ERP - to be adapted or not?

Enterprise Resource Planning (ERP) is principally a software which integrates core business processes of a company providing the executives with a large database of information enabling them to make wise business decisions. ERP incorporates such functions as Human Resources, Supply Chain Management, Customer Relationship Management, Finance, Manufacturing Warehouse Management and Logistics which were previously stand-alone applications. Integration of those business functions into one depository is the main benefit of ERP improving productivity, speed and performance.

On one hand ERP is flexible and allows for customisation but on the other hand the functional customisation may be limited thus forcing the companies to change their business processes in order to adopt ERP. So what's best?

There are advantages and disadvantages on both sides:

Off-the-shelf - No customisation allows for less risks, easy updates, faster implementation, great use of the "best practices" incorporated in the development of the ERP packages, however, it may require rethinking of the business processes themselves to fit the package.

Adaptation - Functional customisation avoids redesign of business processes, therefore reducing the potential negative impact on the company and its employees, it also may lead to competitive advantage for the company, however, it involves more risks in the implementation and operation, makes it difficult to update and obviously, involves higher costs.

According to Panorama Consulting Group's 2008 ERP report, only 23% of organisations implemented ERP as off-the-shelf package, with 34% out of the remained having made significant changes to the package. Large companies with over $500 million in annual revenue, specifically companies in the aerospace, defense, and government industry verticals are more likely to make heavy changes to the ERP package.

I believe there is no single answer that suits all. Each company should think well before deciding whether to customise or not. That decision should be based on the size and structure of the company, sophistication of business processes, time and costs allowed for implementation, need for competitive advantage through the use of ERP.

Largely generalising I would say that small and medium sized companies with weakly defined business processes would largely benefit from adopting the "best practices" incorporated in the ERP packages and changing their business processes accordingly to match the "standard". Also, a change would be easier to manage in smaller organisations. In larger organisations, on the contrary, customisation of ERP packages will be a better solution if they have strongly defined and long operating effective business processes which give them a competitive advantage. Larger organisations may afford paying more and waiting longer for the package to be implemented. Moreover, for unique industries such as airospace and defense, the "best practices" might be simply not relevant.