If you are thinking about an ERP, the first question you have: make or buy?
Should we choose custom or go with an off-the-shelf solution? Being stuck in this intricate decision-making process is simple.
All businesses are different, even if they sell the same products and are in the same niche. What works for one may not be suitable for another, and vice versa.
At Flatlogic, we want to simplify the process and help businesses determine whether to break the bank and go heavy with customization or take a more budget-friendly approach with an off-the-shelf ERP.
Read our insightful blog post and learn:
- What’s the difference between custom ERP vs off-the-shelf?
- When to choose what?
- Who may need out-of-the-shelf ERP, and for whom custom ERP is like a lifeboat in the stormy sea?
- How to make the right decision?
Dive in and discover the best solution!
Custom ERP vs Off-the-shelf. What’s the difference?
Source: https://www.binaryfolks.com/blog/off-the-shelf-vs-custom-erp-how-much-does-custom-erp-cost
First, let’s clarify what an out-of-the-shelf ERP is
Imagine you desperately need a house. You are homeless and need a place to live. Congratulations, you’ve got one! While the first excitement is over, you notice this house is uncomfortable and does not have room for all your family members. To live in it, you need to sacrifice your comfort and refuse your dream of having a fancy villa.
That’s how things look like with an out-of-the-shelf ERP. This solution is designed to fit as many businesses as possible. As a result, it’s 100% generic.
At the same time, custom ERP is like the home of your dreams. It’s an out-of-the-shelf ERP modified to better align with your business needs and processes.
It may include modifying:
- Dashboards
- Reports
- User interface
- Integrations
Now that we’ve covered the key differences between custom and off-the-shelf ERPs, let’s dive into when each option might make the most sense for your business.
When to use out-of-the-shelf ERP
- You have standardized business processes
Out-of-the-shelf ERP offers tried-and-tested functionalities. These systems come with a range of features that are effective for businesses with similar operational requirements
- You need quick implementation
With an out-of-the-shelf ERP, you can support your system immediately. For companies looking at custom ERP vs off-the-shelf choices, off-the-shelf wins in speed. This also means you can achieve your ROI faster and respond to market changes more quickly.
- You have a limited budget
Off-the-shelf ERP is a budget-friendly solution. You do not need to invest in development, testing, and implementation. There is also no need to hire a specialized IT team or consultants to troubleshoot and maintain the software.
Weaknesses and limitations
Unnecessary features: With out-of-the-shelf ERP, you should take it as it is, with all its benefits and drawbacks. In practice, this often leads to an employee being obscured by all these unnecessary bells and whistles.
Result? Productivity — is reduced, and it all boils down to the question: How to use this software?
Not 100% fit to your workflow: A core limitation in the debate of custom ERP vs off-the-shelf is that off-the-shelf options may not align perfectly. Off-the-shelf ERPs are designed to meet general needs rather than specific ones. This can lead to inefficiencies if the system doesn’t align 100% with your company’s unique workflows.
Integration Challenges: Off-the-shelf ERPs might not integrate with any system or tool that the company uses. The lack of interoperability means such data would get ‘siloed,’ which also leads to impairments in decision-making and strategic planning.
Dependency on vendor updates: Though ready-made ERPs promise much easier implementation processes with some flexibility for limiting customization, they can actually create dependencies related to the vendor updating, support, and maintenance of the same.
Who may need off-the-shelf ERP
Understanding the full landscape of custom ERP vs off-the-shelf is essential for making the right choice. For example, certain industries are well-suited for standard ERP systems due to their common processes and requirements.
These include industries like:
Retail: Streamlined inventory management and sales tracking
Education: Efficient student enrollment, attendance tracking, and resource allocation
Manufacturing: Simplified production scheduling, inventory control, and supply chain management
Construction: Enhanced project management, budgeting, and resource allocation
Hospitality: Improved booking management, customer relationship management, and reporting
Consulting: Streamlined project management, billing, and client relationship management
Marketing: Integration of campaign management, analytics, and customer engagement tools
Legal Services: Efficient case management, billing, and document management
Example of out-of-the-shelf ERP
Microsoft Office Suite is one of the most well-known out-of-the-shelf ERPs. It offers:
- Integration
You can easily link Excel spreadsheets to PowerPoint presentations. However, it may require third-party integrations in some cases.
- Data management
Users can generate reports or create complex formulas. But out-of-the-shelf ERPs are not able to handle large-scale data management
- User-friendly interface
The layout is pretty intuitive. Users do not need much time to make familiar with this tool and quickly navigate between applications like Word or Excel.
- Low price
You can use Microsoft Office Suite only for $65 (per user).
Additional consideration: Microsoft Office Suite does not have functionalities like inventory management, customer relationship management, or financial tracking. It also works best for organizations that already use other Microsoft products.
Additional point: Microsoft Office Suite requires significant hardware resources to run effectively.
Apart from Microsoft Office Suite, there are also alternatives like:
Google Workspace — $6 per month
Sap Business One — $94 per month
Odoo — $24
Note! These prices may seem low, but this is only the tip of the iceberg.
For example, with Microsoft Office Suite, you also need to pay for the licensing fees, storage, and any additional software or services that may enhance its functionality.
We’ll also talk about the costs of custom ERP vs off-the-shelf below in this article. Now, let’s proceed to a quick overview of custom ERP.
When to use custom ERP
A custom CRM can be your best fit in such scenarios:
- You have unique business processes
Custom ERP will be developed based on your unique needs and requirements. All custom ERPs differ. You may want to automate specific workflows unique to your industry. Or you may need advanced data integration with other tools you rely on daily. Either way, choosing between custom ERP vs off-the-shelf is all about flexibility.
- You want to scale
Out-of-the-shelf ERP can be a good starting point, but what happens as your company grows? We bet you do not want to stay in the same place forever.
If this is true, the custom ERP vs off-the-shelf comparison becomes crucial. You may need something more than out-of-the-shelf ERP, as it may lack the flexibility to adapt to specific needs over time.
- You want to integrate
Custom ERP can be easily integrated with the software and tools your company already uses. This reduces the need for manual data entry, cuts down errors, and saves your precious time.
- You want to streamline operations and increase efficiency
When it comes to streamlining operations, the choice between a custom ERP vs off-the-shelf system can make a significant difference. According to recent research, custom ERP has led to:
- 40% in IT costs
- 35% in cycle time
- 38% in inventory levels
Weaknesses and limitations
Longer development time: The process of developing a custom CRM can be lengthy. On average, it could take a few months, and this is the minimum time needed to design the system, develop the software, and conduct thorough testing.
Dependency on specific vendors or tech teams: Going heavy on customization limits your flexibility to easily integrate with other platforms. This could potentially lead to higher costs. Switching to other vendors could be difficult in the future because your vendors could have specialized knowledge of your ERM system.
Who may need custom ERP
Large Enterprises and Multinational Corporations
Large companies need a variety of legal systems for specialized tasks. They operate across different regions and often require features like regional reporting standards, multi-currency support, or language adaptations.
With custom ERPs, businesses can configure workflows and modules that adapt seamlessly to different operational landscapes. These companies often conduct a thorough evaluation of custom ERP vs off-the-shelf to ensure scalability and compliance.
Companies in Highly Regulated Industries
Industries like healthcare, finance, and pharmaceuticals face stringent regulatory requirements (e.g., HIPAA, GDPR, and FDA regulations). In the custom ERP vs off-the-shelf debate, the first option wins, as it could help to navigate through this chaos and streamline compliance processes.
Companies with Unique or Niche Business Processes
Companies with highly specialized or niche processes (such as custom manufacturing, R&D-driven firms, or project-based organizations) need an ERP that can adapt to their unique workflows.
Example of custom ERP
Business processes of Amazon go far beyond the standard ERP systems. While fulfilling millions of orders daily, the company needs its custom ERP to combine warehousing, logistics, and inventory. It has such functions as real-time inventory tracking, dynamic routing, or predictive analytics.
Features of a custom ERP fused by Amazon:
- Financial management
- Data management
- Analytics and reporting
- Enterprise asset management
- Enterprise performance management
- Manufacture and production planning
Here is how it looks like:
Source: https://peoplemanagingpeople.com/strategy-operations/3-examples-of-erps/
On the left side people can choose the area of business they want to view. Below is an example of ERM focusing on shipment.
Source: https://peoplemanagingpeople.com/strategy-operations/3-examples-of-erps/
Custom ERP vs Off-the-shelf. Which one is better?
Let’s break down the main factors and compare custom ERP vs off-the-shelf.
| Off-the-shelf ERM | Custom ERM | |
| Cost | Lower initial investment costs May incur ongoing licensing fees and potential costs for additional modules or features that are not included in the base package | Cheaper in longer perspective, but not from the start |
| Deployment speed | Ready-to-use modules for rapid implementation | A longer set-up period |
| Scalability | Potentially limited scalability, especially for rapid growth | More scalable, as it can be tailored to specific business needs and future growth |
| Compatibility and integration issues | Standard integrations for widely-used applications | Smoothless integration. Every feature and function is made to support your specific business processes |
| Ownership | Vendor owns the software and updates As the vendor owns the software, businesses must rely on him for any updates, modifications, or issue resolution. | Complete ownership of the solution. You control how the software is used, modified, or expanded |
Hybrid approach
You do not necessarily need to choose between the complete customization and built-in functionalities. If you are torn apart between these options, then maybe a hybrid approach could work for you.
What does a hybrid approach look like? You customize only specific elements (f.e., unique reporting tools). This could definitely reduce costs but still offer a higher level of engagement. A hybrid model allows businesses to use custom ERP vs off-the-shelf elements flexibly, mixing customization where needed
This approach also offers a quick start, as you can scale up over time as needed. The drawbacks of hybridization are integration issues and higher costs (in the long run).
Factors influencing cost
As you weigh your options, consider the following factors that can influence the overall cost of custom ERP vs off-the-shelf.
Complexity: The more complex is your solution, the higher chances it would be costly.
Vendor: Rates vary. However, if you choose a vendor with industry expertise, you’ll save more money in the long run.
Customization extent: The more customization required, the higher the cost.
Tips on how to pay less
To help manage your budget, here are some practical tips for reducing ERP costs.
- Plan which features you want in advance. This way your ERM will cost less, as your developers will also work less.
- ERP systems commonly get upgraded once or twice a year. Consider this when evaluating the total cost of ownership. Upgrades can involve additional costs for licensing, implementation, and training.
- Choose Flatlogic’s code generator. This is the best way to cut costs on your ERM. Continue reading and find out how it works & what’s the price.
How to make the right choice?
Making the right decision between custom ERP vs off-the-shelf is crucial for the success of your business. Here are some essential questions to consider that will guide your evaluation process:
- What are your business needs? What specific problems are you trying to solve with an ERP system?
- What are the existing workflows and processes in our organization? How will the ERP system fit into our current operations?
- What is your budget?
- When do you want to implement your ERM?
- What features are essential?
- What are the risks involved?
Extra tip: Keep in mind that using the same software as your competitors offers little opportunity for competitive differentiation.
Step-by-step guide on how to decide what type of ERM you need
- List all the areas where standart ERM falls short
Assess whether customization can solve your problems and make sense for you. The list can include:
- Custom reporting
- Integration with other tools
- User interface issues
- Scalability challenges
- Evaluate standard ERP solutions
Explore leading ERP vendors and their standard offerings. Assess whether the standard features align with your business needs.
- Weigh the pros and cons of customization
Customization can definitely improve your business processes, but remember: it’s not the case for all. Be careful about going down a customization rabbit hole, as it can lead to increased complexity, higher costs, and potential vendor lock-in.
- Perform a cost-benefit analysis
Do not forget to think about:
- Licensing fees
- Development costs for custom ERP
- Implementation and training costs
- Ongoing maintenance and support
- Evaluate scalability and future needs
Consider your business’s future growth and whether the ERP system can scale accordingly. Evaluate how the ERP system can handle increasing data volumes and complexities as your business grows.
- Make the final decision
By following these steps and carefully considering your specific business needs, you can make an informed decision about the type of ERP system that will best serve your organization.
Mistakes to avoid
- Do not overestimate your uniqueness
Try to compare your processes to similar businesses.
- Evaluate complexity with effectiveness
Does the complexity really add value? Simplify where possible.
- Do not assume more features means better functionality
Focus on the core features that directly support your business goals.
Try Flatlogic’s code generator
Why choose between the cheap price of out-of-the-shelf solutions and functionality of custom ERP?
Flatlogic’s code generator has the best of both worlds. It creates a custom ERP with all features you need in minutes. And guess what would be the price? Just $33 per month.
What do you get with our ERM systems:
- Tailor each module to meet your specific business needs
- Easy integration with tools like Slack, Google Workspace, Microsoft Office, etc
- Powerful analytics that allow to monitor key performance indicators, generate detailed reports, and track trends
- User-friendly, intuitive interface that makes it easy for any team member to navigate
Technical details:
- Both frontend and backend
- Three roles: super-admin, admin, general user
- Backend languages: Node,js, Lavarel
- Frontend languages: React, Angular, Vue
- Database options: MySQL, PosgreSQL
- Cloud-based system
The final takeaway
Summing up, we’d like to say there’s no right or wrong answer on who wins the battle custom ERP vs off-the-shelf. The only answer is the one that best serves your specific processes, goals, and resources.
If customization is what you’re after, we advise you to use Flatlogic’s code generator. This is the best tool to help build a tailored ERP solution in minutes and with budget-friendly pricing you won’t find elsewhere.
Start your ERP journey with confidence, and let Flatlogic empower your decision with the clarity and support you need.
