ERP Customization vs. Configuration

When implementing ERP software, organizations make many adjustments to tailor the system to their needs. Each “adjustment” or change exists on a scale ranging between basic configuration and complete customization.

The difference is that a configuration (or personalization) is typically a simpler, out-of-the-box setting change, while customizations are usually more advanced and can require code changes.

The more heavy code customizations a company makes, the more costly and riskier implementation and maintenance become. Heavy customizations often extend go-live dates, increase the cost of an ERP project, and break with software updates.

As such, we recommend minimizing heavy ERP customizations; opt for pre-existing, well-maintained integrations when you can. It’s best to find an ERP that fits your business model or adapt your business workflows to fit the ERP instead.

ERP Configuration

Configuration is essential to implementing an ERP system and involves selecting the system’s settings and options. Configuration is setting up and tailoring the ERP to your business.

You can change settings such as time zones, languages, currencies, workflows, financial reports, data analytics, and organization-specific business intelligence. Each department can have different configurations based on its requirements.

Personalization and workflow automation are two significant components of ERP configuration. Personalization includes reports, analytics, color schemes, and setting employee roles. Workflow automation helps create rules for performing automated functions.

Third-party integrations are another critical aspect of ERP implementation. Some third-party systems are compatible with ERPs and easily integrate with them. However, many are not compatible and require additional customization. Integration also involves importing data, which can be possible with configuration, but customization is often necessary.

Configurations are easier and more cost-effective since they don’t require custom coding.

Pros and Cons

Pros	Cons
Less expensive than customization	All requirements may not be met
No source code changes	Most third-party integrations require customization
Configurations compatible with ERP software upgrades	Additional modules require customization
Client requirements determine configuration once during implementation process
Good for small to medium companies

ERP Customization

ERP customizations are changes businesses make to their ERP systems to fulfill critical business requirements. These changes usually involve editing the software’s source code to gain functionality the native features don’t include.

Customization allows organizations to add modules and integrations with third-party software that can expand the ERP’s functionality. Customizations also help build industry and company-specific task-management processes and automations.

You can also extend the functionality of existing modules by adding steps or tools to native automation processes.

While some of these changes are possible with configuration, the complexity of the changes depends on the ERP software purchased and your unique business requirements.

Since customization requires editing the source code, it can be costly and risky. Any time the source code is changed, there is the risk of bugs and breaking the system. Thorough planning, testing, and training are needed to avoid ERP implementation failure.

Additionally, coding can increase the implementation time and add many billable labor hours to your budget. ERP vendors often offer low-code or no-code customization, which can help to mitigate the cost and risk increases. This is becoming increasingly popular with the advancements of AI-assisted coding tools.

Types of Customizations

Software customizations can take on various forms, changing the formatting, design, and functionalities of the ERP system by modifying its source code. Here are a few of the more common types:

• Design changes: High-level cosmetic changes to the default ERP system.
• Forms and dashboards: Formatting and content changes to frontend forms and backend dashboards.
• Functionality extensions: Modifications to the source code that enhance functionality or introduce new features.
• User interface changes: Cosmetic enhancements to the system based on user preferences.

Pros and Cons

Pros	Cons
Helps meet operational requirements.	Extends budget and implementation timeline
Adds modules and functionalities	Needs a dedicated team with ERP, domain, and technical skills.
Best for large enterprises	Future changes need additional customization
Facilitates integrations with third-party software	Customizations receive little or no support from vendors.
	Higher risk of exceeding budget and implementation timeline
	Needs additional resources and maintenance to operate
	No automatic updates to modified software

Choosing When to Customize or Configure

Customization and configuration are not mutually exclusive: Configuration is a mandatory part of implementation, but customization is optional, and highly dependent on your business’s complexity and risk tolerance.

As illustrated in the graphic above, customization and configuration exist on a spectrum. ERP changes are possible through configuration, customization, or a combination of both. Some customizations are relatively low-risk, while others are far more costly and difficult to maintain, such as editing core financial modules or modifying database structures.

To make the right decisions, you’ll need a clear understanding of your business requirements. These needs determine how much configuration will be sufficient, whether any customization is necessary, and what level of technical risk your organization can support.

If you’re still evaluating ERP systems, this is also the stage where demos can help you assess whether the software’s out-of-the-box functionality fits your needs, or whether significant customization will be required.

ERP Selection: Avoid Customization Before it Starts

Many over-customization problems aren’t caused by poor implementations; they’re caused by poor selections. Choosing an ERP that lacks key features in your industry or business model forces teams to build workarounds just to make the system usable.

ERP selection isn’t just an IT decision; it’s a business decision that impacts every aspect of your organization. A well-matched ERP should meet 80 to 90 percent of your core requirements right out of the box. The more fit you get on day one, the less you’ll need to customize, which means faster implementation, lower costs, and better long-term stability.

When evaluating ERP vendors:

• Look for highly configurable platforms
• Ask direct questions during demos: Can this be handled through configuration, or does it require custom code?
• Prioritize systems with flexible configuration tools, strong features out of the box, and proven support in your industry.

Our Recommendation: Avoid Heavy Customizations

A quick wrap-up of best practices for ERP implementation:

• Minimize heavy customizations that involve changing source code to avoid unnecessary overhead.
• Opt for simpler personalizations and configurations whenever possible.
• Ideally, find an ERP system that aligns with your business model or consider adjusting your business model to fit the capabilities of the ERP.
• It is advisable to avoid excessive code customizing due to numerous implementation horror stories associated with it.

In general, we recommend that you either find an ERP that fits your business model, or adapt your business to fit an ERP. ERPs are often designed around industry best practices, so your business processes may improve by sticking to the ERP’s out-of-the-box features.

While most ERP systems can be customized, it doesn’t necessarily mean you should.

Heavy customizations that involve modifying source code or writing custom components can have all kinds of issues that may result in implementation failure:

• Longer implementation: Customizing an ERP can take significant additional time. Planning, coding, testing, and training can add months or even years to your implementation timeline.
• Higher costs: The risk factors that can result in a longer implementation time (planning, coding, testing, and training) can also affect the implementation cost. Additionally, the more you customize an ERP, the more likely it is to break. These fragile systems require dedicated support staff to constantly monitor and repair them, so this specialized staffing can add to implementation and upkeep budgets.
• More likely to break with core updates: When an ERP is highly customized, updating the core software can be impossible or risky. If the updates are possible, you risk losing the customizations or breaking the software.
• Often leads to poor quality: Unfortunately, many custom features are poorly implemented and can compromise the software’s integrity.

Here are some examples of real ERP users from the r/ERP subreddit sharing their experiences with ERP customizations:

FAQ

When should I customize my ERP system?

Whenever possible, it’s generally better to go with vanilla ERP software and personalize it through configurations. Businesses should only move forward with customization when it creates a competitive advantage or the ERP cannot solve a critical issue with native tools.

What are ERP customizations vs. configurations?

Customizations refer to modifying or adding to an ERP system’s source code to meet organizational requirements. They are different from configurations, which are tweaks to the ERP’s default settings using native tools rather than custom code.

What are ERP integrations vs. configurations?

Configurations refer to optimizing the native tools within an existing ERP system to meet a company’s needs.

Integrations connect a core ERP system to other software solutions through application programming interfaces (APIs). Common modules to connect include customer relationship management (CRM), human resources, and business intelligence (BI tools).

Integrations lie somewhere in between configurations and customizations. Pre-built integrations are closer to configurations, while integrations your company develops in-house are closer to customizations.