Implementing a New ERP Vs Updating An Existing ERP
There are three main questions that have been around for just about as long as enterprise resource planning (ERP) software itself:
1. Do I stay with my current ERP system? If so, do I stay with my current vendor?
2. Do I upgrade to the next version? If so, do I stay with my current vendor
3. Do I go with a new ERP system?
These questions are particularly relevant if you are operating an out-of-support system, or are experiencing difficulties with your current ERP Software provider. However, it is unwise to assume that your legacy system is the only factor keeping you from increasing efficiency, automation and essentially, increased margins for your business.
With that in mind, if there is any doubt that your current system or processes fully support your vision and objectives, it becomes essential that the above questions are addressed and plant the initial seed for action.
Considerations for your Current System
Here are some of the (perceived) advantages of older ERP systems, since a significant number of businesses still run old systems for a variety of reasons:
These systems have their share of issues, but over time you have developed processes for overcoming most of the flaws. Newer systems, on the other hand, often require a series of development patches to deal with unexpected technical issues. This is probably the only true advantage a legacy system has over a newer solution.
Older systems have had their costs significantly amortised and thus provide you with greater return on investment (ROI) as opposed to a newer system's high initial costs. This is often a justification for staying the course, but it's important to note that some operational costs (such as the price you pay for an excess of manual processes and their attendant errors) are often not captured in this calculation. Additionally, this argument applies mainly to on-premise installs, excluding Cloud Computing solutions and Hosted solutions, which have a significantly lower upfront initial cost.
For the most part, your personnel have grown familiar with your system's operations. With a new system, re-training is often a challenge, even for businesses that thrive on a culture of change. This is especially true for businesses that have been running a particular system for so long that it is ingrained into their operational reflexes and culture, or in the case of businesses for which any disruption in activities may have a crippling effect.
While these advantages may be valid to an extent, they may also be symptomatic of a lack of long-term perspective that is putting your business at risk. Now we will discuss each of the major questions to determine if that is the risk you are facing.
Do I Stay With My Current ERP System?
To answer this question, you will first need to pose a few more probing questions.
Are you using your system to its full capability?
It's likely that there are more than a few people within your organization who do not have a solid handle on what your existing system can and cannot do outside their daily routine. Either they were never fully trained on it, or they saw no requirement to expand their knowledge about it. But it is often the case that unused software capabilities can help you prevent or mitigate business disruption. This is a good time to involve your vendor or experienced consultants to validate how your system could be used differently to provide more capability.
Does your system provide an accurate reflection of your business?
In the past, markets were relatively kind to businesses that weren’t fine-tuned front to back, but today’s reality teaches faster and more vindictive lessons. It’s essential to periodically review all aspects of your businesses processes: conception, connection, implementation, and evaluation.
- Can you design new business logic within your existing system to meet your objectives?
- Can you connect your processes to all related areas of your system for desired visibility?
- Can you implement processes easily within your organization? Can you make easy translations from system logic to operations?
- Do you have the ability to track and evaluate your process in its execution?
As these questions suggest, it is vital that you be able to identify the existing "blind spots" within your current solution. You can then evaluate the potential impact these blind spots have on your business by assessing each of your business activities and the respective levels of system support they require to achieve your objectives.
Does my vendor currently provide the necessary tools to mitigate the current system’s shortcomings?
Often, it is the case that, as technology and business processes progress, vendors improve internal processes and provide a “second” solution to common business problems. This could be in the form of; vendor add-on products to your current system, customizations done for other clients or modified business process maps.
Can my system respond to my business road map and the evolution of my market?
All businesses need to revisit their business road map periodically in order to reflect changes and trends in their respective markets. You need to be able to map these trends onto the functionality that your system will be called on to provide. This is probably the single most important factor to consider if you are weighing a potential move to an upgraded or new system.
If you are dealing with an out-of-support system, this may prove problematic—your vendor may no longer be in business, or may simply not be cooperative in counselling you on your software. Other factors to consider beyond functionality include the compatibility of your current platform with other solutions on the market. While it's always possible to connect a newer solution to an older system given enough dedication and resources, the cost may sometimes be more conducive to a full replacement.
Do I Upgrage to the Next Version?
If you have already decided that you need added functionality to support your business, you’ll need to make a decision about whether to upgrade to a newer version of your system or implement a new solution. Sometimes, depending on the scope of the upgrade, it may feel as though you are buying into a new solution entirely. This is especially true if you are upgrading a solution that you have heavily customized. That's why we recommend approaching any significant upgrade with the same due diligence that you would for a new solution.
Having said that, there are some distinct advantages to upgrading versus adopting a new solution:
- Familiarity - Having a long-standing relationship with an ERP vendor means that you are familiar with the way the vendor operates. Your vendor should also have a good understanding of your organization, your people and the processes within the organization, which will help assist you in evaluating the complexities of an upgrade. In the event that you are running an out-of-support solution, your vendor may already have an upgrade program to help ease the transition.
- Adoption - While vendors will always push to renew their offerings, familiar aspects of their solutions typically persist throughout the various iterations of their solutions. While some training will likely be required, a relatively friendly user interface and environment will speed up the adoption process and the return of your operational effectiveness.
- Cost - While there are hardware considerations to be taken into account that may play against you, such as moving over to a revamped version of your solution built on different server technology, an upgrade is often cheaper by a significant margin than a new solution. And depending on your negotiation skills, it is normally less challenging to obtain better prices for repeat business.
- Stability - Even at the best of times, rolling out a new solution carries more than its fair share of technical issues as compared to upgrading a system. While there is a risk of upgrade failure, this typically does not require a complete rollback due to crippled operational execution. Implementation failures, on the other hand, are another story. In general, it is also easier to roll back an upgrade than it is to undo a new system install, especially in the case of a "big bang" install (i.e., with no active legacy system).
- Flexibility - Most major upgrades are geared towards adding increased functionality as well as connectivity - the latter being a strong imperative for today's business solutions. Software vendors are looking to facilitate the inter-operability of their solutions, both to help their client-base link to various systems and to keep their solutions relevant.
This list outlines the major benefits you can expect from an upgrade. And depending on the extensiveness of the upgrade and your operational needs, you may be extending the life expectancy of your solution/s by a few more years. This is why keeping an eye on the roadmap of your vendor in the context of your own is important. After all, you may be faced with looking at a new alternative for your needs.
Do I Upgrage to the New System?
This is a question that many businesses ask with mixed feelings. On one hand, you will have to deal with a new vendor for critical aspects of your organisation - along with all the uncertainty this path brings. On the other hand, you have the opportunity of finding a solution that is able to address the challenges you are facing and the challenges to come for both now and the future. We believe that there is always a certain critical point at which an older system becomes obsolete and requires replacement. This holds true for even the most recent solutions in the market.
Although these solutions may address the current environment and more importantly the future requirements, there is no guarantee that some factors might not change this reality, be it legislative, economic, trending or otherwise. My point is that it makes sense to assess whether newer technology can do what you do better, while at the same time, freeing up the resources you're expending to continually patch things up with your legacy system.
While a new system may be extremely disruptive, it does offer a few significant advantages:
- New Business Logic - You will find that some of the things you used to do a certain way with your old system have evolved positively, or that it is now possible to do things you wished for but never could do previously, especially if you are running a very dated system. Today’s solutions have a strong focus on ease of use and configurability, which greatly increase operational effectiveness, particularly when coupled with user-configurable processes. Also, some vendors offer pre-configured versions of their solutions based on an industry’s best practices. While such pre-configured software may not prove to be an easy fit within your business, it does offer the advantage of a stable configuration that is ready-to-use.
- Cost Savings - Depending on your current set up and maintenance requirements, a new system may come with a higher initial cost. But in your assessment, you have to consider the total as-is costs of managing a collection of spread-sheets, dealing with other manual processes, and resolving the other shortcomings of your system. If you factor these types of costs into your selection process, you may find that the ROI of a new system is not such a long-term consideration. In addition, software as a service (SaaS) may be an interesting option if you are financially limited with respect to install and maintenance costs.
- Sustainability - Old systems have a well-known habit of being incompatible with a lot of new technology. And, if you are looking to adopt newer point solutions, you may find that you are unable to leverage the full potential of your new acquisition. Also, the older your system is, the more vulnerable to system failure you are. To make matters worse, backing up your systems for recovery purposes may be problematic if your main systems are down and you cannot secure replacement equipment. Data quality and quantity also become a factor to consider.
- Employee Retention - Most businesses are looking for innovative and energetic members to join their team, and the newer generations of professionals tend to be fairly demanding of the tools they use, both in their personal and professional lives. Younger hires expect more functionality from the tools they use, particularly if they are expected to deliver results quickly. Not recognizing and responding to this threat might be a driver for them to search for better opportunities elsewhere.
On the other hand, a new system will require more training than an upgrade, and more established employees may struggle to adopt it depending on their individual acceptance of change and degree of computer savvy. Younger hires tend to be more technologically savvy, and are likely to pick up new tools more readily.
- Connectivity - With an out-of-date system, you may find yourself having to repeatedly build bridges to new point solutions - which likely consumes much effort for unsatisfying return on expectations. By adopting a new system with robust connective capabilities, you give yourself more flexibility to implement new functionality in an increasing number of geographical spaces in the long run.
A Final Word
Businesses often focus too narrowly on immediate operational and budgetary considerations (as opposed to infrastructure assessments) due to immediate pressures. However, a proactive approach to periodically evaluating your IT infrastructure will help avert the need today for significant crisis management tomorrow (which is often too little, too late), as well as the cost of lost opportunities along the way.
Ultimately however, the way you answer these questions depends on your assessment of the potential threats and associated operational costs of your as-is processes versus the cost of an upgraded platform or a new ERP system.
It is also important to understand the changes that will take place if you elect to adopt a new ERP system or upgrade, as well as - on the other hand - the potentially massive cost savings inherent in using your current system to its full capacity.
Director – Solution Minds
Mob: +61 400 729 559