Custom ERP Development: When It’s Your Best Option
For any small-to-medium-size business (SMB), there comes a point where a single source of truth is necessary to keep the organization running smoothly. Manufacturing needs to track input and output. Purchasing needs to know what materials to purchase and when to purchase them. Payroll needs to be made accurately and on time. And there are dozens of other requirements that need to be met which are all critical to the organization’s wellbeing. The need for an ERP system has become apparent, and the task at hand is to select an ERP system that handles each of these tasks effectively.
Cost ≠ Effectiveness
One of the paradoxes you’ll observe when researching case studies of ERP implementations is that companies will spend millions of dollars on an ERP implementation, only to declare the project a failure (SAP is notorious for this) after it’s determined that the ERP system chosen can’t meet the organization’s requirements. Meanwhile, you hear of organizations that have built their own in-house ERPs that function relatively well, or have survived on a handful of spreadsheets for years.
You would expect more cost would equate to higher quality and functionality. Experience tells us that in reality, though, this just isn’t the case. Instead, additional costs are tied up in software licensing fees, ERP consultants who may or may not know what they’re doing, and training for your employees.
From a developer’s standpoint, there’s no reason why an ERP needs to cost hundreds of thousands, or even millions of dollars to implement. Technology is technology. An Oracle or Microsoft SQL database (both paid options) can store data just as effectively as a MySQL database (free, open-source). The same goes for servers, and there’s no tradeoff in security, either.
Decision makers are often surprised to learn that in many cases open-source offerings are actually considered more secure than paid options such as Microsoft SQL Server, all other things being equal. The reasons for this are beyond the scope of this article due to security being such a complex topic, but it essentially boils down to less malware being written for these systems, and the fact that thousands of contributors are working to maintain and develop code that is available publicly, so it’s more difficult to introduce insecure code, features, and functionality.
Custom ERP Development vs. Out-of-the-Box Solutions
Let’s consider a scenario in which we’re trying to decide whether to hire a solo software developer to build a custom ERP solution, or to use an out-of-the-box ERP system from a vendor (SAP Business One), along with a team of implementation consultants.
We’ll assume the software developer has access to third-party libraries and services, and that there may be additional costs using the custom ERP developer approach such as API access or third-party integrations (such as payroll, accounting software, etc.). We don’t expect the solo developer to build a payroll or accounting system entirely from scratch.
| Costs | Custom ERP | Out-of-the-Box ERP |
|---|---|---|
| ERP Licensing | $0 | $110 per user per month — $219 per user per month [1] |
| Server Costs | $20+ per month [2],[3] | $0 for cloud, $994+ for on-prem |
| Employee Training & Education | $0 (and your employees’ time) | $400 — 800 per user per year (and your employees’ time) [4] |
| Implementation & Configuration | $100,000+ [5] (the cost of hiring a US-based full-time software developer for a year, less if part-time) | $150,000 — $750,000 for most mid-sized businesses [6] |
| API Access, 3rd-party Integrations | $200/month [7] (Quickbooks Online access for up to 25 users) or more | $0 |
From this example, we can see that the costs of a mainstream ERP implementation are substantially higher than the custom ERP development route. Cost isn’t the only factor, though. Quality, reliability, maintainability, and overall robustness are paramount for any ERP system intended to be used for many years.
With this in mind, it’s not necessary to constrain decision-making to entirely one approach or the other. It’s possible for custom ERP developers to pull data out of an existing system, and integrate it with a bespoke web app fit for a specific purpose. For example, a web app or mini-app that handles one function of the business particularly well, like KPI tracking, computer vision for quality control, document management or automation, fleet tracking, or data manipulation.
In summary, there are significant cost savings when it comes to developing a custom ERP solution. These cost savings don’t come without risks, however, so it’s important to balance the two when making an implementation decision:
Benefits of hiring a custom ERP Developer
- Substantially lower cost.
- Can be rolled out a little at a time.
- More freedom to develop the exact system you want.
Risks of hiring a custom ERP Developer
- If something happens to that developer, the maintainability of his or her software may be in question.
- This can be mitigated to some degree by using common open-source frameworks and libraries such as Flask, Django, React, Bootstrap, Laravel, Express.js, etc.
- The quality of the software rests solely on the developer.
How to Choose the Right ERP System
Some of the broader challenges that come with choosing an ERP system are:
- You won’t know how well a system will work, or if it will work at all, until it is implemented.
- When asked whether their system can do X, Y, or Z, ERP salesmen are trained to always say ‘yes’.
- They’re trained to say this because, theoretically, their system can do it. That doesn’t mean their system can do it out-of-the-box (i.e. not requiring custom software development), or that it won’t take significantly more time or cost to develop that functionality.
- Implementation is time and resource-consuming.
- It often takes a year or longer to complete an implementation, with input needed from various departments and stakeholders within your organization for the duration of the implementation.
- In many cases, ERP systems may not accomodate your existing manufacturing processes or workflows.
- ERP vendors may require or ask you to change existing processes for successful implementation.
Given these challenges, how do you choose a path forward? With all of the uncertainties involved, I recommend that you ask for references from both the ERP vendor as well as any implementation consulting firms that you decide to use. Getting feedback from their references will give you the best insight as to how well your implementation project is likely to go. If you use the custom ERP approach and hire a software developer, ask for any employment references or references from past projects to get an idea of what their skills are like, and how they work.
The Case for Custom ERP Development
The main benefit of using custom ERP development services is the reduced risk of wildly expensive implementations. Even if an implementation costs 1.5 or twice as much as the initial estimate, your costs are likely to be much lower than they would be had you moved forward with a traditional ERP implementation such as Infor M3, Sage, or SAP.
If you’re happy with parts of an existing ERP implementation, but find it falls short of a specific use case, it’s also possible to leverage custom software development to develop a piece of software that resides adjacent or outside of the ERP. In this case you get the best of both worlds, with highly specific functionality built without the constraints of your chosen ERP system, while still retaining its existing capabilities and data.
Using a custom ERP approach, you’re able to move quickly and get exactly the functionality you want, rather than going back and forth between implementation consultants trying to configure a one-size-fits-all solution to your needs. As mentioned earlier, not all ERP systems accomodate every manufacturing use case, and in some cases, software vendors will suggest that your organization change existing manufacturing practices to better suit the software’s capabilities, rather than the other way around.
Summary
Choosing the best option for an ERP solution is almost never a clear or straightforward process. There are a number of variables at play, including costs, timelines, employee buy-in, how well a given ERP system will work with your existing and desired processes, as well as the uknown unknowns. By using custom ERP development, you can mitigate some of these risks and limit your exposure to runaway costs.
If you need custom ERP software development, whether its an integration or an end-to-end solution, schedule a call with me for a free evaluation and to explore what’s possible.