How to ensure custom software returns investment
For many business owners and operators, the word “customization” holds a lot of negative connotations. Perhaps in a previous experience their custom software was poorly documented. Perhaps it was difficult to upgrade or they didn’t receive enough return on investment. Not every customization needs to be that way.
When starting a business, entrepreneurs are working with ideas, not software. They do not restrict the products they offer nor the internal processes they follow based on how their software functions. Because of this, they often find themselves down the road with software that doesn’t support some of the decisions they’ve made.
The solution is often manual processes such as spreadsheets and lots of wasted hours conducting operations in an ad hoc manner. Here is where customizing your system should be considered.
Before you agree to any system customization, however, be sure that the created product will be versatile, supportable long-term, and will provide a healthy return on investment.
When to tailor?
As I present myself to my wife wearing a suit that’s been in the closet for a few years, it’s clear from her reaction that I’ve grown (not taller, unfortunately), and that I need to take the suit in for some modifications. As your business grows, you should constantly re-evaluate your Enterprise Resource Planning (ERP) software.
In some cases you may not have the information you need to make well-informed business decisions; in other cases processes or data entry may be so inefficient or cumbersome that your staff is overworked and you’re considering new hires. This is the ideal time to evaluate your current ERP software and to determine whether some modification, or tailoring, is worth the investment.
As you talk with a developer (tailor, if you will), it’s important to ask the right questions.
The most important question is how long the delivered solution will take to upgrade when you upgrade to a new version of your ERP software. Ask for specific details such as what the upgrade process will be, how window modifications are reproduced and what potential problems may come up during the upgrade.
The biggest complaint against customization is that it becomes an impediment to upgrading your software in the future; however, this doesn’t need to be the case. Make sure from the beginning that you understand what ongoing investment will be required to keep your customizations in use.
Next, be sure to ask what documentation will be provided. Ideally, documentation should be provided before signing any proposal. The design of your solution determines the price, so if your developer hasn’t made solid decisions regarding design, you might find that the actual cost may exceed estimates.
Request the documentation up front so you know what you’re getting and the developer knows what he or she is estimating.
Returning investment
The most important factor in discerning whether to tailor your ERP is whether your investment will pay for itself. Here’s a great example:
Compellent Technologies in Eden Prairie recently faced a fork in the road when its staff was working a lot of overtime to process sales transactions. The company either needed to hire a few more employees or increase productivity.
By tailoring their invoicing process, Compellent reduced the steps required to process a single sales invoice from as many as five steps to always just one. Implementation took less than a month and staff was able to process four times their previous output capacity.
Compellent estimated the return on investment to be only three weeks. In addition, their new simplified process will make it much easier to train new staff as their business grows.
Your ROI can also be intangible. Too often, companies are maintaining and using data outside of their ERP system on various spreadsheets because the system doesn’t allow them to do everything they want. If the person maintaining the master list leaves, so does the process for maintaining it – and chaos ensues.
Perhaps your CEO is working with month-old data. Imagine the value in providing him or her with real time data.
Backup required
Once you’re up and running on your tailored solution, you should protect your investment by making sure you have the backup materials required to make changes and upgrades in the future.
Document everything.
Hopefully you received documentation from the developer. If not, you should create it. Your ERP solution most likely came with supporting user manuals. You should have the same sort of materials for any functionality you add.
Having this documentation will assist your staff in knowing their system, and will assist the developer if changes are needed in the future.
Ask for the source code.
When you contract with a developer to create a solution specific to your organization, the entire solution (finished product and code) belongs to you. Be sure to request a copy of the source code for your solution.
You have a right to it and it should be safeguarded. If that source code is ever lost, in some cases part of or perhaps the entire solution will have to be recreated.
If a tailored solution doesn’t save you money in the long run, it isn’t worth doing. It needs to pay for itself and show some benefit toward operational efficiency and data integrity.
