A previous primer in this series (Vendor Selection) has already identified three common sources for manufacturing Enterprise Resource Planning (ERP) software – in-house bespoke systems (custom-written for a specific application), out-sourced bespoke systems and standard packaged systems.
Concerns that can lead to a preference for bespoke applications include unique requirements not widely available in packaged software, a reluctance to depend on an external provider for a business critical infrastructure element and a perception that development and maintenance costs can be minimised by coding in-house
Conversely, in addressing the first concern, there is a real risk of concentrating on special functions to the detriment of pursuing best practice in wider processing and also of cementing in legacy business practices with a resultant loss of flexibility and potentially improved efficiencies. While anxiety about the commercial risk associated with dependence on third parties is understandable, in reality the risk of losing or re-allocating in-house skills is usually higher. In the case of out-sourcing, it is worth questioning whether a local IT consultancy with a handful of end users (probably all using different applications) really provides more security than a vendor of the same or greater size supporting a larger, distributed user base, all on the same software platform.
In-house or out-sourced bespoke ERP software can indeed be less costly to develop than packaged solutions because the total function count can be restricted. The development costs however, are borne exclusively by the single end user, whereas in the case of packaged software, the costs are distributed across many end users. Maintenance costs can also appear lower for bespoke applications, particularly if (as is often the case) on-going development is reactive and minimal and also because real costs are often partially absorbed into general overheads. Software maintenance and on-going development for packaged products benefits from the input of a much larger number of users and is hence likely to progress at a faster rate and provide better value.
For the larger manufacturer, many of the above pitfalls with bespoke ERP software can be minimised due to substantial, well-funded IT departments, greater numbers of internal users and institutional continuous improvement programmes. For the manufacturing SME however, it is clear that packaged ERP software will deliver more functionality, better long-term security and a lower total cost of ownership (TCO).
Where does that leave the prospective implementer with unique processing and data requirements? Vendors of packaged solutions will usually offer customisation to fill this gap, often at significant additional cost. While this approach would appear ideal, it can lead to excessive upgrade costs due to high consultancy and programming requirements, particularly where the vendor is not also the author of the software. This trap can be avoided by ensuring that the software is designed to support customisation without core code changes, for example through the use of object-oriented design and a structured architecture including open source libraries, custom hooks and automated change management facilities. To maintain internal ownership, it is also important that these tools are accessible to, and usable by, the end user and that the full development environment is included in the installed software.