The predicament for modern ERPs: to customize or to standardize?

I’m writing this note in response to Dwight Fischer’s post on ERP trends for Education. Dwight is CIO at Dalhousie University, and IT leader among his Canadian peers. There have been conversations, also largely led by ERP vendors such as Ellucian and Oracle, about the cloudification of ERP systems (or so-called Student Information Systems). Software vendors are interested in selling subscriptions (i.e. recurring revenues), while they can provide economies of scale on the hosting side, as well as more OpEx and less CapEx for universities.

Although this sounds like the future is happening before our eyes, one of the major obstacle has been the wide variety of modules installed by universities and colleges. No one seems to agree on the same bundle of modules, and if we add the custom modifications to the picture, the standardization of ERPs across institutions (a pre-condition to cloudification) remains only a dream at this point. Dwight advocates that encouraging standardization is the natural course of action for CIOs.

I wanted to make two simple points:

1. the value of ERPs comes precisely from customization
2. customization is affordable (and desirable) when industry best practices are followed

I’m drawing from the savoir-faire of the Free/Open Source Software community, widely used across industries (80% of the software is open source), and in particular from the ERP practice at Savoir-faire Linux. In the last four years, we helped more than 50 customers digitized their practices, while leveraging Odoo, the Open ERP.

I’m also sharing what I learned from my own experience at the Ontario Ministry of Education, helping school boards share their IT services. Over several years, IT teams across organizations learned to collaborate in progressively sophisticated ways. Today, they accomplish more together than they could ever have done in silos.

Here is my response to Dwight:

Thanks for the post Dwight. Great summary of the disruption happening in the ERP industry. One idea I would challenge though is that standardization is a good thing for ERPs. Since the role of ERPs is to digitize (and enforce) business processes, standardization may only work for an organization with standard processes, but is there any? For the regular guy or gal, it may mean some gymnastics to fit what the software thinks he or she should be doing in an utopian organization, thus a lack of adoption at best, and a lack of productivity at worse. It sounds counter-intuitive to me, since adoption of IT technologies (and responding to user needs in particular) is the top factor explaining the software crisis we’re experiencing since the 60’s. Projects go over budget, over time, or don’t deliver on expectations (in some cases it’s all the above). Can we meet user needs with a standard/generic ERP?

Most of the customers we’re helping with their digitization actually find more value in custom-fitting the software to their needs, and not the other way around. Although buyers think about software first, they quickly find out the whole purpose of the ERP implementation is about increasing productivity in their organization. We identify and we avoid processes that are not mature, to focus on those processes that are mature and time-consuming. The business case is easy to make when we can show that FTE time can be spared in some area, so that it can be focused where it should be: serving students better (possibly more interaction and customer service). In the end, the ERP pays for itself rather quickly. It does so when it supports people in their tasks, vs asking them to work differently.

I would agree that making modifications on school ERPs has led to complexity and exponential costs. Primarily that is because IT teams have been working in silos. The industry practice is to collaborate on software development, thus outsourcing and lowering the maintenance cost. The Linux operating system is a good example. You find it in Android phones, data centres, Samsung TVs, networking gear (Cisco, GE, Brocade, etc), planes, cars, public clouds (e.g. 25% of the Microsoft Azure workloads), now Blackberry… In the end, the cost of maintenance is very low for a single organization, and near zero for a university and college (most work being handled by Intel, Microsoft, Google, and companies like Savoir-faire Linux). Companies compete on areas of differentiation and core competencies, while cooperating on the non-essential. The same can apply to ERPs in education. Why keeping these customizations secret, when someone else is out there to help you pick up the tab? It is only a matter of collaboration and managing code repositories effectively. This is what the Odoo Communication Association members, for example, are aiming to do. There is no secret. Collaboration is key!

When it comes to ERP implementation, you can have your custom cake, you can eat it too with your friends, and you can still pay for it.