ERP Systems: Build It Don’t Buy It
In our work, we’re constantly evaluating the top tech trends impacting companies today, and a common theme is clear: industry leaders innovate, invest, incent, and win. Enterprise Resource Planning (ERP) technology is no exception to this rule.
What we’re seeing among the country’s top corporate innovators is a knowledge that best-in-class business processes, impacts and results aren’t going to come from deploying a tool every other company is using. That’s the secret Tesla knows. Tesla – Disruptor in Chief in the automotive and manufacturing sectors – chose to build its own customized ERP system under the visionary leadership of Elon Musk.
Why? Because Tesla knew conventionally available ERP systems wouldn’t support their culture and business model.
Tesla’s crystal clear mission includes inherently disruptive approaches and products, meaning they wouldn’t likely have “fit” into a standard packaged ERP. The company also needed its system faster than the large ERP vendors could move. Instead of many months or even years configuring packaged software, the company built its own in four months. No doubt it is a better fit for their business than any package would have been – and they owe nothing to a vendor for ongoing software assurance and upgrade costs going forward.
Many companies we talk with want to gain industry leadership by inventing and using new best practices. Then, they implement or upgrade to a standard ERP platform, all but guaranteeing they will adopt business processes that are only average or slightly better. The intention is good, but the outcome could be better. Much better.
There is little to no chance that an ERP vendor’s process template is optimal for your business.
Consider the fundamental realities: How much time will pass before a truly new best practice is invented somewhere – anywhere – in industry and is suddenly available to anyone in an ERP product? And how valuable is that new best practice? The higher its value, the more closely guarded it will be with intellectual property protections. Even if access is possible, an ERP software maker must be aware of and understand it. Then, they must integrate it into their product and offer it in a general release.
How likely is that scenario? How long will it take? Can a company afford to wait? Those questions are precisely why market leaders build their own custom ERP if they can afford it. The prerequisites for doing so are not for the faint of heart: willingness to invest, truly capable IT resources, a strong belief in your business model, and visionary leadership.
How can you be an industry leader using a tool that everyone else already has?
Clearly, not every company can be Tesla. For many businesses, just getting to a standard industry practice will produce significant value in excess of what they will spend on a new ERP platform. ERP technology continues to improve, thanks to large R&D budgets at SAP, Oracle, and Microsoft, and these systems provide more value and are easier to use than ever before. And for most businesses, a packaged ERP is a viable choice. Packaged ERP systems can be optimized when a company is crystal clear about where the competitive advantage comes from in their business. Then, they are armed with the insight to customize the ERP in specific areas to retain and capitalize on that advantage.
But the lesson from leaders is clear: if you want to support best-in-breed business operations, you’ve got to build your own.