To Code or Not to Code

Businesses that purchase packaged application software – for example, an Enterprise Resource Planning system – must make choices about customization. Software vendors, anecdotal evidence, and practitioner-oriented research all recommend that organizations should customize software as little as possible, and instead adapt their processes to meet the “best practices” of the software. However, businesses continue to exceed their budgets on implementing and maintaining customized software, often to a significant extent. This suggests that either these organizations are making poor decisions, or that the conventional wisdom about customization is incorrect. In this paper we model the primary factors in the customization decision: “fit” between the desired business process and the packaged software; costs related to development, maintenance, integration, and performance; and benefits related to increased fit, integration, performance, and user acceptance. We use simulation techniques to illustrate the conditions under which customization is likely to provide value to the organization, as well as conditions under which customization should be avoided.