Don’t Try to Reinvent the ERP Wheel – You DO Have a Limited Budget (You Are Not Elon Musk)
Welcome to the first installment in our series: Don’t Try to Reinvent the ERP Wheel – A Weekly Look into ERP Selection Tips. This week we are going to look closer into creating an ERP system on your own and the associated costs. Specifically, we’ll ask the questions “Do you have an unlimited budget?” and “Should you build your own ERP system?” Unless you are Elon Musk or Richard Branson, you probably do have a budget and likely don’t have the adequate resources to build a successful ERP system in-house.
You are not Elon Musk
If you happen to be Elon Musk and have an enormous amount of capital, combined with a very unique product, you may want to develop your own ERP system in house. According to Electrek that’s exactly what he did, “Instead of going the conventional but costly route of implementing a trusted ERP system like SAP, CEO Elon Musk tasked his Chief Information Officer Jay Vijayan to develop in-house a custom end-to-end system fit to Tesla’s particular needs as an automaker operating its own store and service centers.” If we’ve learned one thing from Elon Musk, with endless resources you can fly to outer space (and create your own successful in-house ERP system).
For most of companies, however, building your own ERP system is not cost efficient and often is not the best solution regardless. Selecting the best ERP system is a process that has many factors to consider. Overlooking just one or two variables adds wasted time and money.
The solution already exists
Selecting and implementing an ERP system isn’t meant to be a test of your company’s IT capabilities. Yes, there are plenty of open source software options that “could” work, but there are many benefits of using a proprietary software over using open source software to build your own. As noted on CIO.com, trusted software companies end up offering more than just simple computing power. Here are a few of those benefits:
Open source options may seem enticing to some, but there are clear benefits of using proprietary software that override developing in most cases. To make the best selection for your company, and before deciding that you are so unique that there are no options that will work, be sure to clearly identify your needs and ask for help in making such a decision.
Do you have an unlimited budget?
Many executives assume that anything done in-house will be the cheapest route. Fact is, this is rarely the case. As referenced in an article by Intersog, the average ERP package for a mid-sized business takes over a decade, and a team of a hundred developers to create. Clearly, you are not going to get this level of development in-house. Another consideration, an average of 80% of software functionality is used out-of-box in most organizations, this creates significant wasted effort rebuilding technology that already exists. Another factor besides additional cost is an increased risk. When purchasing an off-the-shelf package, things like warranties, dedicated customer service, training manuals and security protocols are assumed. When taking on an ERP on your own, you will be responsible for the on-going maintenance, trouble-shooting, user training and support as well as security patches. The costs of hiring and training for this level of support are often not considered.
There are cases, such as with Tesla, where a custom solution will make sense. We recommend strong consideration before assuming this approach, however. A far more common trend when custom functionality is needed is to consider a hybrid approach. Either modifying an off-the-shelf solution to match your specific needs, or developing a custom module to integrate with an off-the-shelf ERP may be the best alternative. Consider these options before trying to create the entire software suite yourself.