessive ERP customization is often blamed for these disasters. ERP customization refers to the process of modifying the existing software and programs as per the requirements of the firm. Customizing the ERP program takes a lot of additional resources, time and financial investment –and it almost inevitably results in the project going way over budget and gives a system where the company has to rely on non-tested functionalities. A case in point would be the United States Navy who sunk over $ 1 billion in four different ERP projects that all resulted in failures.
The following are three main reasons why custom-made solutions end up causing more problems than ever before:
Increased Complexity and long term costs:
A company that demands heavy modifications to the system has to invest large upfront capital before they can reap the benefits of the ERP. Often time the changes are very narrowly focused and even minor deviations in business practices or related legal regulations render the entire system outdated. Once the firm has invested large capital in an on premise system, they are financially bound to a certain degree to continue using the system and upgrade the same solution for years to come. The ERP programs have to be individually customized each time the ERP system has to be updated to support the evolving industrial environment.
Upgrades to the system are continually delayed
ERP vendors periodically release new versions of their software and add new features and services. A customized ERP system is not able to mesh fully with the new version and data is often lost in the process. The firm is dependent on customization consultants to alter the customized codes each time that the system has to be updated – which adds a significant amount to the ongoing operational expenses. These additional expenses and problems are a hindrance when the firm decides to update heavily customized system. Companies tend to delay the upgrades to their system – sometimes indefinitely. This makes the company vulnerable as it is not able to adapt to the rapidly changing business environment and requirements.
Best practices are compromised
ERP vendors expend a significant amount on R&D to develop the best, standardized system that incorporate the industrial and legal requirements. Customisations to the system may result in the company failing to adhere to the industrial best practices and cause a lot of financial and legal woes.
If a company finds that it needs to customize the entire ERP system, it would generally indicate that the chosen solution is not the ideal one for them. Looking for an industry-specific ERP solution would help the firm in minimizing the amount of customisations required to make the system compatible with the business needs.
Companies need to understand beforehand that heavily customizing their ERP system greatly escalates the potential for disaster. The initial upfront investments required are exponentially greater and both the short and long term operational costs are significantly higher. The industrial best practices tend to be compromised in the long run and the consistent delays in updating the system leads to the firm becoming a dinosaur in the dynamic business world.
Contributor : Vidushi