Over the years—or even decades—since many organisations implemented their enterprise resource planning (ERP) systems, the world has undergone significant transformations. Simultaneously, ERP systems themselves have also evolved considerably.
As a result, many organisations now face the challenge of ERP systems falling out of sync with their changing business requirements, or they are enticed by the enhanced capabilities offered by new ERP solutions. This leaves them contemplating an overdue ERP upgrade or even a complete replacement.
Considering that ERP upgrades represent a substantial investment, it becomes essential for business leaders to conduct a thorough assessment of their current solution and build a compelling case for the necessity of an upgrade. If the decision to move forward is made, crafting a well-structured project plan and referring to an ERP upgrade checklist will be pivotal in ensuring a successful and seamless transition to a modern ERP system.
Top Reasons for Upgrading Your ERP System
The decision to upgrade your ERP system often stems from a combination of ageing technology and evolving business needs. As time goes on, your legacy system might lose its efficiency, struggling to adapt to new business processes and provide the real-time visibility crucial for modern companies.
Legacy technology can become brittle with intricate customisations that are both challenging and expensive to maintain, relying on specialised knowledge that your organisation may no longer possess. The desire to migrate to a more advanced database, unsupported by the existing ERP system, can also prompt the need for an upgrade. Moreover, older on-premises ERP solutions might burden you with the maintenance of server hardware, diverting focus from core business goals.
In certain cases, very old ERP systems may solely operate on discontinued operating systems, or the ERP solution itself may have lost vendor support, leaving you with no alternative but to embrace a newer version of the software to ensure ongoing assistance.
Additional factors driving companies to upgrade their ERP systems include:
- Outdated user interfaces that prove difficult to navigate or require excessive steps compared to modern systems.
- Inflexible software incapable of accommodating the more efficient ways your business wishes to operate.
- Inability or high cost of scaling the system to match your company's growth trajectory.
- Sluggish data reporting and analysis, failing to keep up with the rapid pace of today's business landscape.
- Limited or no support for mobile devices, hindering the agility and connectivity expected in today's work environment.
The Significance of ERP Upgrades
The utmost importance of ERP upgrades lies in the tremendous business value they can unlock. With advancing technology, modern ERP features offer businesses opportunities for growth and cost savings that legacy systems simply cannot match. For instance, recent ERP solutions introduce real-time visibility through comprehensive dashboards, scorecards, and KPIs, empowering companies to make data-driven decisions swiftly. The integration of artificial intelligence and machine learning in ERP systems automates processes and enhances decision-making capabilities, while more robust and integrated e-commerce functionalities cater to the evolving digital landscape.
Additionally, new ERP systems may incorporate Internet of Things (IoT) devices, providing real-time location and status information that significantly fortifies supply chain management and enables early detection of potential disruptions. As supply chains grow increasingly intricate, this capability alone could prove compelling enough for certain businesses to warrant an ERP upgrade, as it bolsters their resilience in a volatile market environment. In a world where business processes and relationships are rapidly transitioning to the digital realm, these advancements in ERP functionalities become increasingly invaluable.
Upgrade or Replace: Making the Right Choice
The decision between an ERP upgrade and a full replacement is a significant one, contingent on the potential business value each approach can generate and its cost implications. Depending on the specific needs and constraints of your business's existing software, both options present compelling cases.
Advantages of Upgrading: Generally, an upgrade tends to be less disruptive compared to a full replacement. In the best-case scenario, existing integrations and customisations in your ERP system remain intact, minimising changes to the user experience. Moreover, sticking with the current ERP provider eliminates the need to partner with a new vendor (a benefit if you are content with the quality and service). If your business team is already comfortable with the current system, an upgrade offers smoother change management.
Pros of Replacing: Significant technological advancements have occurred since many businesses acquired their current ERP system. Exploring alternatives from different providers might reveal innovations that align perfectly with your organisation's specific needs. Embracing a different ERP platform could unlock a plethora of business opportunities and process efficiencies beyond what a mere upgrade to the latest version of the current system can offer. In scenarios where a merger or acquisition necessitates the operation of two separate ERP systems, a full replacement can streamline operations, reduce complexity, and enhance collaboration between the two business units.
Whether you're inclined towards an ERP upgrade or a complete replacement, exploring cloud deployment options is a strategic move. Modern software-as-a-service (SaaS) cloud ERP solutions can significantly reduce IT costs and complexity by shifting the responsibilities of hardware management, performance optimisation, patching, and upgrades to the vendor. Embracing cloud solutions also eliminates the need for remote users to access ERP functions through a virtual private network (VPN), streamlining IT management, especially in an era where remote work has become more prevalent. With cloud ERP, future upgrades become virtually seamless; certain providers automatically offer new capabilities to all customers as part of their subscription package.
Your current software provider may encourage you to transition from its on-premises system to a cloud-based solution. This shift could align with the vendor's future investments, offering potential cost and management advantages in the cloud environment. However, it's essential to fully grasp the vendor's offering and determine whether it's a hosted solution or a genuine cloud-based approach.
In the event that you choose to stick with an on-premises system, thoroughly review its roadmap to ensure it aligns with your evolving business needs and can adequately support your operations in the future.
Evaluating ERP Systems: Making Informed Decisions
When it comes to evaluating ERP systems, the process begins by clearly defining your objectives—identifying the specific problems you aim to solve and the opportunities you want to seize. For instance, you may seek to reduce costs and enhance efficiency by gaining real-time insights into sales trends or supply chain metrics, such as daily order fulfilment.
Perhaps you've encountered challenges with inaccurate quarterly forecasts resulting from outdated data and flawed assumptions stored in spreadsheets. By quantifying the potential increase in sales achievable through advanced e-commerce capabilities that maintain up-to-date inventory information, you can better understand the value of such improvements. Additionally, time and resources can be saved by leveraging built-in functionalities for faster monthly financial closings.
A modern ERP system utilising machine learning can automate best practices in finance and operations, streamlining processes and boosting efficiency. Furthermore, the incorporation of advanced analytics in new ERP software enables you to significantly enhance your response to shifting customer demands, optimise pricing strategies, improve marketing performance, and identify potentially fraudulent activities.
Once your ERP objectives are clear, you can compare how each option—upgrade or replacement—can fulfil these improvements, assessing both direct and indirect costs, including integration, customisation, and training expenses. Evaluating implementation plans for each solution will also contribute to making an informed decision for your business's future.
Deciding When to Upgrade Your ERP System
According to a study by SelectHub, businesses typically utilise an ERP system for 5-10 years before considering an upgrade. However, the timing of the upgrade or replacement varies for each company, and the decision is usually driven by a strong business case. For some organisations, an ERP upgrade aligns with broader strategies for modernisation and automation, necessitating new ERP capabilities to stay competitive and efficient.
ERP Upgrade Checklist
For a successful ERP system upgrade or replacement, thorough project planning is essential. Use this checklist to guide you through the process and keep track of progress:
- Establish a preliminary project team: Gather individuals from various departments who possess the knowledge and relevant roles to assess the need for an ERP upgrade or replacement. Involve end users who understand the current system's limitations from their day-to-day experiences.
- Build a business case and gain management approval: Document the potential value that a new ERP solution can bring to your organisation and present it to executives to obtain their approval.
- Identify requirements: Clearly define the features and functionalities that the new ERP system must have to deliver the documented value, along with any optional features that could be sacrificed if necessary.
- Identify potential solution providers: Research vendors with a proven track record of addressing requirements similar to yours, including your current vendor. Seek input from industry partners about their ERP experiences.
- Build and approve an implementation plan: Develop a realistic plan with clear project milestones, including database upgrades, data integration and migration, legacy customisations, user training, go-live planning, and ongoing vendor support.
- Execute the plan collaboratively: Foster an open and candid relationship with all involved parties to address concerns, identify risks, and work together toward solutions.
- Perform post-mortems and plan next steps: After the implementation, take the time to conduct thorough evaluations and learn from the experience. Maintain a positive and productive relationship with your ERP vendor.
For ERP system replacement:
- Decide between upgrade or replacement: Analyse the comparative cost, disruption, and business value of both options. Ensure that key stakeholders are aligned with the chosen path.
- Shortlist top providers: Request and review detailed proposals and demonstrations from potential ERP providers. Ask questions, assess roadmaps, check references, and understand the support commitments.
- Choose a provider: Select a partner you trust and believe is the best fit for your requirements and budget. Consider any tradeoffs and prepare for potential challenges.
- Recruit a full project team and hold a kickoff meeting: Identify resources from your company and the ERP provider who can dedicate the necessary time to the project. Use tools to track progress and accountability for tasks.
