Pavlo Author of the article Pavlo Bilan CEO

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Off-the-Shelf vs. Custom vs. Hybrid ERP Software – What to Choose for Retail Business?

If you started thinking of an ERP solution for your business, you probably noticed it’s not a piece of cake. With so many offers on the market with various features, pricing, and subscription models – how not to get lost in this variety?

Let’s start from the beginning and mention several kinds of ERPs: out-of-the-box, custom, and a hybrid combining features of both.

An off-the-shelf ERP, you get a pre-built set of features that can fit your business or not. A customized solution differs with its perfect-fit to your business processes. In contrast, hybrid one is something that has the best of both – software packages with pre-built features that can be tailored to your specific needs.

Need a piece of advice on picking the right option? Let’s get started.

Advantages of Out-of-the-Box ERP Solution

A pre-built ERP is a software containing all the tools, samples, and features from the get-go.

The bad news is that such platforms are developed to match as many businesses as possible. So they are almost 100% generic, which means you can’t modify them according to your specific requirements. Also, some features don’t fit the needs of individual businesses.

It’s often an easy-to-use system, and you can learn it in simple steps, but it won’t cover every process your particular business requires. There also can be some features you don’t need at all – as it tends to be not flexible but rather a universal solution.

Here are some points you should look at when considering generic out-of-the-box ERP systems:

  • Off-the-shelf systems usually have a lower cost. But keep in mind that initial purchase price often excludes fees for upgrades, monthly or annual licensing, per-seat charges, software support, and per-website or installation licenses. All these issues can considerably affect your final spendings. Over time, these fees can even exceed the costs of a custom solution.
  • Process adjustments. When implementing such an inflexible solution, you might have to change some of your processes to match the logic of software. This leads to the need for staff education and a slower work rate at the beginning. And don’t forget you’ll still need to cover the processes that ERP doesn’t.
  • Infrastructure requirements. You may need to change your infrastructure to accommodate the software. For example, you may need to use new browsers, programming language, rollout processes, etc.
  • Because an out-of-the-box ERP software is not a perfect fit with your business, it won’t be modified as your retail business grows. 
  • Most out-of-the-box ERP systems are not flexible and customizable. Even if there is an opportunity for tailoring, customization can be costly.
  • Off-the-shelf ERP software vendors are not interested in on-going support. As they gain profits from your initial purchases, they don’t put much effort into resolving the issues you may face. When you need to troubleshoot the problem, you’ll likely contact their call center representative – not an experienced software developer.

To sum up, off-the-shelf ERPs can perfectly fit small and medium businesses that don’t have too many complex processes or are looking for an affordable solution.

Why You Should Consider a Custom ERP System 

Choosing a custom software means you’ll be using an ERP based on your business requirements and processes. You’ll decide what features and components should be included.

Usually, flexible software like Oracle or SAP would still have the base of a feature that comprises roughly 20% of it. This means you’ll have 80% of the features and customization in your hands. Decent software vendors should analyze your processes and needs and make a custom package offering for you.

So what is essential to pay attention to when considering a custom EPR system:

  • Custom ERP solutions cost more upfront than their off-the-shelf competitors as they need to be prepared before they are ready to use. You should also remember that additional features and adjustments are likely to be considered extra. Sometimes you may even require hiring an in-house engineer to help you with the system integration and support, which also increases the cost. Of course, you know what you pay for – the efficiency and automation are significantly higher than an out-of-the-box software can provide.
  • Rollout Time. The system rollout process involves many people, such as database engineers, QA, developers, and so on, so it takes longer. In some cases, the rollout may even take up to several months. Hiring and onboarding your developer, if required, may also take time. The rollout often happens in the background without interfering with your core business processes, so you can run your business as usual and wait until the ERP is ready.
  • Another advantage of choosing a custom ERP software – it’s suitable for integration with other systems. If you’re using QuickBooks for bookkeeping, you can set up your ERP system to operate with it automatically. Out-off-the-box ERPs are far more demanding in this regard due to the lack of customization and integration options.
  • Custom ERP software vendors tend to build long-term partnerships with their customers as they prefer to continue modifying the software for as long as possible. This provides personalized support to take care of your specific needs and requirements. You’ll interact with trained software engineers, not call center representatives.
  • Implementing custom ERP is quite complex and requires plenty of time involved. You need to make sure the software company you choose is stable financially and has a lot of expertise in your industry. A good practice is to talk with other customers and meet the team before signing a contract – this will provide more transparency and certainty in long-term investment efficiency.

In conclusion, custom ERP software is a good fit for large-to-enterprise-level retailers, such as Walmart or Target, as they can afford the cost and have big and complex chains, no generic system can cover.

Generic + Custom ERP Hybrid System – Pros and Cons

At this stage, you might be thinking there is no perfect solution for your retail chain entirely as you’re neither small nor large. It’s good to know that you can get an ERP system that combines the best of both types.

In most cases, hybrid ERPs are 80% out-of-the-box and 20% customizable. So you have an option to get something that meets most of your requirements while providing plenty of customization options to cover the rest of them. You don’t spend so much time and money on putting together a whole system – only on your business’s specific critical aspects.

Let’s take a look at what you should consider when analyzing hybrid ERPs:

  • The upfront costs (with support as extra) of the hybrid ERP software fall right between their off-the-shelf and custom ones. They cost less than fully flexible ERPs due to the lower amount of adjustments required to get them working.
  • Rollout Time. Hybrid ERP software takes less time to implement than their fully customizable counterparts, but longer than generic software. The rollout of the off-the-shelf aspect is generally on the faster side since it’s the same copy-and-paste process for all retailers.
  • A customizable aspect takes longer since it depends heavily on the complexity and size of your retail chain. Usually, the software vendor analyzes the current business processes to pinpoint any gaps and ensure that the new system addresses them, which does take time. The pay-off is that you get all the features you need.
  • Industry specifications. As this kind of ERP software is not 100% or even 80% customizable, make sure that its core features are usable in your specific industry and meet your business needs.
  • Hybrid ERP software vendors tend to form lasting partnerships with their customers, the same as with custom ERP software vendors. This leads to personalized support that’s there when you have specific needs and requirements. So you’ll address your requirements to trained software engineers.
  • One of the most significant advantages of hybrid ERP systems is its readiness to be modified as your business grows. Considering this, you’ll never get to the point where it becomes obsolete or unusable, as is often the case with generic systems.

Hybrid ERP software is a perfect option for small-to-medium specialty retailers with over $10 million in revenue.

What About Building an ERP System In-House?

Building your ERP system brings the ultimate flexibility and fully-customizable features. This way, you’ll make sure that every tool matches your every need and process.

It’s the option that requires much time and money investments, but you’ll get a perfect solution with no need to depend on subscriptions and licenses of pre-built and custom solutions. You’ll also get the tool that will grow and change with your business.

If you’re considering this option, take the following into account:

  • Building an ERP system is not your core competency; you may not have enough expertise to create one that functions at an acceptable level. As a result, you may end up with a system that costs a lot to make but doesn’t quite work as expected. You’ll need a team of skilled developers to pull this off the right way.
  • Investing in skillful software developers will likely end up costing you more than merely buying a system – whether it’s off-the-shelf or custom-built. It’s also highly likely that you’ll go through multiple iterations of the software before getting it right, which won’t be cheap. You may run out of money before you even get to that point.
  • Upgrades & upkeep. To ensure your ERP system continues to function correctly, you will need to have a designated IT person or department oversee its operations. The last thing you want is for your system to crash while your IT person is either on vacation or busy with something else. Besides, your IT person will have to be skilled enough to fix the problem.

With so many ERP software vendors out there, it’s much easier to find one that can meet your exact needs. The market is insanely competitive, so the vendor you find will likely do their utmost best to keep you as their customer.

Instead of Conclusion

Your decision will mostly depend on your business needs and resources. If you’re a smaller retailer, it will make more sense to go for an out-of-the-box ERP system. If you’re somewhere in the middle, with massive growth potential, then an out-of-the-box + custom ERP system might suit you better. If you’re a large enterprise with more than 250 locations, then a fully customized ERP solution is the perfect fit for you.

All retailers are different, and there’s no one-size-fits-all solution. So, evaluate your business carefully before you come to a decision.

If you need any consultation on choosing or building the right ERP system for your business – the BilSoft team is ready to help. Get your consultation for free by filling up the form, and we’ll get in touch soon.

Pavlo Author of the article Pavlo Bilan CEO
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