Is Custom ERP Development Worth It?
<p>Enterprise resource planning is a transformative technology for any company. But why would you need a custom ERP with such a large number to choose from? Here are some reasons why.</p>
Enterprise resource planning is a transformative technology for any company. But why would you need a custom ERP with such a large number to choose from? Here are some reasons why.
While traditional solutions in this field are nothing new with plenty of giants already on the market, more and more enterprises choose to go with custom solutions. In this article, we determine whether this move is justified.
One reason for that is the transformation in the software development industry. Particularly the decreased cost. But are these tailor-made solutions really that cost-effective and efficient? Let’s take a closer look.
The Gist of Enterprise Resource Planning
Enterprise resource planning (ERP) systems are one of the quintessential types of enterprise software. They combine business processes in a hub from where you can easily manage your entire business. The range of its functions includes production management, order processing, business resources monitoring, CRM, payroll, inventory management, provides data on revenue, expenses, staff, clients, and much more.
Gartner has coined the term “postmodern ERP” which is the next logical step in the evolution of this technology. This means that different modules these systems have can be replaced as they become outdated or redundant. The main benefit of these postmodern solutions is that they adapt to the needs of each company while the traditional ones are delivered as-is. As a result, by their nature all custom ERPs are postmodern.
What Business Problems Does It Solve?
It sounds great on paper but the real question is what business problems does it solve. Let’s look at several examples.
Easy human capital management (HCM) with payroll calculation and performance evaluation. A well-structured database of employees and potential new hires helps the HR department do their job more efficiently and make informed decisions. Some of the more uncommon features in this area are compensation management, skill assessment and more.
Data redundancy also becomes a problem of the past. Your databases are consistent and organized with zero duplicates. The system makes sure that data doesn’t contradict itself too.
Another issue that requires certainty at all times is inventory management. You completely eliminate the inaccuracy that is often prevalent in manual bookkeeping. The information about the stock of the product is always relevant and updated in real time as soon as the order is finalized. But as you know, inventory doesn’t just include the product you’re selling. Yes, custom ERPs can even order coffee for your office.
The overabundance of manual paper processes is largely the core problem that leads to many other ones mentioned above. That’s largely due to a combination of human error and inefficient access. Nobody needs to go through filing cabinets and folders just to find a snippet of data from a couple of months ago. There is a handy search function for that.
Also, software like this doesn’t provide incorrect or vague reports. In fact, you can configure your ERP dashboard to serve as a constantly updated report screen you can access at any time. This data is gathered from across all departments with the status of all processes visible in real-time.
These five benefits are in no way the only ones. The list of day-to-day problems solved by custom ERPs is never really complete. However, the ones that we’ve mentioned serve as an example of the things that you won’t have to waste your time on anymore. You can spend the saved time on other important matters such as digital transformation.
Who Benefits From Custom ERP?
In our experience, there is a misconception that some companies have. They think that their company is not complex enough to warrant an entire ERP to be made just for them. It’s not the case since there is no such thing as a simple business. Each has enough complex processes to streamline and improve.
Here’s how to understand that yours needs a custom ERP:
- Unclear inventory and/or supply chains. It’s easy to dismiss when things run smoothly. However, when an issue arises you need to see what caused it.
- The forecasts you get are often incorrect. It may be because of the nature of your business or simple human biased judgment.
- The mass of spreadsheets becomes difficult to use and navigate or you are outgrowing the paper and whiteboard approach to running a business.
- Finding information has become arduous. It should never take you long to find the contact email of your client, as an example.
As you might have noticed, these parameters are rather vague. There’s a reason for that. The list of areas using ERPs in their daily operations is truly expansive. Among them are:
- Customer Relations
- and much more
If you aren’t sure, don’t worry. You are not the only one. One of the most important questions regarding software development is whether to build or to buy. Let’s compare the two options you have regarding ERPs. Licensing a ready-made one or creating a custom one.
Two main things off-the-shelf solutions have going for them is the relatively low initial cost and the quick deployment. And while it sounds great in the short term, the ROI is actually smaller than for tailor-made software. The reason for that is that often ready-made ERPs aim for the widest appeal possible to drive sales. In actuality, they become bloated with unnecessary features making you pay for the thing you don’t use. On the flip side, they may be missing the functionality you require. It’s not uncommon for organizations to have two separate ERP systems because of that reason.
Then there is custom ERP development. It is more expensive and you have to wait for it to be developed but you get exactly what you want. This includes the features and the industry focus. Every area of business has its own unique aspects that should be considered. This is what you get with such systems.
Custom ERP Benefits for Enterprises
- Decision making
The most obvious and arguably the most valuable benefit of ERP software is its effect on overall productivity. It streamlines many day-to-day operations making the staff measurably more efficient. Business process automation that it offers can legitimately kickstart the growth of your business to a new level.
Prescriptive data analytics is one of the main benefits of AI-enhanced ERP systems. Instead of presenting data simply as an illustrative graph, it offers you a plan of action that will bring the best results based on objective statistics. You can clearly see how your decisions will affect the trajectory of your business.
Gradual delivery in small yet working parts is another huge benefit. Such an approach to implementation allows the end-users of the ERP to have an input into its creation. Long gone are days of waterfall programming with all of its faults. You won’t receive a system that is technically complete but is not at all what you wanted. Thanks to Agile development if you change your mind on something or want to test an idea you have, you can do it.
A good ERP system is always accessible. All data is always just a couple of clicks away. The reason for this is that every employee shouldn’t have any difficulties using it on a regular basis. That way, having all the data in a central hub instead of storing it by the department, improves the transparency of operations. With the implementation of blockchain technology, you guarantee that despite the centralized nature of this software, the data is safely encrypted.
All businesses look for growth. With a custom solution, you won’t outgrow your software. Instead, it serves as a foundation with extra features developed when you start to need them. You can always reconfigure it down the line.
All of this can be integrated into the processes of your enterprise. Surely there must some sort of catch, right? Sure, it has some risks. The high cost is something that not all small businesses can afford. Also, the time required to develop, test, and perfect the system is pretty long. To be completely honest, the benefits you get completely outweigh the few drawbacks.
How Much Does One Cost?
As we have mentioned, this type of custom software is more expensive than ready-made solutions. It used to be even more expensive before. SMB couldn’t afford to develop custom ERPs. With the changes in the software development market, it’s not the case anymore. Regardless of the size of your company, you can find a reliable team that will suit both your needs and your budget.
Due to the customizable nature of ERP software, development costs are hard to predict. One complex feature may take many weeks of development, while another company doesn’t need it at all. This is why to get an accurate estimate it’s better to have a general vision of the desired product.
In general, the cost of custom ERP development is between $25,000 and $75,000. But there are plenty of cases when it takes more than $150,000 and even $500,000 for large enterprises because of the requirements, the complexity of their implementation, and the sheer amount of data.
To get a better idea of what goes into the creation process here’s a short example of the development lifecycle. First, the team assesses the goals and plans out the following stages. After that, they design a working prototype that is later used to add the features to. The next stage consists of the development itself. The configuration of databases, hosting and the UI/UX development is done during this phase. Also, the necessary integrations are made, since often companies chose custom ERP solutions only after becoming disappointed in an off-the-shelf one first so the migration is often necessary. Testing is done rigorously throughout the entire development process to guarantee the high-quality bug-free experience and the safety of data.
As you can see it is a process that requires time. ERP software is a central hub of all the information and operations of an enterprise. Therefore, it needs to run as smoothly and as safely as possible. After all, your business deserves nothing less.
Successful Implementation of Custom Features
It’s important to point out that ERP integration has a serious risk attached to them. in the worst case, failure can even result in a company having to go out of business. Vodafone can serve as a quick example of such a disaster. It lost massive sums of money and was fined 4,6 million because of a mistake in CRM integration of one of Oracle’s platforms, resulting in huge data loss. The reason for failure can range from poor priorities and lack of funding to the core business processes being ineffective, to begin with.
This sounds awful, doesn’t it? In reality, this case is one among a huge number of stories of companies reaching new strategic goals and eliminating the bottlenecks of growth. Let’s look at a few different examples of how customizability works by industry.
Manufacturing enterprises arguably benefit the most from such software. Optimization of the operations is always a case-by-case process and ERPs can handle it regardless of the company scale. Energy and oil corporations, in turn, benefit from environmental damage control and mitigation of risks. Quick service restaurants are not an exception, you can check our case study for more details. Even schools are going digital with the integration of LMS software following unconventional programs into their enterprise resource planning systems.
As you can see, custom ERP development solves numerous business problems without being overly bloated. They suit your specific industry and fit the workflow of your company. This technology overhauls the internal processes and makes them measurably more efficient if not completely automated.