If your enterprise has customized your mission-critical ERP systems over the years, your future upgrades will likely be more troublesome and terrifying because the changes can conflict with the patches. On the other hand, if you are running out-of-the-box ERP with little customization, maybe you're not getting all the important features your business needs.
So what's a CIO to do? And how do you figure out what to do next if upgrades or replacement are looming in your future?
These are the kinds of important decisions being faced regularly by enterprises of all sizes as they carefully examine the future of ERP implementations inside their businesses, says Rebecca Wettemann, an ERP analyst with Nucleus Research Inc.
"We do see more and more CIOs going the 'less customization' route" nowadays, she says. "In the last round of ERP deployments that people did, maybe 10 years ago, they did a lot of customizations. But I would say that the majority today are going 90 percent out of the box — with very vanilla installations. It gives you a more predictable and cheaper deployment and then obviously, it makes upgrades less disruptive and less costly."
Part of the reason for this recent trend is that ERP vendors are now recognizing that if they build applications that include verticalization, they will be easier for more companies to adopt with fewer problems and far less customization, she says.
"Verticalized applications" are built with specific vertical industries in mind, so they are essentially designed to fit different kinds of businesses out of the box. To help the applications better conform to your specific company, they include role-based views and components that users can configure with check boxes and other methods so they more closely suit your business and process needs, without requiring code writing and deep code customization. That means that verticalized applications can later be upgraded more easily minus the associated problems and sometimes major complications that come with trying to upgrade customized code.
One vendor that does this well is NetSuite, a cloud ERP company that allows lots of configurability, she says.
Even some of the big players in the ERP marketplace tend to discourage the full customization route today.
"If you talk to Oracle, they will tell you don't customize," Wettemann says. "They'll tell you to use a verticalized application and limit yourself to configuring as opposed to customizing code."
It's becoming a more common mantra in the ERP industry, according to Wettemann.
"What we're seeing more and more are companies that are saying let's go vanilla now because they can always adjust or change things later," she says. The idea that ERP is a big bandage and that nothing can ever change after you deploy it is going away."
And in practice, this "install vanilla" approach is a good one for many clients, she says. "I think it depends to a certain extent on the application that is chosen. If the application has vertical functionality with role-based sourcing and other possible configuring, then, yes, you're better off going vanilla."
"Clients see this as a less risky move, a more predictable way to deploy ERP and a way that is more likely to minimize disruptions and costs over time, which is even more important."
There are other things to consider, too, such as being sure you find a trusted partner to work with as you navigate the ERP upgrade/replacement waters, she says.
"I hear this a lot from clients," she says. "With ERP, success depends not just on the software but on the partner, too. And selecting a partner means finding one that has enough experience to [to guide you] when you might want to go out of the box and do some customizing. You'll want to find someone who's done that kind of thing before. Then they can help you plan [a successful strategy]."
That's just as important for ERP consultants, because most of them aren't making their money from implementation nowadays, Wettemann says. "They're making it with change management consulting and helping you to make those tough decisions."
It is also just as important when deciding your ERP strategy that you work with the users of the application and get their input.
"The other key thing that we're seeing is people are getting business unit owners and actual end users involved in the process much earlier," she says. "That means not just through an implementation team but through a team that is doing usability testing and getting process feedback. That wasn't as common a few years ago."
So what changed?
"I think CIOs today realize that user adoption is really critical in the success of an ERP implementation," Wettemann says. "Getting users involved early gives you very good feedback so you can solve problems before they really become big problems on everyone's desktops. That way you don't roll out an application that no one has seen before," which can cause massive dissatisfaction and problems with the people who will actually have to be using the software.
Another benefit of early user involvement is that it allows you to show users directly how an application can make their lives easier, Wettemann says. "This approach comes from CIOs who might have personally experienced or marginally witnessed a horrible ERP failure that occurred because of user adoption issues, or they read about such a failure."
It's also important, she says, not to underestimate the technological prowess of your users in the workplace today, even when you are showing them new things.
"The flip side of early user input is that the consumerization of technology means that telling a user, 'oh you don't know how to use this' isn't acceptable anymore," Wettemann says. "Now they'll tell you "I set up my wireless network at my own house. Don't you dare tell me that I don't understand how this system works.' Users are getting more experience everywhere."
As you explore your ERP strategy it is a good idea to get involved in user groups where passionate discussions are likely going on about the products and vendors that you are considering, Wettemann says. "You'll get feedback from real users who are already using the things you want to implement. They can give you an honest, unwashed assessment of their own experiences."
No matter what route you take, there are several key questions to ask yourself as you proceed, Wettemann says:
1. Does the application that you are reviewing already have vertical functionality in it and is it configurable in the ways that you need to massage it for your business processes? Will it be able to do what you are asking it to do? Will it work for your users?
2. Does the vendor and partners have references from businesses and industries like yours? Do they have to do any customization as opposed to configuring? How much customization did that involve? What did they have to do?
3. Is this a CIO led initiative or a business led initiative inside your company? If you have strong business sponsorship, you can push greater change management, which will mean less customization of the code. That happens because then you have a cheerleader on the business side who is telling people that this is the right new way to do things.
There is no wrong route to take here.
Whether you upgrade, customize, go vanilla, rip and replace or use a combination of options, your ERP path has to fit your company, your business and your needs to make it a success.
One important thing to remember in all of this is that you and your enterprise are not alone in your ERP decisions. Many companies from large to small are facing similar issues.
"It's really mixed, with lots of mid-market companies deciding to deploy ERP for first time, while in larger organizations there's a lot of add-on going on in the market," Wettemann says. "In the Oracle world, most everyone is looking at upgrades at this point and waiting to see what happens with Fusion, their next-generation ERP application. In the SAP world, we aren't seeing a lot of new SAP deployments right now. What we are seeing are add-ons like Business Objects for existing customers."
So what are your short-term and long-term ERP plans? Are you eyeing customization or vanilla? I'd love to hear your thoughts for a future story.
Todd R. Weiss covers Enterprise Applications, SaaS, CRM, and Cloud Computing for CIO.com. Follow Todd on Twitter @TechManTalking. Follow everything from CIO.com on Twitter @CIOonline and on Facebook. Email Todd at firstname.lastname@example.org You can also join Todd in the "CIO Forum" group on LinkedIn.com to talk with CIOs and IT managers about the things that keep them up at night.