The Dangers of Developing a Custom ERP System In-House

In theory, developing a custom ERP solution in-house to manage your wholesale and distribution business may sound like the perfect solution. However in practise it rarely is.  Even though the system would be designed with your specific business processes in mind, the benefits gained from a completely customized solution are often outweighed by the resources necessary to maintain such a “perfect fit” system.  It's preferable to work with an industry specific software company, who can meet most of your software needs out-of-the box, and provides the option to customize as well. Working with an ERP software vendor who becomes a trusted business partner ensures you get the best of all worlds - a solution that is designed for your specific business type, maintained by a team that provides expertise is the areas of software development and management, and provides guidance and insight into industry process improvements. It's often the smaller vendors who look to build these types of relationships, as it benefits them in the long run as well – working closely with customers means they get first-hand insight into industry specific requirements, and that enables them to continuously enhance the software to better meet the needs of their target market.  Below we take a closer look at the dangers associated with developing a custom in-house system.

Resource Investment

First and foremost, as a wholesale distribution company, your core competency is not in creating ERP solutions, nor should it be.  One of the problems with developing a system in-house is that it eats up a lot of resources and requires a large investment into the technology and skills needed to keep the ERP application up and running.  Even if this task is assigned to an IT department, it still takes time and other resources away from the activities that contribute to the businesses core competency.

Lack of Outside Support

Secondly, home-grown software of any kind does not come with outside support.  ERP vendors have teams of people with a vast range of expertise in areas such as development, data migration, consulting, reporting, process management, training and more.  If something goes wrong with a system developed in-house, it is up to the small team of developers and designers to fix it.  This can often be a painful and time-consuming process and takes resources away from managing other IT processes, and if employees leave, you're stuck trying to find and teach someone about your custom system.

Painful Upgrades

The next issue arises from the fact that completely customized in-house ERP systems are way more difficult to maintain and upgrade. Home-grown solutions often require continuous pieces of customization in order to manage changing processes, especially for a growing business.  All of these small additions can become unwieldy and leave users stuck when the person who developed them leaves.  The development and design of new features are often limited by the imagination of an individual user and aligned with their specific way of thinking.  Working with an outside software vendor gives you access to the knowledge of a team who has worked with other similar companies, and thus may be able to recommend better ways for managing certain processes. These systems are designed with the best processes in mind to ensure functionality developed does not disrupt other areas of the system or business.  When developing a system in-house, time must be spent planning processes, developing the application, testing how it works and then training users on the new features.  When working with an outside vendor, upgrading functionality is often simply a matter of turning on specific features that are already built in and ready to go.  An example is turning on the ability to do warehouse transfers when your business expands to multiple locations.

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Outdated Technology

The next issue pertains to delays in hardware and software technology upgrades as a result of standard capital allocation approval processes.  When developing a system in-house, the technology and infrastructure may not get upgraded as frequently if not properly budgeted for on a regular basis. Other projects may get priority which can increase the risk of system crashes and bugs in the long term.

Employee Training

Lastly home-grown systems are inherently one of a kind, which can be problematic when hiring new employees and dealing with staff turnover.  A completely customized solution means that there are only a few people who know how the system was developed and how to use it.  If those people should decide to leave the company will there be someone to replace them? It can be a challenge to bring new people up to speed on a home-grown system and the amount of time spent doing so is often much higher than when working with an outside vendor. Of course these concerns are not totally avoidable when using an outside software vendor, which is why it is important to ask the right questions and look for a solution that is intuitive and easy to use.  Outside vendors will automatically have more resources available for training and are often built on existing common technologies such as Microsoft which makes the transition and recovery of data easier.

The market for inventory and accounting ERP software is more saturated than ever before which provides businesses the opportunity to find a solution that is designed with their type of business in mind.  Most companies will be able to benefit from an out-of-the-box system with simple customization and the need for developing in-house solutions is fading.  If you’re thinking of developing something in-house, keep in mind the above list of pitfalls and spend the time trying to find an existing vendor to work with.