The Hidden Costs of ERP Customizations

1.
January
2016
THE
HIDDEN
COST
OF
ERP
CUSTOMIZATION
WHAT
HAPPENS
WHEN
YOUR
CIO
IS
READY
FOR
RETIREMENT?
ARE
YOU
PREPARED?
Some
level
of
customization
has
always
been
quite
common
in
implementations
of
business
applications
and
Enterprise
Resource
Planning
(ERP)
is
no
exception.
Often
the
result
of
functional
gaps,
these
customizations
are
costly
to
maintain
and
can
prevent
you
from
taking
advantage
of
innovation
delivered
by
your
solution
provider,
causing
this
gap
to
grow,
not
shrink.
The
older
the
software,
the
more
customized
it
is,
the
more
likely
this
is
to
prevent
you
from
responding
to
the
normal
kind
of
change
that
is
a
constant
in
business.
But
there
is
nothing
“normal”
about
the
pace
of
change
these
days.
The
possibility
of
your
entire
business
model
being
disrupted
today
makes
the
threat
even
more
potent.
In
fact,
it’s
downright
scary.
The
combination
of
time,
effort
and
resulting
cost
to
maintain
aging,highly
customized,
non-­‐competitive
ERPs
is
obvious.
But
another
issue
lurking
in
the
shadows
is
often
overlooked:
That
would
be
the
set
of
skills
needed
to
keep
these
solutions
working
–
skills
that
are
obsolete.
Even
if
your
baby
boomer
CIO
has
kept
his
(or
her)
skills
up-­‐to-­‐date,
these
obsolete
skills
are
what
makes
him
(or
her)
so
hard
to
replace.
As
this
skill
set
retires,
there
is
nobody
to
pick
up
that
ball
and
you
don’t
want
to
be
training
new
hires
in
obsolete
skills
any
more
than
they
want
to
be
learning
them.
The
more
highly
customized
these
solutions
are,
the
bigger
your
problem.
THE
PRICE
YOU’VE
PAID
FOR
CUSTOMIZATION
Customization
used
to
consistently
mean
mucking
around
in
source
code.
That
was
because
in
the
past
all
the
logic
was
“programmed”
into
that
code.
This
made
business
applications
rigid
and
inflexible.
Sure,
there
were
always
some
configuration
options,
but
those
options
were
constrained
by
the
logic
embedded
in
the
source
code.
That
meant
you
were
burdened
with
excessive
time
spent
testing,
maintaining
and
often
modifying
the
customizations
each
time
the
software
changed.
As
a
result
it
is
quite
likely
you
fell
behind
in
terms
of
keeping
current
with
the
innovation
provided
by
your
solution
provider.
Back
in
the
days
when
upgrades
provided
only
small,
incremental
changes
and
were
few
and
far
between,
this
was
an
acceptable
burden.
But
better
development
tools
and
methodologies
and
advanced
technologies
means
more
and
better
innovation
left
on
the
table
if
you
skip
upgrades.
Over
the
last
Key Takeaways
ü Customizations
are
costly
to
maintain
and
can
prevent
you
from
taking
advantage
of
innovation
delivered
by
your
solution
provider,
causing
funcitonal
gaps
to
grow,
not
shrink.
ü As
baby
boomer
CIOs
and
experienced
IT
staff
retire,
there
is
nobody
to
pick
up
the
ball;
you
don’t
want
to
be
training
new
hires
in
obsolete
skills
any
more
than
they
want
to
be
learning
them.
ü Much
of
what
used
to
require
source
code
modifications
now
can
be
accomplished
through
personalization,
configuration
and
overall
extensibility
without
ever
touching
a
piece
of
code.
ü Upgrade
or
replace
now
while
you
still
have
the
business
expertise
of
your
baby
boomer
staff.
ü Outsourcing
the
care
and
feeding
of
your
ERP
can
be
a
first
step,
but
moving
to
a
real
software
as
a
service
(SaaS)
solution
can
do
much
more
to
remove
the
cost
of
obsolescence
from
your
business.

2. The
Hidden
Cost
of
ERP
Customization
Page
2
of
6
few
years
Mint
Jutras
Enterprise
Solution
Studies
have
kept
track
of
the
barriers
preventing
upgrades.
Customizations
consistently
ranked
in
the
top
three,
along
with
the
cost
and
effort
of
upgrades
in
general
and
the
potential
for
disruption
to
the
business
during
the
upgrade
process.
In
addition,
we
capture
the
overall
challenges
to
achieving
the
goals
of
ERP.
Just
two
years
ago
(in
2013),
customization-­‐related
challenges
topped
that
list.
By
2015,
this
was
still
a
problem,
although
our
survey
participants
had
made
some
progress
on
this
front.
Customization-­‐related
challenges
had
dropped
to
the
number
two
spot.
Why?
The
answer:
Some
had
replaced
old,
outdated
technology
with
next
generation
solutions.
New
business
applications
have
come
a
long
way
in
recent
years.
Much
of
what
used
to
require
source
code
modifications
now
can
be
accomplished
through
personalization,
configuration
and
overall
extensibility
without
ever
touching
a
piece
of
code.
This
does
not
require
deep
technical
skills
and
changes
are
carried
forward
as
the
software
is
enhanced.
And
yet
there
are
many
older
solutions
out
there
that
are
still
constrained
by
outdated
technology,
requiring
a
certain
(outdated)
skill
set
to
modify
and
maintain.
The
vast
majority
of
customization
still
requires
IT
skills
(Table
1).
Table
1:
What
does
it
take
to
customize
the
software
you
have
today?
Source: Mint Jutras 2015 Enterprise Solution Study
Data Source
In
this
report,
Mint
Jutras
references
data
collected
from
its
2015
and
prior
Enterprise
Solution
Studies,
which
investigated
goals,
challenges
and
status
and
also
benchmarked
performance
of
implementations
of
software
that
actually
runs
the
business.
Responses
are
collected
from
companies
across
a
broad
range
of
industries
of
all
sizes,
ranging
from
very
small
to
very
large
enterprises.

3. The
Hidden
Cost
of
ERP
Customization
Page
3
of
6
The
trouble
is,
if
the
software
installed
is
based
on
older
technology,
that’s
a
whole
different
set
of
skills
than
those
being
taught
in
schools
today.
The
skill
set
needed
to
maintain
existing
customizations
is
rapidly
becoming
obsolete
and
who
wants
to
acquire
skills
that
are
only
marketable
to
those
stuck
in
the
past?
The
baby
boomers
with
those
skills
have
no
one
to
pass
them
on
to.
You
don’t
want
to
train
millennials
with
obsolete
skills
and
they
don’t
want
to
learn
them.
As
those
baby
boomers
start
to
retire,
those
skills
will
be
walking
out
the
door
and
they
are
not
easily
replaced.
Furthermore,
the
customizations
that
were
originally
developed
to
fill
a
functional
gap
are
very
likely
having
the
opposite
effect.
If
for
example
you
are
an
automotive
manufacturer,
you
may
have
originally
purchased
a
general-­‐
purpose
ERP
solution
because
that
was
the
best
(only?)
option
at
the
time.
Since
then,
more
features,
options
and
entire
suites
of
products
have
come
on
the
market
to
specifically
address
automotive
manufacturing
needs.
Even
if
your
existing
solution
provider
has
gone
this
route,
you
are
unable
to
take
advantage
of
newer
capabilities
because
of
the
barriers
your
customizations
have
created.
That
leaves
you
to
continue
to
fill
those
gaps.
Yet
your
core
competency
is
not
in
developing
business
applications.
You
will
inevitably
fall
behind
the
state-­‐of-­‐the-­‐art
commercial
applications,
putting
you
at
a
competitive
disadvantage
and
exacerbating
the
skills
gap
problem.
SO…
WHAT
DO
YOU
DO?
If
you
find
yourself
in
this
situation,
there
are
a
couple
of
different
paths
you
can
take,
but
the
ultimate
goal
should
be
to
reduce
the
level
of
customization
of
your
solution.
The
first
step
will
be
to
take
a
hard
look
at
the
customization
you
have.
Ask
yourself
why
it
exists.
Did
it
result
from
thinking,
“that’s
the
way
we
have
always
done
it”
or
from
prior
limitations
of
the
software?
Limit
customization
to
only
that
which
adds
real
value
to
your
business.
In
general,
that
means
something
that
gives
you
a
competitive
advantage.
UPGRADE
OR
REPLACE
This
may
mean
upgrading
to
new
releases
of
software,
if
newer
releases
have
kept
up
with
advanced
technology.
Or
it
may
mean
trading
in
your
software
for
a
newer
solution
–
yes
the
dreaded
rip
and
replace.
Replacing
an
existing
ERP
solution
used
to
get
a
bad
rap
–
lots
of
time,
effort
and
dollars
spent
just
to
get
back
to
where
you
started.
That
is
simply
no
longer
the
case.
New
“next
generation”
software
puts
you
miles
ahead.
And
the
personalization
capabilities
and
extensibility
of
next
generation
solutions
allow
you
to
“customize”
solutions
without
the
invasive
code
changes
required
in
traditional
“customizations.”
We
asked
our
survey
participants
to
characterize
the
type
of
customization
they
require
today.
Almost
all
the
kinds
of
customization
needed
today
can
be

4. The
Hidden
Cost
of
ERP
Customization
Page
4
of
6
accomplished
without
touching
source
code
and
much
can
be
done
with
little
or
no
technical
skills
(Figure
1).
Figure
1:
Type
of
“Customization”
Required
Source: Mint Jutras 2015 Enterprise Solution Study
As
long
as
your
current
solution
is
“good
enough”
you
may
be
tempted
to
continue
to
just
“get
by.”
That
thinking
could
get
you
into
further
trouble.
You
need
to
treat
this
with
a
sense
of
urgency.
Make
that
upgrade
or
replace
that
system
while
you
have
the
expertise
in
house.
As
noted
in
Can
ERP
Help
Bridge
the
Generational
Divide?
baby
boomers
learned
the
business
the
hard
way.
When
they
entered
the
workforce,
they
had
little
access
to
technology.
As
a
result,
they
know
the
business
very
well.
Not
only
can
they
articulate
the
needs
of
the
business,
they
also
know
how
to
work
around
systems
that
don’t
exactly
fit
those
needs.
This
is
not
something
millennials
are
well
versed
in.
Millennials
take
technology
for
granted
and
don’t
have
the
same
depth
of
business
knowledge.
They
rely
heavily
on
software
and
technology
to
guide
them
through
business
processes.
So
if
you
need
to
make
a
significant
change
(upgrade
or
replacement),
do
it
now
before
the
business
expertise
walks
out
the
door
with
those
retiring
baby
boomers.
MOVE
TO
THE
CLOUD
If
your
CIO,
or
other
IT
staff
intimately
involved
in
keeping
your
current
solutions
(including
customizations)
up
and
running
are
due
to
retire
soon,
you
might
want
to
consider
getting
someone
else
to
help
you
simply
keep
the
lights
on.
Outsourcing
the
care
and
feeding
of
your
ERP
can
be
a
first
step,
but
moving
to
a
real
software
as
a
service
(SaaS)
solution
can
do
much
more
to

5. The
Hidden
Cost
of
ERP
Customization
Page
5
of
6
remove
the
cost
of
obsolescence
from
your
business:
not
only
in
the
hardware
and
operating
systems,
but
people
and
skills
as
well.
That’s
not
to
say
you
want
to
kick
those
baby
boomers
to
the
curb.
You
want
to
be
less
dependent
on
their
skill
in
obsolete
technology
and
make
more
strategic
use
of
their
business
expertise.
Talk
to
your
solution
provider
about
getting
some
help
in
lifting
your
current
solution
to
the
cloud,
but
don’t
stop
there.
You
will
only
gain
partial
value
from
this.
You
also
need
to
shift
to
the
future
–
upgrading
or
migrating
to
the
latest
release.
If
your
current
solution
provider
can’t
do
this,
consider
getting
a
new
one.
Look
for
a
solution
that
is
easily
personalized,
one
that
is
extensible.
Especially
if
you
are
accustomed
to
a
solution
that
was
heavily
customized,
you
will
want
to
preserve
the
best
of
those
customizations
without
assuming
the
burden
of
maintenance.
A
good,
modern,
technology-­‐enabled
ERP
solution
today
provides
both
personalization
and
extensibility
without
having
to
modify
any
code.
If
you
are
accustomed
to
a
legacy
solution
running
on
older
technology,
you
might
be
assuming
what
you
see
in
a
demo
is
what
you
get,
particularly
in
a
multi-­‐tenant
SaaS
solution.
You
may
be
assuming
changing
it
is
either
not
possible
or
is
difficult
and
requires
the
skills
of
your
IT
staff.
Both
are
bad
assumptions
and
can
prevent
you
from
exploring
the
extent
to
which
you
can
modify
what
you
see,
even
in
a
SaaS
environment,
with
limited
or
no
technical
skills.
But
just
as
dangerous,
is
assuming
you
can
do
anything
and
everything
you
want
without
asking
the
tough
questions.
Take
a
“show
me”
attitude
and
perhaps
even
take
a
test-­‐drive
yourself.
That
(the
ability
to
test
drive
it)
in
of
itself
is
a
key
advantage
of
a
cloud-­‐based
solution.
No
need
to
upgrade
or
replace
hardware
or
build
out
a
data
center.
In
fact,
no
capital
expenditure
is
required
at
all.
Keep
that
capital
and
use
it
to
grow
your
business.
SUMMARY
AND
KEY
TAKE-­‐AWAYS
Aging,
heavily
customized,
non-­‐competitive
ERP
solutions
may
be
costing
you
more
than
you
realize.
The
out-­‐of-­‐pocket
costs
to
maintain
customizations
are
only
a
small
piece
of
the
overall
price
you
pay.
Customizations
build
in
barriers
to
taking
advantage
of
innovation
delivered
by
your
solution
provider.
The
older
the
software,
the
more
likely
it
is
to
prevent
you
from
responding
to
the
ever-­‐accelerating
pace
of
change.
The
functional
gaps
the
customization
was
intended
to
fill
have
the
potential
of
growing
wider.
At
the
same
time,
the
skills
needed
to
maintain
those
customizations
are
becoming
obsolete.
As
baby
boomers
get
set
to
retire,
they
have
nobody
with

6. The
Hidden
Cost
of
ERP
Customization
Page
6
of
6
that
same
skill
set
to
pass
the
ball
to.
You
don't
want
to
be
training
new
hires
with
old,
obsolete
skills
any
more
than
they
want
to
be
learning
them.
As
the
baby
boomer
generation
is
planning
to
retire,
you
need
to
be
planning
to
retire
those
customizations.
That
might
be
accomplished
through
upgrades,
if
your
current
solution
provider
has
indeed
kept
up
with
the
latest
technology.
Or
it
might
mean
replacing
them.
In
either
case,
consider
the
advantages
of
the
cloud.
The
first
step
may
simply
be
to
lift
current
solutions
to
the
cloud
in
order
to
get
some
help
in
just
keeping
the
lights
on.
But
consider
that
only
as
a
first
step.
Moving
to
a
new,
technology-­‐enabled
SaaS
solution
that
is
extensible
and
easily
personalized
can
provide
much
more:
more
and
better
functionality,
with
a
better,
more
customized
user
experience.
If
members
of
your
IT
staff,
who
you
depend
on
today,
are
getting
ready
for
retirement,
before
they
go,
tap
into
their
vast
expertise
to
help
you
in
that
transition.
Meet
your
needs
now
and
well
into
the
future
with
a
next
generation
solution
that
is
easy
to
personalize,
configure
and
extend.
And
then,
wish
them
well
to
enjoy
a
long
and
happy
retirement.
About
the
author:
Cindy
Jutras
is
a
widely
recognized
expert
in
analyzing
the
impact
of
enterprise
applications
on
business
performance.
Utilizing
over
40
years
of
corporate
experience
and
specific
expertise
in
manufacturing,
supply
chain,
customer
service
and
business
performance
management,
Cindy
has
spent
the
past
10
years
benchmarking
the
performance
of
software
solutions
in
the
context
of
the
business
benefits
of
technology.
In
2011
Cindy
founded
Mint
Jutras
LLC
(www.mintjutras.com),
specializing
in
analyzing
and
communicating
the
business
value
enterprise
applications
bring
to
the
enterprise.