Andy Ziegele makes a living by assessing the operational value of corporate technology—as a senior manager at Ernst & Young’s transaction advisory services, it’s his job to make sure his clients know the business value of the assets they want to buy and sell. Profit spoke to him to get his perspective on customization of business software—which he says can turn out to be a challenging business investment for enterprises.
Profit: How pervasive is the issue of software customization?
Ziegele: It’s been an issue since the early days. Doing technology due diligence for buyers looking at companies, I’ve run into it with companies that have customized versions of ERP [enterprise resource planning] software. Overall costs may increase without the companies realizing any long-term business benefits. I’ve seen systems that are so customized that the base package is unrecognizable and that have hundreds of add-on packages that do odd things. Over the years, shareholder value has decreased due to customization.
Profit: Why do companies customize if it causes such tremendous challenges?
Ziegele: To be fair, companies start out by making one small decision, and it goes on from there—they end up with a hugely customized system a thousand small steps at a time. Some decisions may be the right ones in the near term but costly in the long term. The temptation is to make a few small changes in ERP software to pacify the user base. However, many small changes can turn into a big change over time.
Profit: What problems do companies generally run into when they customize?
Ziegele: When you customize ERP software, it can be more challenging to maintain and to upgrade to newer versions of the software. With each upgrade, you have to go back in and reapply the custom code, which often lacks documentation. It’s not unheard of to have customizations that are completely unknown by the company, as the creators didn’t document the changes and may have long since left the company. As a result, many companies stick with older versions of their ERP software simply because it is difficult and expensive to upgrade.
Profit: Sounds like a risky situation for businesses. What are the primary issues that you see right now?
Ziegele: Customized ERP software can hamper growth strategy. For example, I ran into one company that wanted to implement scheduling software, but the solutions the IT staff evaluated called for a more recent version of the ERP software. The company was stuck with its highly customized older version, so it had to develop custom interfaces.
Running older versions of ERP software also increases your vulnerability to viruses and malware. I’ve seen companies that have to run their ERP system in isolation to safeguard it from attack; it’s an extreme case, but more often than not, the company did not budget for that amount of maintenance and programming work. If they did the analysis and took a holistic view of what customization might mean to the business, they might have decided not to proceed with those customizations.
Profit: With such issues, are you finding that more companies are considering vanilla implementations?
Ziegele: I would love it if going vanilla became a trend, but it hasn’t yet. Customization is very pervasive in the culture. I’ve looked at more than 200 companies of different sizes and industries, and I’ve seen very few people who stick to vanilla implementations.
Profit: What do you think is the main reason for this resistance?
Ziegele: Most of it is political. Users are convinced that they have unique business processes so they resist the notion that they can work with a standard vanilla ERP system. I implemented a vanilla ERP system in a previous position, and business users insisted that they needed customization. I said, “OK, we will meet your needs,” and we never had to customize. It’s a difficult battle to win, but it’s worth it. Leaving the ERP system vanilla helps keep the overall IT costs down.
Profit: How can CIOs maximize their chances of implementation success?
Ziegele: If I had to pick a critical success factor for getting vanilla ERP systems implemented, it has to be executive sponsorship. You have to be able to sell the idea. It requires a salesperson to convince management to keep the software standard.
Getting to a stable and vanilla software implementation can be challenging, particularly if you have to revamp a highly customized environment. But if you can take your closing from 23 days down to 5, for example, and easily handle follow-on projects because the budget isn’t paying for maintenance staff, management will listen.