Cloud computing and the increasing consumerisation of enterprise technology are two factors that are transforming ERP and enabling new ways for companies to interact with their staff, customers, suppliers and other stakeholders. Despite such advancements, ERP deployments are often left to grow old, moving from a business enabler delivering value, to a straitjacket holding the business back.
Every business, whatever its stage of maturity, faces the organisational, technological and economic challenges of change and growth. If it’s systems and processes are not designed to accommodate such change easily, the business may quickly show signs of distress, losing strategic focus, missing business opportunities and not achieving maximum customer satisfaction.
Market research shows that “approximately half of ERP customers are currently on releases that are two versions behind the current release, which may be four years old or more.” In the same way an old boiler costs us more due to inefficiency, regular break-downs and obsolete parts, a five year old ERP system cannot meet the needs of a modern business and cannot support change, nor can it allow a company to take advantage of new possibilities.
Increased investment in customer-facing technology means companies are collecting more and more big data that they are struggling to utilise effectively. In fact, the desire by organisations to use ‘big data’ is often at odds with the realities of their legacy ERP system.
This article identifies some of the indications that an ERP system is hampering your business, and outlines the importance of modern ERP strategies to successful modern business.
Processes are adapted to what the system can cope with
One of the key differences between old or traditional ERP and modern ERP is that systems were highly customised and therefore cost a lot to maintain. Enterprises have spent too long re-engineering their businesses to fit their legacy ERP.
Once employees start adapting what they are doing to fit with what the system will allow, no matter its limitations, it’s time to review systems. Based on the regimented functionality of old ERP, it’s unlikely that these processes enable the organisation to be fleet of foot, agile and successful in the face of change. If things have to be done the hard way for no good reason, staff will lose their drive and the company will fail to be competitive.
Work-arounds and spreadsheets are mushrooming
When people start relying on manual systems to complete everyday tasks that should be a part of the system’s process support, it’s time to change. All businesses, regardless of their size, rely on work-arounds to some extent. But these should cover idiosyncrasies within the business – things that are unique to the business and not normal aspects of core business processes. Problems start to emerge when data is duplicated. Databases start to spring up all over the organisation, physical lever-arch files (binders) are growing to a bursting point and complex spreadsheets are taking over routine calculations.
Companies are unnecessarily putting themselves at risk of human error, and again preventing themselves from being competitive by using outdated numbers for activities like budgeting, forecasting and planning. By running a complete and integrated, role-focused ERP solution that can be adapted to support any type of business change – planned or unplanned – simply, quickly and cost effectively, companies can ensure accurate and real-time data.
With a modern ERP you shouldn’t need to demand manually generated reports or resort to spreadsheets for budgeting and forecasting or other activities, because the system should be up to speed with the latest business structure and process changes. This in itself delivers significant ROI compared to the error-prone reports companies using ‘old ERP’ systems have to rely on.
You no longer have your finger on the pulse
Outdated ERP can leave you dangerously out of touch. The more change your organisation is subject to – growth and expansion, acquisitions, new product lines, etc – the less you really know. A lack of available business information can become a significant problem, no matter how many spreadsheets and workarounds have been developed.
The vendor is holding you hostage
Outdated ERP cannot support business change and so the only way to make any sort of tweaks to the system is through significant, complex and expensive programming at code level. That’s why ‘big legacy’ ERP customers find that they’re completely dependent on their software providers and so cannot compete effectively in today’s business environment.
And even today, these vendors are getting fat from holding their customers hostage to expensive consultancy just to keep their heads above water. Some customers are facing costs in the order of millions just to upgrade their legacy ERP to a supported version, and that’s just a single upgrade – which doesn’t future proof them for long.
The difficulty of modifying traditional ERP to support business change has been a major cause of so many project failures in the past. Traditional software evaluation has focused too much on the total cost of ownership (TCO), and implementation projects have concentrated on meeting the needs of the business at the time the project was agreed. Often the business changes even during the implementation project, causing disruption and budget overruns. Once the project team has left, further business change can render the initial ERP implementation outdated and almost useless.
When evaluating ERP, organisations should include the Total Cost of Change (TCC) in their calculations – a vital measure of value that is often overlooked. That’s a measure of the cost of making changes to an ERP system. How quickly can adjustments be made, and what stresses do such changes place on the organisation? Even relatively minor business changes can compel alteration in many different dimensions of an ERP system.
When modifications take too long or are highly costly, the consequent negative impact of business disruptions can be significant including decline in stock price, revenue loss due to delayed product launches, and a decline in customer satisfaction. When evaluating ERP systems, companies must weigh the cost, complexity, and difficulty of modifying the system long term, after it has been implemented.
A lack of innovation
Think how much business has changed in the last decade. The impact of the internet, mobile technology and globalisation has been massive, with new business models and operational structures. Companies are more decentralised. Flexible working, home working, part-time and temporary working are on the increase and sales and customer service teams are becoming increasingly remote and mobile. Legacy ERP cannot meet the new dispersed business structure – modern deployment options are required.
In today’s business environment, vendors must be able to show an innovative product roadmap and deployment strategy. Are they developing mobile and social applications that could benefit you in the future? Are they simplifying future upgrade paths, delivering more value at less time and cost to the user? Most importantly, can your ERP system take advantage of expanding delivery models like cloud computing?
You’ve lost your independence
Unlike with traditional systems, modern ERP ‘leaves you in charge’. Flexible delivery options should be a key part of the system, with a spectrum of on-premise, hosted, shared service, hybrid cloud or full cloud deployment, plus business process outsourcing (BPO) options available. If these options are not available to you and you are unable to take advantage of emerging technologies because of your ERP system, then it’s time for a change.
Modern ERP puts users back in the driving seat
Rafts of new, entrepreneurial businesses are emerging powered by enhancements in technology and an increasingly global environment. The fast growth and opportunities available to companies today did not exist even five years ago. To survive and be successful in this new world, more established companies must be able to take advantage of new opportunities and emerging markets quickly and efficiently, and be able to respond to organisational change.
Only more modern, services-centric ERP will enable this essential business agility and by migrating or upgrading to take advantage, companies should see significant ROI including new capabilities and lower total cost of ownership. And more importantly, a dramatically reduced cost of change.
ERP was originally designed for manufacturing businesses, but ERP as an IT solution proliferated for a reason and that’s because it is the only solution (even today) that addresses the complex business processes of the enterprise. New approaches to ERP have already moved it in favour of the services-centric organisation. Buyers of ERP software are becoming more savvy also.
They see significant differences between the different products being marketed today than those from previous generations. Flexible systems that change as the business changes without code-level programming and intimidating upgrades can provide organisations with the independence they need while providing flexible delivery options, be that cloud, on-premise or a combination.
Enterprise software should be central to the way that companies engage with their customers, ensure efficiency, manage change effectively and deliver knowledge and information to stakeholders. Modern ERP exploits new technology including analytics, cloud computing, mobility and big data, so enterprises no longer have to compromise to get a system big enough to accommodate their sophisticated needs.