The decision to replace Enterprise Resource Planning (ERP) software is not always clear. Since ERP software delivers widespread functionality within an organization, replacement often uncovers mixed feelings. For some, the ERP may be satisfactory in sustaining operational processes, while for others, deficiencies in the very same system may be apparent. The argument typically becomes a strategic investigation, where pros and cons lists and cost benefit analyses prevail as decision-making tools.
Know the signs
In our experience, there are key deciding factors that can help execute a decision in favour of ERP software replacement. Although again not always cut and dry, these eight signs (or a combination of several) are most frequently found to influence a new ERP software implementation.
Sign #1: ERP system no longer supported by vendor.
This reason is the most significant of all. An ERP software system that is no longer supported by its developer puts a company at a great risk. Unsupported systems can potentially cause extended periods of downtime, reduce the ability to compete, and even increase turnover and reduce sales as staff and customers seek out more tech-savvy organizations with more to offer.
Sign #2: Company has outgrown the ERP or business systems.
Outgrowing an ERP or business system is evidence that a company is developing and thriving; so not entirely a bad situation to be in. Indicators for outgrowing a system can range from lack of functionality to inability to scale. For a growing business a new ERP system can introduce many significant improvements in process and productivity to keep the upward trend continuing – and typically just at the right time.
A common scenario for outgrowing a system occurs where organizations execute a move from a more financial-based business system to full-blown ERP software. Companies using QuickBooks or smaller business systems lack functionality in non-financial areas and can realize immediate benefit once ERP is implemented.
Sign #3: Staff working outside the ERP system.
A strong indicator for an ERP system that is past its prime, is the number of ad-hoc solutions that exist outside of the ERP. These solutions are intended to make up for system functionality shortfalls, but in fact introduce their own significant shortcomings. Ad-hoc solutions often lack visibility, lack security, create duplicate data entry, disregard existing processes, and are infrequently documented creating a sizeable liability.
Sign #4: Silos of non-integrated business data.
A by-product of ‘Reason 3’, ad-hoc solutions create silos of data that contradict the IT philosophy of a Single Source of Truth (SSOT). Decision makers are challenged with data visibility, data accuracy, data version control and are often challenged with compiling information to get key performance indicator and reporting results.
Sign #5: Limited functionality.
Limited functionality not only includes deficiencies in tools to improve or run business processes, but also includes lack of key requirements like regulatory compliance features that are critical to business operations. ERP software that cannot meet operational needs can hurt a business. Optimistically hoping for a developer to provide upgrades could result in increased losses, and further disappointment.
Sign #6: Costs of keeping ERP system outweigh those of replacing with a new system.
This is dramatically seen in instances where businesses have a homegrown custom developed business system. Improvements to these legacy systems involve big dollars in development to keep up to their off-the-shelf counterparts. Of course, even off-the-shelf ERP will require some modification, but modernizing a homegrown application with tools such as e-commerce, mobility, web portals, dashboards and other utilities can become astronomical.
Sign #7: Inability to obtain business insight.
One of the key reasons that a business requires ERP software is to obtain business insight. If a business system cannot deliver satisfactory reporting, in a simple and timely manner, it is time to re-evaluate its worth. A business cannot compete in industry without visibility into their own operations.
In addition, if business data is available, but decisions are continually off-the-mark, perhaps the accuracy and availability of data is the culprit. Decision makers need to be empowered with precise business insight to enable educated decisions that allow the company to succeed.
Sign #8: Cloud.
Leaving a successful on-premise ERP implementation behind for only this reason may not be warranted, but Cloud ERP (Software as a Service or SaaS) is taking the industry by storm. The reasons for the appeal: scalability, flexibility, pay-as-you-go, mobility, peace of mind – and so much more.
If existing software cannot be upgraded to a cloud platform, perhaps a change may be required in the future. Cloud simplifies ERP software management, and with no capital costs, and a solid services partner with a firm uptime commitment, the decision to move to cloud is easily justified.
The Decision to Move Forward
As discussed in a previous article, it is difficult to pinpoint the ‘right’ time to launch a new ERP software project, but identifying the need for new ERP software should be easier. Along with recognizing the signs above, decision makers need to assess the overall impact on the company as a whole – which includes taking into consideration the arguments of individuals lobbying either for or against the decision.
When in doubt independent ERP Software Consultants can also help by providing expectations for process improvements, investment cost, projected return, and project duration – without bias towards any particular system.
Our last word of advice: if the signs to change ERP systems are evident – don’t ignore them. ERP software acts as a foundation for all business processes, therefore delaying the inevitable will increase the loss of not pursuing a new ERP.