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How much ERP custom software application development is too much?

ERP vendors don't want you to customize at all. Third-party support firms say go for it. The debate on customizing business applications continues.

Scientists say that humans replace all their cells every 10 years or so, which technically would make us all younger than some companies' enterprise resource planning (ERP) systems. But many ERP applications also go through major internal changes, at the hands of their users. That prompts a pair of questions: At what point do software customizations morph your ERP system into a species that's completely different from the original product? And generally speaking, is customization good or bad for your system?

That is a debate going on in ERP circles today, as vendors, analysts and users struggle with the potential benefits and drawbacks of custom software application development. The debate sits at Oracle's front door, as the software giant pushes customers to upgrade to newer versions of its business applications and the pricey support contracts that accompany them.

A report this year from Denver-based Panorama Consulting found that a whopping 90% of corporate ERP systems have at least some level of customization. And that number has grown, from 89% in 2012 and 85% in 2011. The consultancy cites protection of competitive advantage and mitigating organizational change management as two main reasons.

But count Wade Lewis, chief information officer at Georg Fischer Central Plastics LLC, an Oklahoma-based piping manufacturer, as one of the 10% in the no-customization camp.

"We used to customize the hell out of stuff, some hardcore coding," says Lewis, whose company recently upgraded from E-Business Suite R11 to the R12 release. "Those days are gone. Customizations are a thing of the past."

According to Lewis, ERP megavendors like Oracle and SAP are building what they call "personalizations" into off-the-shelf products, enabling admins and end users to tailor application displays without modifying any code. That gives IT departments some flexibility with their ERP systems while ensuring that they'll be able to carry personalizations from one version to another. If you do standard custom software application development, the customizations won't come with you when you upgrade.

"If you have a lot of customizations, when you upgrade you have to re-customize," Lewis added. "You have to tailor the core code itself to make the product behave the way you want it to."

Oddly enough, that's the same explanation some use when arguing against upgrading your ERP system. The most prominent example of this is Rimini Street, the third-party software support company that has gained media headlines at the same fervent pace as it has gained new customers, largely because it's willing to take on the big guys in Oracle and SAP.

One of Rimini Street's main selling points is that it supports customizations while Oracle and SAP do not. So, if you have a longstanding ERP system that is thick with custom software application development and still meets your needs, you might consider using Rimini to support it rather than spending a lot of money to upgrade just to stay current for vendor support of the noncustomized portions.

Actually, for many businesses, a six-figure payment is just a penny ante on the overall cost of an ERP upgrade, according to Rimini CEO Seth Ravin. He said that one of the largest of the company's 700 customers would have to spend about $100 million to upgrade its ERP systems. It would be one thing if an ERP upgrade provided huge jumps in features and functionality, Ravin said, but he doesn't think that's usually the case.

"There is no revival with the customer base in terms of a sense of value, of great things coming down the line," he said. "The customer is not going to come to us if they truly believe that staying with the vendor has value."

Margaret Wright, president of the Oracle Applications Users Group (OAUG), thinks there is a threshold where your ERP customizations start to overshadow the system itself.

"Anything more than 10% is too much," she said. "Then it's no longer your core system. It starts to become your own, in-house-developed application."

Wright said she sees OAUG members moving away from heavily customizing their E-Business Suite applications, usually because it does make upgrades more difficult. You end up having to do more analysis on the front end to find out if an upgrade will break one of your customizations, for example. Whereas before, companies would change their ERP software to accommodate the business, she now sees the tide reversing.

Earlier this year, I wrote about a solar company that migrated its ERP system from another vendor's software to EBS R12 in 10 weeks, with one of its major tenets being that no ERP customization would be allowed during the upgrade and customization requests would be ignored for the first six months of using the Oracle applications.

"I see more of our members changing their business processes rather than customizing," Wright said. "I see more people wanting an out-of-the-box product because it's less complex."

As of now, the overall numbers aren't supporting Wright's contention, and haven't for the past few years. I guess we'll see if that changes.

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Do you customize your Oracle applications?
Can you customize Oracle ERP and if we can what will be the cost difference?