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Office Depot says 'no' to Oracle ERP Cloud customizations

Office Depot believes it's possible to run its HCM, EPM and supply chain on the Oracle ERP Cloud without customizations. The retailer says it will save money and headaches. Analysts agree.

Office Depot, a firm with about $11 billion in sales, is moving major applications to the Oracle ERP Cloud. In...

doing so, Office Depot wants to avoid any customizations as it shifts from in-house systems.

The retailer will use best practices embedded in various Oracle ERP Cloud platforms: in this case, Oracle's Supply Chain Management Cloud, its cloud-based Human Capital Management (HCM) and Enterprise Performance Management (EPM) systems. Oracle announced Office Depot's decision Jan. 29.

Rejecting customizations was easier for some systems than others. HR business processes lend themselves well to this change, said Damon Venger, senior director of IT applications at Office Depot.

With HR they "are not reviewing our customizations -- we are getting rid of them," Venger said.

By not customizing its Oracle ERP applications, the retailer will simplify its IT processes, and reduce the cost of maintaining and managing them, he said.

Office Depot started selling the initiative internally last year. "It's hard for executives in the business to say, 'I have to do performance management in a specific way," Venger said. That's the goal at least. Supply chain will "definitely be more challenging," he said.

Deciding on no customization is 'trendsetting'

Office Depot uses Oracle products, including PeopleSoft, hosted in an Oracle data center. It uses Hyperion Financial Management products, and a supply chain product.

It's hard for executives in the business to say 'I have to do performance management in a specific way.'
Damon Vengersenior director of IT applications, Office Depot

The HCM and EPM migration will take about a year, and supply chain about two years. The company plans to use Agile development processes to complete the migrations.

For a company its size, Office Depot's decision on customizations is "trendsetting," said Seth Lippincott, an analyst at Nucleus Research. But it's also possible because vendors are developing "what they would consider best practices in every one of their capabilities," he said.

Some users argue that they need ERP customizations because of unique business requirements or industry-specific practices. But those arguments are waning as vendors add industry-specific capabilities, Lippincott said.

If customizations are about "letting people feel comfortable and safe in what they're used to, it won't help," Lippincott argued. A firm will still go through a change management process. It makes sense for the long-term to force users into the new environment, he said.

APIs will connect customizations, but once started problems mount.

Office Depot made 'pragmatic' decision

Judith Hurwitz, the CEO of Hurwitz & Associates, called Office Depot's decision "pragmatic."

Routine updates mean testing against the customizations. "You are always sort of out of sync" with the latest updates. They may take months of testing. Asking a vendor for customizations can add millions, she said.

"Are your processes really so unique, so different?" Hurwitz said. For most firms, they aren't, she said.

Venger said the decision to migrate to the cloud "was not a blind move to go." Office Depot analyzed its real costs, including data center costs, licensing -- every aspect.

Oracle ERP Cloud "came with a significant cost-savings," and functionality upgrades, Venger said. With the on-premises system, "unless we customized it, you wouldn't have functionality changes," he said.

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What are the use cases for customizing ERP software? Or is vendor software good enough?
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This is not the right question. The question should be: Is Oracle changing its model from "lets ship craxxx and then licensee will have to spend millions on customization" ( in house or outsourced) to " our software covers at least 80% of all essential processes for any vertical"
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That's fair. The claim that many vendors make is that their software can meet most business needs without customizations. Whether that's true or not will be put to the test by firms such as Office Depot. If the retailer can deploy Oracle cloud supply chain product without customizing that will be a proof point. 
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