Custom ERP or Off-the-Shelf: How to Decide

The short answer

Buy packaged software when your process is ordinary and the package fits it with few changes. Build custom when your process is the thing that makes your business work, and forcing it into a standard shape would cost you more than building.

Most businesses are somewhere in between, so the honest first step is to find out how far a package really gets you.

What does "fits" actually mean?

A package fits when your team can do their daily work in it without workarounds. The warning signs are specific. One or two is normal. If this is the daily reality for most of the team, the package is not fitting.

• People keep a spreadsheet next to the software for things it cannot hold.
• The same data is typed into two systems.
• Approvals happen over chat or phone because the software has no step for them.
• Reports are built by hand each month because the numbers in the system do not match how you measure the business.

When is packaged software the better choice?

Packaged software is the better choice in these situations.

• Your process is common to your industry and you are happy to adopt the way the package does it.
• You need to start quickly and the cost of a build is not justified yet.
• The package already handles the compliance rules you need, and you have confirmed that with the vendor.

When is custom the better choice?

A custom build is the better choice in these situations.

• Your approval structure, pricing rules or stock handling are specific to you and are a real part of how you compete.
• You would otherwise pay for several tools and still need people to move data between them.
• You expect the process to change as you grow and want the software to change with it, not the other way round.

How do the costs compare?

Packaged software is usually cheaper at the start, and its cost tends to grow with the number of users, add-ons and workarounds. Custom software costs more at the start, and the cost is mostly the build.

Which is cheaper over time depends on how many workarounds you would otherwise carry. Ask for both numbers over a period you care about, such as three years, before deciding.

Is there a middle path?

Often the best answer is neither extreme. Keep a package for the parts that are standard, such as accounts, and build only the part that is specific to you, connected to it. That keeps the build small and the risk low.

What should you do next?

List the five most painful steps in your current process, then check each against the package you are considering. If it handles four or five without workarounds, buy it. If it fails most of them, the gap is the case for a custom build.