During the darkest days of the recent recession, most companies hunkered down and pulled back IT spending, including enterprise application investments. It would have been foolhardy to replace a legacy ERP system and deploy a new one with the future looking so uncertain. Now that conditions have improved somewhat, many manufacturers’ IT budgets have thawed and companies are considering replacing their legacy ERP systems with Software...
as a Service (SaaS) applications, for example, or migrating to different on-premises platforms. The features available in a new ERP deployment can be enticing, and it's tempting to just walk away from a quirky system that barely meets your needs.
Some experts say not so fast. Rejuvenating your existing system is most likely less risky, costly and disruptive to your organization than a wholesale swap-out. Budgets may be a little looser now than two years ago, but the economic picture is still clouded at best, making it wise to hold down spending. Though sticking with your existing system is not the sexy choice, these experts cite five good reasons to stay the course and skip a new ERP system deployment.
1. Lower cost. This may not be obvious, especially if your head has been turned by the new SaaS ERP offerings. Switching to a monthly operating expense instead of maintaining the capital equipment required to run your ERP on-premises appears to be more cost-effective -- there’s no hardware to buy and no maintenance.
But SaaS is only cheaper if you are starting from scratch, and its cost advantage diminishes over time, according to Eric Kimberling, president of Panorama Consulting Solutions, an ERP consultancy based in Denver. Kimberling said it doesn’t require an analysis to determine that migrating to a new on-premises system will cost big bucks. “It’s usually less expensive to stick with your current system as long as you’re not passing up business benefits,” he said.
2. Less risk. “With rip and replace, there is a significant amount of risk,” Kimberling said. Implementing and learning a new system will cause major disruption to the organization, and change management and training are often given short shrift. “There is a comfort level with the old system,” he said.
Often, the organization can get as much benefit for lower cost and risk by upgrading ERP to the current version (most companies run on older ERP versions) or by simply using features that have been sitting on the shelf and then optimizing business processes accordingly, Kimberling added.
In fact, most companies still view SaaS ERP as too risky, according to an annual survey conducted by Panorama. Only 17% of the 200 Panorama clients that participated in the survey had adopted SaaS ERP.
Exciting new social media features may dazzle, but reliability is more important, adds Paul Ziliak, founder at xkzero, an ERP implementation partner in Rosemont, Ill.
3. Small changes can mean big benefits. When it feels like your legacy ERP system has run out of gas, do a quick assessment to see if there is any hope.
First, does your system have useful features that you implemented but never turned on? If so, you should be able to enlist a consultant or even an in-house superuser to train people to use the features.
Second, what version are you running? If you are more than one or two release cycles from being up to date, you can expect to get a major boost from upgrading, Kimberling said.
And third, are any of your important business processes broken? If so, optimizing them can work wonders. In fact, implementing an upgrade in concert with process improvements can reap major rewards at much less cost and risk to the organization than a migration.
4. Your current vendor is looking to help. Your ERP vendor may be willing to pull out all the stops to keep you on its platform. Most vendors will offer migration credits for upgrading, for example, or free licenses for additional users. Beyond that, some vendors are even hiring consultants to help customers ensure they are getting the most out of the system. This might seem extravagant, but from the vendor’s point of view, it is worth it to keep key customers in the fold.
“We have been paid good money to help [vendors’] existing clients automate little pieces of their business that might not previously been automated,” Ziliak said.
5. The grass isn’t always greener. As with many things in life, when you’ve spent years with one thing, it’s common to lust for change. But when it comes to ERP, in an uncertain economic climate, your biggest priority should be to keep your back office and other critical functions running. Unless your system is completely broken down (and if it is, you clearly must make a change), there are many ways to improve around the edges to minimize business impact and hold down costs.