Why do so many of today’s systems replacement projects end in disappointment? On the face of it, the prospects should be favourable. By definition, these companies are experienced users of at least one other system, so they should have a shrewd idea of what they want from the replacement, and be aware of the pitfalls to avoid.

The problem is that, typically, the amount that most companies feel able to spend on a new system is barely enough to replicate the functionality of their current one. A limited implementation budget is quickly eaten up by mundane, unavoidable stuff: the monthly and statutory reporting, the basic management information. After all the pain of a six to eight month systems replacement project, a company can find itself with no more functionality than its current system is giving them – perhaps less. Who needs this kind of return on investment disaster?

Potentially, some organisations may have the budget and resources available to go on developing the new system beyond the initial implementation phase. But many do not have this luxury. By the time they’ve got back to the point where they left off with their old system, they’ve blown this year’s IT budget.

As a result, the new system does not help the business to address the original objectives. It is not easing the process of meeting compliance requirements; it does not deliver the expected cost reduction or efficiency improvements, or provide greater reporting granularity. Yet many organisations are stuck in this rip out and replace cycle, failing to maximise the value of any investment.

Different Approach

In many cases, the decision to replace the existing system is based on information provided by internal staff. Yet these individuals often lack any relevant experience or expertise in the current version of the existing system and have no insight into the raft of improvements on offer or benefits that can be derived.

To ascertain the true potential of the current system, it is important for senior management to speak with the existing system provider for advice on just what can be delivered with the latest version. Organisations are often astonished to discover what can be achieved with the current version of the system in use, let alone the latest updated version. With the majority of companies typically using a fraction of the functionality paid for, a modest investment in consultancy can reveal forgotten capabilities, or suggest simple enhancements that will deliver big returns and restore confidence in the existing system.

This may allow the current IT budget to be re-deployed to address additional areas not currently integrated or even automated, such as purchasing and personal expense management, document management or CRM/service management.

It is, of course, important to be aware that many partner salesmen earn bankers’ bonuses for selling software licenses. Is the motivation for their advice focussed on short term personal gain or achieving a long term client/partner relationship? Whether the advice appears sound or not, it is worth seeking advice from another (suitably qualified) partner organisation for a second opinion.

Indeed, depending upon the driver for change, it may be that a change in supplier, rather than a change in software, may be required. For instance, if the reporting structure is required to incorporate new international business units and the incumbent supplier has no practical international deployment experience and/or no corporate system restructuring experience, then a new supplier is probably called for.

Cost Comparison 

On the other hand, if the existing supplier has the required experience/expertise and there is a good working relationship between the client and supplier – why throw that away? The supplier will have staff familiar with the company’s set-up and processes, possibly built up over many years. It will take a long time for a new supplier to build this knowledge.

It is also important to compare the costs associated with upgrading the existing software with that of an entirely new system. Often the cost to upgrade software to the latest version is covered within the annual support and maintenance cost – so there is no additional charge. It is therefore possible that the only significant cost will be consulting related, encompassing the cost to install, restructure, transform data and train users. There could also be an associated hardware / infrastructure cost if the system has not been upgraded for some time.

In contrast, even if a new supplier gave the software away free, the costs to implement a new system would far exceed that of upgrading the existing system, even with a large implementation/restructure. Taking the upgrade route requires minimal staff training and far less business disruption.

Of course, there will be times when new investment is required – especially if the hardware/infrastructure is approaching the end of its working life. As the Software as a Service (SaaS) and cloud computing models gain maturity, it is certainly worth considering the cost of ownership comparison for outsourced/hosted solutions versus in house managed solutions – or a combination of both.

But, the move from on premise to hosted does not necessarily require a change in system, as long as the system is available in the cloud. Often, the hosted approach will force an upgrade to the latest version – this could be a positive move, as it could again provide the organisation with access to new functionality that could help to deliver key business objectives.

Understanding Opportunity

There are always times when new software is required. But this should be the last, not the first choice. Organisations need to be aware of what new technology has to offer. But to make best use of a limited systems budget, Financial Directors and IT Directors should temporarily forget about the march of technology and instead ask what aspects of their business have altered since the original system was implemented.

An upgrade will typically be far more cost effective than purchasing and implementing a completely new application. Even if a change in infrastructure to upgrade to the latest version is required, this will be significantly less disruptive than the implementation of an entirely new system.

In all probability, for less than the cost of implementing that flashy new package at the most rudimentary level, it is possible to increase the usefulness and sophistication of the current system beyond recognition. It will cause considerably less disruption to the business, and deliver the key business requirements and that elusive ROI!