Custom or off-the-shelf ERP system: Which is right for your business?

What will the system’s total cost be?

Customizing an ERP system can be expensive. One thing to keep in mind, however, is that the cost of an ERP system must be evaluated over the long term, often over several years.

For example, a custom system that appears affordable at first may end up costing significantly more over its lifetime. It can also create unexpected challenges, especially if the system needs to be modified and maintained over time.

That’s why many businesses fail to achieve the expected return on investment from custom ERP solutions.

Even when starting with an off-the-shelf ERP system, upgrades can become costly if the system has been heavily customized.

Most ERP systems are upgraded once or twice a year. If you have a highly customized system, each upgrade will typically require the customizations to be redone. In many cases, if you choose not to upgrade, you may also lose technical support for your system.

It’s also difficult to estimate the additional costs associated with a custom ERP system. These costs depend on the specific customizations and what is affected by future upgrades.

What level of risk is acceptable to your business?

A highly customized system can increase your dependence on your vendor, since the system’s ongoing performance depends in part on the quality of your relationship with that provider.

Conversely, off-the-shelf systems are typically supported by multiple service providers, making it easier to switch vendors if needed.

Implementation risk

To deliver a highly customized solution, software vendors must strike a difficult balance between project scope (system functionality), quality (the absence of system bugs) and cost (development effort). This can be a significant challenge.

For vendors working within a fixed project budget, cost often takes priority over quality and the scope of the final deliverable. By contrast, off-the-shelf systems offer proven, pretested functionality that can often be implemented with fewer surprises and less risk.

Long-term management risk

To function properly, ERP systems depend on other technology components, including hardware, operating systems and software applications.

As these components evolve or vendors stop supporting them, a highly customized solution must be updated regularly to continue operating properly.

Even when vendors start with an off-the-shelf solution, they often need to redo customizations each time an upgrade is released.

In general, the less an off-the-shelf solution is customized, the easier it will be to maintain over time.

Does your business really need a customized ERP?

In most cases, small and medium-sized businesses are better off researching and selecting the off-the-shelf ERP system that best meets their needs. This option generally costs less over the long term and involves fewer risks. 

In addition, vendors of off-the-shelf ERP systems regularly add new features to their solutions, particularly in the area of artificial intelligence. By limiting customizations, businesses can generally take better advantage of these new capabilities when upgrading their systems.

However, it’s best to avoid customizing an off-the-shelf system whenever possible.

The total cost of ownership of an off-the-shelf system is generally easier to determine upfront. These solutions often incorporate industry best practices.

Finally, if you’re not receiving the level of technical support you need, switching technology vendors for support services is generally easier with an off-the-shelf system. 

Next steps

Are you considering investing in an ERP system or another technology solution? See how LIFT can help you adopt technologies that support your business’s growth and productivity.