Custom ERP or off-the-shelf: how to choose

When a company decides it needs an ERP, the first decision is not which product but which kind: a packaged product that is configured, or a system built around the company. Both paths can end well and both can end expensively. The difference is which suits which company.

What is what

An off-the-shelf package is a product already used by hundreds or thousands of companies. You buy a licence or subscription, and adaptation comes down to settings: master data, approval flows, document layouts.

A custom system is built around the processes of one company. It has no functions you do not need and it has the ones nobody else has.

In between there is a third path, which is the most common in practice: an existing platform with ready-made core modules, on which the special parts are built around the company.

The packaged product

Advantages

• It works from day one, because it has already been proven elsewhere.
• The initial cost is lower and known in advance.
• Legal changes, such as new fiscalisation rules, arrive through regular upgrades.
• It is easier to find people who already know it.

Limitations

• You adapt to the system. Where your process differs from the one it expects, workarounds appear, and often spreadsheets on the side.
• You pay for modules and functions you do not use.
• Deeper customisations are expensive and can make future upgrades harder.
• You depend on the vendor’s price list and plans. A per-user subscription grows with the company.

The custom system

Advantages

• It follows the way you really work, including what makes you better than competitors.
• It contains only what you use, so it is simpler for the people working in it.
• It connects to existing machines, devices and programs without compromise.
• There is no per-user fee that grows with headcount.

Limitations

• It takes longer to reach the first usable version.
• The initial cost is higher.
• The result depends on how well the supplier understands your business. A developer who does not understand a warehouse or bookkeeping will build exactly what you said, not what you need.
• You depend on the supplier. That is why ownership of the code, documentation and access to data are matters for the contract, not for later.

How to decide

It helps to answer five questions.

1. How special is your process? Accounting, payroll and basic warehousing work similarly in all companies, and packaged solutions generally do the job there. Production, planning, costing and everything customers recognise as your advantage often do not fit the predefined frame.

2. Where do you lose the most time and money? If it is in the part that is the same for everyone, a package will solve it. If it is in the part that is only yours, a package will bypass it and the problem will remain.

3. What does the system have to connect to? Machines, scales, scanners, the web shop, the bank, existing programs. The more connections and the more unusual they are, the more adaptability matters.

4. How often do you change? A company that introduces new products and changes processes every few months needs a system that changes with it, quickly and without great cost.

5. Who will maintain it in five years? With a package, it is the vendor and its partners. With a custom system, it is the supplier, so check how long they have existed, who their clients are and what happens to the code if they stop operating.

Cost over five years, not the first year

A comparison of initial prices almost always favours the package. A comparison over five years often looks different, because it includes:

• licences or subscription, per user and per module
• implementation, data migration and training
• customisations and their maintenance at every upgrade
• support and changes
• your own people’s time during implementation
• the cost of what the system does not cover and continues to be done by hand

The last item is rarely counted and is often the largest. A system that covers eighty per cent of the process leaves twenty per cent in spreadsheets, with all the consequences we describe in the article on Excel in manufacturing.

The most common mistakes

• Choosing by feature list. A longer list does not mean a better fit. It matters more to see your typical working day done in the system.
• Copying the old way of working. Introducing a system is a chance to simplify the process, not to build a bad habit into software.
• Undefined scope. Without a clear list of what the system must do on day one and what can come later, the project has no end.
• Underestimated data migration. Untidy master data for items, customers and suppliers is the most common cause of delay.
• A project with no owner inside the company. The supplier cannot decide for you how you want to work.

How we approach it

FERP is our ERP, built to fit the company: warehouse, production, logistics, cash register, fiscalisation and HR in one interface. The core is shared and proven, and what makes a company different is built around it. It is developed by the same team that works on finance and controlling, so the system delivers the numbers management needs from the start.

It is not the answer for every company. If your processes are standard and well covered by a packaged product, we will tell you so. If you are not sure, tell us how you work and you will get an honest assessment of which direction makes sense.