ERP Customization vs. Configuration: Understanding the Difference

When implementing ERP software, organizations make many adjustments to tailor the system to their needs. Each “adjustment” exists on a scale that classifies between a configuration and 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 becomes. Heavy customizations often extend go live dates, are poor quality, and break with software updates.

As such, we recommend to minimize 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.

You can change settings like time zones, languages, currencies, workflows, financial reports, data analytics, and organization-specific business intelligence. Every 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.

Integrations are another critical aspect of ERP implementation. Some third-party systems are compatible with ERPs and easily integrate with them. Though, 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

ERP Customization

ERP customizations are changes that 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 and add steps/ tools to native automation processes.

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

Since customization requires editing the source code, this can be costly and risky. Any time the source code is changed, there is the risk of bugs and breaking the system. To avoid ERP implementation failure, thorough planning, testing, and training needs to be done.

Additionally, coding can increase the implementation time and add many billable labor hours to your budget. ERP vendors often offer low-code customization, which can help to mitigate the cost and risk increases.

Pros and Cons

Choosing When to Customize or Configure

Customization and configuration are not mutually exclusive: Configuration is a mandatory part of implementation, but customization, and the level of customization, are optional.

As illustrated in the graphic above, customization and configuration are a spectrum. ERP changes are possible through configuration, customization, or both. Also, there are more and less risky customizations and more and less expensive ones.

For proper implementation of your company’s ERP, it is essential to understand your business needs thoroughly. These business requirements will determine if and how many customizations are necessary or if configurations alone are sufficient. These requirements will also determine the risks your company should be willing to take on for implementing a new system.

Scheduling a demo for your prospective ERP solution helps determine if the out-of-the-box functionality meets your business needs and what customizations may be necessary.

Our Verdict: 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 detailing their experiences with ERP customizations: