When you are implementing an ERP system—like Dynamics 365—for your business, there might be some questioning about whether you need customization or not. You might even find articles out there raving about why ERP software customization is not the best idea and that ERP configuration is a better approach. And this is a question that most executives would expect to be ‘No, you don’t need a customized ERP system.’ But being honest here, most implementations will require some sort of customization at some point, especially if you want to set realistic expectations for your business goals.
In fact, according to an ERP Survey about ‘The Real Facts About ERP Implementation,’ the results showed that:
- 10% of the respondents required minor customization for their implementations
- 33% of respondents required ‘some’ customization
- 37% of the respondents needed customization
With this, and based on my experience, I could say that more than 80% of the time—I could even dare to say 90% of the time—customization was required to fully implement the solutions effectively.
So, don’t try to avoid customization or run away from it. At some point, you will need it. Why? Well, because of your initiatives. In this sense, you will need that your ERP functionalities are prepared to meet your business needs.
Here’s an example for you
Years ago I saw a company struggling to meet their new business requirements due to their uncoordinated Dynamics 365 platform. As some of their internal processes required automation, they needed a system able to meet their needs. Their main goal was to improve their KPI’s by bringing in workflow optimization through reconsideration and automation of their current processes. But a key point for them was to maintain their current business culture and to not compromise their competitive advantages areas.
With customization the company was able to improve their strategic planning and productivity by bringing their ERP together without compromising these competitive areas and by adapting the original functionalities of the ERP to their business reality. By these, they manage to save costs on organizational management and to improve their KPI’s. A perfect fairytale ending where everyone lived happily ever after and the company managed to make their goals come true. They couldn’t have achieved this with an out-of-the-box solution, and I will tell you why.
What are the main struggles of having a vanilla ERP system?
In my opinion, you will set yourself for disappointment if you think you can develop a project with zero customization— well, technically, you can, but be prepared to find yourself wandering around circles thinking about how to fix this and that. Spoiler alert, in the end, you will take more time and expend more money than necessary. Why? Well, because sometimes cheap becomes expensive, and trying to save money on a zero customization policy can lead you to compromise certain areas of your business including your organizational management.
In this sense, what are the challenges of a vanilla ERP? Here is what I noticed.
1) Every Business is Different
The main thing and one of the main struggles of a vanilla ERP—and this one comes out of pure common sense— is that all businesses and organizations have different needs, goals; they belong to different markets, they manage their processes differently, etc. So, inevitably they will require different solutions, functionalities, and approaches to fit with what they actually need. Moreover, not all clients will require the same solutions, nor will they have the same problems. This wouldn’t be a multimillion-dollar business if we could get solutions out of a magic box—or, as some people say, an ‘out-of-the-box solution’ that could be applied to everyone, right?
2) Different businesses, different needs
Put it differently; imagine ERP as a cake mix. There are thousands of different cake mixes in the market. If you go to your local store, you may even find that they even come in different flavors and presentations. Chocolate cake mix, vanilla cake mix, carrot cake mix, birthday cake mix, and the list go on and on. They all serve the same purpose—make the batter that will be baked into a beautiful cake. But here’s the thing, if you go and read the instructions on the back of the box, you will find that most of them require three ingredients, oil (or butter), eggs, and water. That’s it, nothing more than that.
In the end, the final result can be pretty surprising, but what if you like your chocolate cake with extra dark chocolate? Or what if you want to bake a green cake for your four-year-old son that loves ‘The Hulk’? Yes, you will still buy the cake mix—mainly because you can go wrong with one— but you will add that extra something that will make your cake x10 more amazing. In this case, get prepared to use the green dye and add a few drops so your son can eat the ‘hulk green’ cake that will make him happy on his birthday— which was your main goal when you reached for that cake mix in the first place.
3) All ERP systems have their limitations
There so much an ERP system can do for your business, but keep in mind that every single functionality is a prefabricated model that is meant to suit the standard business processes and that at some point, you may find that it lacks something that you need—like the green dye I used to make my four-years-old son birthday cake ‘Hulk Green’, just as he requested. And that’s when you will find yourself looking for customization. There so much an ERP system can do for your business, but keep in mind that there are some limitations.
Moreover, another way in which a vanilla ERP can be contra-productive is regarding your Organizational processes. ERP implementations require significant changes, which often include organizational change management. In this way, when an organization is unable to accommodate into a new environment, things can get tricky—to say the least. At this point, you get where I am trying to get at, right? But, everything I said can be solved with one thing, customization.
What is ERP Customization? Maybe I should have addressed this earlier in this article—sorry if I kept you reading this without mentioning a very important detail— nevertheless here we are. To comprehend what kind of ERP you need to understand that every system has its standard applications and functionalities to designated processes somehow, adapt those functionalities, so they are able to meet your needs, you will to either configure or customize your ERP.
Customizing ERP means modifying its applications on a macro scale so that they are able to meet your specific business or requirements. These customizations are intended to build another solution—a better one, that is to say—or to change the pre-existing one that comes with your ERP. What is the main goal of customization? to solve functional misalignments between the embedded ERP processes and the existing business processes.
In this way, if you need to:
- Modify or enhance the existing features in your ERP
- Add another task management processes
- Add new features and options that are not included in the original system
- Configure the applications so they can include support for third-party functions
In those scenarios, you will need to customize your ERP. So, having this off the table, let’s continue.
To consider: How does Configuration differentiate from customization?
ERP Configuration involves modifying a solution. On the other hand, customizing Dynamics refers to developing new solutions. One modifies, and the other creates.
Getting your ERP to meet your strategic initiatives through customization
This is where things get interesting. I talked about how your ERP can be limiting and, in some cases, not aligned with your business needs and your organizational reality. This is why, maybe in this stage, customization may sound like the solution to all your problems, but here is the thing, sometimes the cure might be worse than the disease. What I’m trying to say here is that you need to be very careful and strategic when deciding what to customize because letting your customization go too far—resulting in an over-customized ERP— is a recipe for disaster. To avoid this, what you need is to have strong control over your project and governance in the right place so, if you want to be able to get your ERP aligned with the strategic initiatives, you need to know your business plan from all angles.
Align your ERP to your business needs and goals
Like I said, to be able to align your ERP to your business needs and goals, you need to analyze your business plan.
The answer is very simple. If you don’t know what you want, how can you know what you need? In this way, having a notion of and identifying what the quantifiable and tangible results that you expect to perceive from implementing an ERP in your organization are, it’s what’s going to provide you with the governance mechanism that you need to sort out which are the areas that you need to customize or not to customize to achieve your strategic initiatives. Moreover, you need to ask yourself, If I customize this or these functionalities that require me to invest X amount of money and Z amount of time—not to mention the risk factor— to implement the customization, how will my business benefit from it?
Once you have the answer, you will set yourself on the right path.
Customization and Organizational Change
Remember when I talked about organizational change as one of the limitations of a vanilla ERP? Well, here’s the deal, there is one thing you need to keep in mind about customization. Customization can be expensive, that’s true. But, it is a necessary measure that most businesses that don’t invest in organizational change will find themselves involved with.
What is organizational change?
Organizational change is the process in which an organization transitions from a process, method, or environment to another.
The reason for this is that if you don’t invest in organizational change so your employees can adapt and transition into a new environment without resistance; you are very likely to resort to customization. In this way, if your employees are used to working in a specific environment, and they find themselves comfortable with it, consequently, they are going to require changes to adapt the new functionalities to fit what they are accustomed to. In other words, either you manage the change and invest in it, or invest in customization.
What are the advantages and disadvantages of ERP customization?
At this point you need to know something; customizing can create problems, but so does ‘not customizing’ and adopting a ‘zero customization policy.’ So let’s clear out what are the advantages and disadvantages of ERP customization.
Advantages of ERP Customization
- You will have complete control over the system. When you customize an application of your ERP, you gain control over it, and you can change it as you want it to—you own ERP.
- With customization, you are more likely to meet your business’s specific requirements as your ERP functionalities will be customized according to your needs. In this sense, you will be able to tailor apps and functionalities to your liking.
- You won’t have to sacrifice your specific competitive advantages due to the lack of flexibility. With customization, you will be able to maintain and modify your ERP functionalities around your competitive advantages.
- You will gain scalability. As businesses grow and evolve over time, with the customization, you will be able to make your ERP grow with you.
- You can manage your organizational processes more efficiently as you can have them adapted to your reality.
- You won’t have to invest in organizational advantage as you will be able to adapt the different functionalities according to your current reality and business culture.
Disadvantages of ERP Customization
- You can experience problems during the implementation of the customization and afterward
- It can be expensive and timely. As it is a process that requires lots of coding, analysis, and testing, it can be costly and timely.
- The more you customize your ERP, the more likely you are to introduce some bugs by accident.
- It is a risky process as you can over-customize your ERP
What’s the next step?
You can save yourself from most of the aforementioned disadvantages by ensuring to count on an experienced team of developers. In this sense, if you are worried about the bug issues and the risk of over-customizing your ERP, our team can help you with that. Reduce risks and get the most out of your ERP with our team of experts. Contact us for a free demonstration. But if what you want is to have a team—within your own organization— capable of customizing your ERP, which can be very advantageous for you as you will be able to customize without resorting to third parties, you can up-skill your developers to meet the skill set required to customize Dynamics 365 applications.
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Finally: Getting your ERP to meet your strategic initiatives through customization
I am almost done here, but before wrapping this up, you need to know that customization is an option. To customize or to keep your out-of-the-box—vanilla sort of flavor— ERP is all up to you. Will you benefit from customization? Of course, but it is something you can’t take lightly as it involves a lot of risks, takes time, and most importantly, requires an important investment. So, make sure to team up with the right partners or to count with the best team possible to minimize any downfalls and make the most out of your ERP.
In addition, thank you very much for reading this article. I hope you found this useful, and remember you can count on us anytime. This was Brandon Ahmad from Instructor Brandon and Dynatuners. See you next time!