Rimini Street CTO Eric Helmer looks at whether enterprises should customize or configure their ERP system in this latest post in his composable ERP series.
Enterprises that look to satisfy most business requirements know that they must modify their out-of-the-box ERP systems. By making adjustments to their SAP or Oracle ERP system, an enterprise can fine-tune their processes to achieve better functional fit and enable better business outcomes. With the industry moving from a monolithic, one-size-fits-80% ERP approach toward composable ERP strategies that utilize multiple, best-fit solutions, the question becomes: “Should I customize or configure when adopting a composable ERP strategy?”
In this piece, I look at the differences between customization and configuration; and propose a path forward for enterprises that want to have nimble and flexible ERP systems.
Composable ERP is built using modular services
A composable ERP strategy is one in which an enterprise chooses a mix of vendors and technologies that best meet their needs — compared to relying solely on a single vendor’s ERP suite. When an enterprise adopts a composable ERP strategy, it must undergo a philosophical shift: where the enterprise used to be constrained by the ERP vendor’s underpinning technology, it can now focus on finding best-fit solutions that can be configured to support business outcomes. Although the configurable component must be integrated with the core ERP, going this route reduces the need to customize (and maintain) partial-fit solutions within the ERP vendor’s application and technology stack.
Utilizing a composable ERP strategy has many benefits, including the ability to shape the applications environment to specific needs, evolve at one’s own pace, and as a result, extend the life of the current ERP system.
If an enterprise wants to successfully configure a composable ERP solution, there are several , but the core tenant is the targeted utilization of additional technologies outside the core ERP system to achieve better business outcomes. This is accomplished by using best-fit vendors that address specific needs, such as Workday for HR tasks or Salesforce for customer relationship management needs.
But there’s more to consider. Say an enterprise has adopted a composable ERP strategy but is now looking to further differentiate their ERP portfolio to achieve a tactical advantage over their competition. The question they must answer is this: Should the enterprise customize or configure their composable ERP solution? Before we can answer this, it’s important to understand the differences and benefits of the two options.
Differences between configuration and customization
Although the two words may appear to have similar meaning, customization and configuration are terms that describe different ways an enterprise can modify their ERP system. The key distinction is that customization involves making a change, modification, elimination, or addition to the underlying code of a given system to achieve an outcome not available out-of-the-box, whereas configuration is more about fine-tuning the system within its available configurable parameters.
To think about this another way, a customization is something that is completely proprietary to a given enterprise. The enterprise invests time and resources to produce code that is completely novel for a given system. This is the main advantage of the customization approach: bespoke code is a unique, valuable asset of the business.
However, this benefit is not without risk. Customizations can quickly morph from having a targeted purpose to becoming unwieldy. Once you open the Pandora’s box of customization, it often empowers the business to choose to simply “modify the code” to gain a desired functionality. When this happens, customizations can get completely out of control. I’ve seen some that are tens of thousands of lines of code — without documentation — which is a maintenance nightmare. When customizations become unruly (and most software vendors won’t support customized code), some IT departments deploy teams specifically designed to support these modifications and to troubleshoot when changes to the code break the application.
Contrast this with configurations. While customizations are net-new code created by an enterprise, configurations are tweaks inside the vendor’s provided set of intentionally modifiable options to achieve a particular output. This is like the equalizer controls on a high-end sound system. A jazz fan can dial in the bass, mid, and treble to achieve the perfect sound for that genre of music. And that same system can be configured for an optimal output of rock music. The listener simply configures the system’s settings for optimal listening satisfaction.
Configurations are not proprietary to a specific enterprise, but there is a degree of sophistication needed to dial them in for your enterprise. However, the main advantage is found in the available support: because you are configuring a vendor’s system for your needs, that configuration should retain full support from the vendor without the maintenance overhead.
Agility and flexibility are key benefits of configuration when adopting a Composable ERP strategy
Customizing code is certainly a way to achieve better functional fit or differentiate your business. However, you may be able to achieve a similar fit/competitive advantage by adopting a composable ERP strategy and configuring the modules, with the added value of improving agility and flexibility versus customizing core ERP code. Why is this?
First, by integrating a variety of different technologies with your ERP stack, you’ll be able to create a highly modular system. This flexibility (aka the system is easier to change) effectively future proofs your entire system against unexpected events. It also makes the resulting ERP portfolio more agile (aka it can be change more quickly). This results in a long-term ROI when compared to the inflexibility of a monolithic system. When you adopt a composable ERP strategy, you may begin to see different interplays within these systems that optimize for your business objectives in a way that outperforms your competitors.
Second, within each of these modules, a business can specify configurations that maximize specific business outcomes. So, not only is the enterprise yielding better results by adopting a particular SaaS technology, they are also enhancing those results by fine-tuning both the SaaS application and core ERP system. By having variability in both the underlying application and technology stack and in its associated configurations, enterprises can create a unique system that would be as hard to replicate as a system that is customized.
Looking at agility in more depth, a composable ERP strategy allows the enterprise to move at the speed of its own internal roadmap rather than being locked to the core ERP vendor’s pace of innovation. This freedom of innovation should result in a better long-term ROI. Additionally, when an enterprise refrains from changing the underpinning code, it is far easier to support and troubleshoot, which results in a system that should be less costly and less cumbersome to maintain.
The key to success with configuration is that the products and services included in the composed solution must be able to achieve the desired business outcomes through configuration. If it can’t be configured to fit, then it may not be the right choice to replace custom ERP code. If it can be configured to fit, step back and watch the benefits roll in.
Looking for thought-provoking, educational content? Check out Street Wise, your one-stop shop for authoritative articles, interviews, blogs, and more from industry leaders on today’s hottest topics.