Build vs. Buy vs. Both

Have you ever had a project start out heading in one direction that looked promising, and then veer off in the opposite direction that yielded remarkably better results? Of course you have. In information systems projects, there's the classic dilemma of "build vs. buy" — and unwary clients can be impaled by either the "build" horn or the "buy" horn.

Here's the "rest of the story" in such a "build vs. buy" dilemma — our case study in this month's e-update. We were originally retained by the CEO and CFO of a structural steel fabricator for a "system screening" project — that is, to review the 3 or 4 software packages that the CFO had identified, and to vet the choices. We found — just as our client had — there was not an obvious choice, because:

• Lower-end industry-specific packages would meet the needs of one — but not both — of this client's lines of business.
• Higher-end industry-specific packages would meet the manufacturing needs of both lines of business, but were too cumbersome for the streamlined operations of our client — they lacked sales and accounting integration and were priced well beyond the client's project budget.
• General ERP (enterprise resource planning) packages were incapable of handling the inventory tracking and production planning needs unique to this industry.

Our work did identify another lower-end package we believed had the right base and fundamental structure to support customizations for our client — and our discussions uncovered that this vendor was eager to improve their software to address the needs of this client's second line of business. We provided our client with ideas for enhancements and some pointers for negotiations with the vendor — and we were done. Thus, our "system screening" project was finished.

A few months later, we received a call from the CFO, who said that, while the vendor was more than willing to develop the negotiated enhancements, our client was having trouble "speaking the language" of software development. Could we speak that language? Absolutely — in fact, that's one of the things we're well-known for! Thus began our "designing and managing systems customizations" project.

Over a period of several months, we:

• Discussed these process changes with appropriate client personnel and obtained their agreement.
• Translated the revised process into functional and technical specifications that the developer could use.
• Managed the development work performed by the vendor.
• Worked closely with the developer and end-users to understand and quickly resolve any issues during development.
• Installed and tested enhanced modules, as they became available.
• Resolved issues, once the software was rolled out for general usage.

So, "the rest of the story" for this client is this — the project ending up costing more than they had initially budgeted — in fact, it ended up being about the same as the higher-end industry-specific packages. Our client, however, got exactly the right software for their business, and quickly realized benefits that they had not anticipated. In fact, both the CEO and the CFO say that, while they would likely not have initially undertaken this project if they had known the eventual cost, they now say that the project has already paid for itself in inventory control and usage, system accuracy and data availability, and numerous time-saving business processes.

The moral of the story? Given the right consulting firm and the right basic package, a systems customization project could be the best possible choice.

If you would like to hear how a similar story could be written for you, please let me know.

Sincerely yours,     Todd L. Herman

A Case Study:

Designing and Managing Business System Customizations

Situation…
This multi-location structural steel fabricator needed to migrate off the mainframe-based business system of its former parent, for both functionality and cost reasons.

Problem…
Mainstream ERP systems lacked the capability to operate within the industry and its unique inventory requirements. Even high-end industry-specific systems lacked full integration between the operations and accounting modules, and support for the percentage completion and interim billing methods used in this industry.

Because no single package could meet most of our client’s needs, the options were to:

• Purchase an industry-specific solution and devise linkages for the separate systems.
• Develop a custom solution in house.
• Identify an existing product that met base needs and could be further tailored.

Solution…
After assessing our client's key operations, management, and accounting needs, we identified an existing product meeting many key needs and having a good design lending itself well to customizations needed by our client.

The Shop Bill organizes and summarizes the key material needed for a section of the fabrication job. Numerous validity checks ensure that all pieces and operations are well-defined before the job is released to the floor, allowing accurate and efficient processing, and eliminating duplicate data entry.

The Cutting Ticket allows Inventory Control and Purchasing personnel to aggregate production requirements and optimize orders against material in stock or on order. These routines permit various user-defined options, and are designed to minimize waste, maximize efficient inventory usage, identify additional material purchase requirements, and serve as the initial production order.

We worked closely with client personnel in Selling, Estimating, Planning, Scheduling, Operations, Billing, Accounting, and Management to understand all current processes. As enhanced modules were installed and tested, any issues identified were quickly researched and resolved. We then defined the functional and technical requirements for the customizations and managed the work performed by the system vendor.

Results and Benefits…
Our client obtained the functionality they needed to run their business, tailored to their unique needs in a cost-effective manner. Other benefits realized were:

Improved front-end job planning and setup validation has significantly improved operations on the floor.

• Automated cut optimization, with appropriate consideration of variable length inventory, has greatly increased material efficiency.
• Accounting and billing processes are now highly automated, reducing errors and slashing the monthend close process.
• Customized software automated many tedious manual processes and instilled appropriate setup and discipline throughout the entire company, ensuring that the streamlined fabrication flow is routinely and accurately executed.

Conclusion…
When faced with a "build vs. buy" decision, we were able to help our client plan and successfully execute a "buy and extend" strategy to deliver the technology needed to support their streamlined operations and accounting processes.

Additional Resources

How do you decide to "build or buy or both"?
A Business Process Review can be a good first step.

The Todd Herman Approach to:

• Business System Design & Customization
• System Screening & Selection

Todd Herman's Series on System Erosion:

• System Erosion – Part 1: Definitions, Concepts, and Analogies
• System Erosion – Part 2: Symptoms, Causes, Recommendations, and Outcomes