Enterprises across the globe are thinking of migrating to composable ERP solutions (a term coined by Garner). As per research conducted by Boomi along with Coleman Parks, 94% of organizations worldwide are embracing a composable Enterprise Resource Planning (ERP) strategy to overcome the limitations of legacy monolithic applications.
With this, a very pertinent question arises: What should you opt for while adopting a composable ERP strategy: ERP Configuration or Customization.
In this blog, we will highlight the differences between ERP configuration and customization; and propose a path forward for enterprises that want to have nimble and flexible ERP systems.
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Let’s first begin with composable ERP systems.
What is composable ERP?
Composable ERP is an outcome-focused strategy that moves away from monolithic systems, recognizing that no single product can adequately serve all organizational needs. It provides the architectural flexibility to mix and match best-of-breed solutions and technologies in a modular fashion. This approach empowers organizations to design and deploy highly efficient workflows tailored precisely to achieve desired business results.
Adopting a composable ERP model provides several strategic benefits, such as the capability to precisely shape the application ecosystem according to distinct organizational demands. This modular approach facilitates independent evolution and iteration, which ultimately contributes to maximizing the return on investment and extending the operational lifespan of the existing ERP infrastructure.
What is ERP Configuration?
ERP configuration is the process of tailoring an ERP system to meet the specific operational, functional, and regulatory requirements of a business — without altering its core source code. It involves adjusting the system’s pre-built settings and components so that the ERP behaves in a way that aligns with an organization’s unique business model, workflows, and data management needs.
During ERP system configuration, implementers modify system parameters such as time zones, currencies, languages, approval hierarchies, financial calendars, and user roles to match business operations. It can also include defining industry-specific workflows, setting up reporting templates, or mapping cost centers and profit centers to reflect the company’s structure.
For example:
- In Oracle Fusion Cloud ERP, users can configure charts of accounts structures, ledger sets, and business units to support multi-country operations.
- In SAP S/4HANA, configuration may involve defining material types, purchasing groups, or plant locations in the IMG (Implementation Management Guide).
- In Microsoft Dynamics 365 Finance and Operations, users can configure workflows for purchase requisition approvals or define posting profiles for financial transactions.
ERP Customization and Composable ERP
A composable ERP is designed with modular, interoperable components that can be configured and reconfigured to respond quickly to business changes.
For instance:
- A manufacturing company might configure supply chain, inventory, and finance modules from different vendors through APIs to create a unified digital ecosystem.
- A retail business could configure its order management and customer experience modules differently for online and in-store operations while maintaining centralized financial control.
What is ERP Customization?
It is the process of extending an ERP system’s core functionality by writing new code, scripts, or modules to meet very specific business requirements. ERP customization involves adding new business logic, altering system behavior, developing new interfaces, or integrating third-party applications to create a more comprehensive solution. These changes are made directly within the ERP’s source code or through supported extension frameworks, making the ERP more closely aligned with the organization’s unique business model and processes.
For example:
- Oracle Fusion Cloud ERP: Creating a custom invoice approval workflow that includes additional business rules not available in the standard configuration or building an integration with a third-party tax engine like Avalara for automated tax calculation.
- SAP S/4HANA: Developing a custom Fiori app for specialized manufacturing order tracking or adding Z-programs to handle unique costing calculations.
- Microsoft Dynamics 365: Writing a custom plugin to automate commission calculation for sales teams or integrating Dynamics with an external logistics platform through custom APIs.
- NetSuite: Creating a SuiteScript to automate purchase order generation when inventory levels drop below a threshold or connecting the system with an external eCommerce portal.
ERP Customization and Composable ERP
Instead of directly modifying core code, modern ERP ecosystems encourage low-code/no-code extensions and API-driven customizations. This modular approach allows businesses to innovate and extend ERP capabilities without risking system stability or upgrade compatibility.
ERP Configuration vs. Customization
| ERP Configuration | ERP Customization |
| It involves adjusting pre-built settings, parameters, and workflows within the ERP system to align with business processes — without modifying the source code. It is faster, cost-effective, and upgrade-safe. | It requires writing new code or modifying existing code to add or change functionalities that the standard ERP does not support. It offers deeper flexibility but is more time-consuming, costly, and may affect future upgrades. |
How Opkey can help
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