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ERP Systems: Custom-Built Or Off-The-Shelf?

Enterprise resource planning (ERP) software is an integrated suite of applications that help businesses manage key operations such as accounting, sales, marketing, inventory, and human resources. Because this category of software seems to do it all, it’s not a one size fits all.

In fact, one of the most common questions surrounding ERP is whether to buy an off-the-shelf system or get one customized for the organization.

It’s a tough decision. Customized normally means hiring expensive developers who bring cost overruns and delays, but that’s not necessarily the case anymore.

Off-the-shelf is enticing, but can one ERP system really satisfy all of the organization’s business needs? Further, if your competitors are using the same off-the-shelf system, will you lose your competitive advantage?

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What Are The Benefits Of ERP Software?

Complete visibility of tasks: ERP software offers complete visibility into important aspects of a business because there is a single dashboard through which senior management can monitor both departmental and organization-wide data. ERP removes the need for management to log in to multiple systems in order to gauge the health of the business.

More efficient workflows: Because an ERP system reduces the need for repetitive data entry in different systems or software, data remains accessible by all users. As data related to projects, people, products, and services move along the value chain, it is automatically updated for the next department, without the need for additional data entry or validation efforts. These workflows save time and improve the organization’s overall efficiency.

What Are The Typical Features Of ERP Software?

Some features of an ERP system include, but are not limited to, the following: Inventory management: Keeps track of stock and manage reordering to prevent running out of inventory, ensuring smooth supply chain operations.

Accounting and financial management: Gathers your organization’s accounting and financial data and generates comprehensive reports such as general ledgers, balance sheets, and financial statements. HR management: Maintains a complete employee database and manages core HR processes, such as recruiting, hiring, payroll, training, and learning and development.

Reporting and analytics: Analyzes various workflows, monitors key performance indicators (KPIs), and generates an array of reports to aid compliance and support management decisions. CRM: Records customer information and all interactions, including sales, with the organization.

Customization Can Get Expensive—Fast

Comparing and understanding ERP pricing can be a complex task for business leaders. However, because an ERP system is not considered and purchased to handle single, one-off tasks, the cost of an ERP system must be evaluated over the long term.

Further, the cost of the ERP system can be shared among multiple departments, rather than have the financial burden placed on any single department.

The initial cost of a custom system may seem very reasonable. However, a custom ERP system can become costly over time, especially as the organization grows and its data and application needs grow along with it. The ERP system will need to be further customized and maintained to keep up with the changing needs of the organization.

Extra costs are also hard to estimate beforehand when customizing ERP systems, since it depends on what you customize and what is affected by future upgrades.

Off-the-shelf ERP systems can seem attractive to start, especially for those organizations unaccustomed to what the system can do. However, as with a completely custom-built system, even an off-the-shelf system will eventually need to be upgraded to accommodate the growing and often complex needs of the organization.

Off-The-Shelf Systems Are Often Better For Smaller, Growing Organizations

Smaller organizations that might be hesitant to jump in to a custom-built ERP system will certainly benefit by starting with an off-the-shelf ERP system to meet their needs. In general, this route costs less and is less risky.

Then, when customizations are needed, consultants can be brought in to build features or modules.

Additionally, an off-the-shelf system’s full lifetime cost is also easier to determine upfront, and industry best practices are generally incorporated into these solutions.

If you are unsure of which route to take, talk to us. LNB Solutions has advised organizations of all sizes on their choice of ERP and can provide guidance on a right-fit solution.

Contact us for a free consultation.