Upgrading an ERP system. When is the right time?

13 September 2022 Consultancy.com.au 5 min. read
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Keeping an ERP system up-to-date is one of the key pre-requisites of a fully functioning, and effective system. Upgrading an ERP system can however be a daunting task, and as a result, it is advised to carefully plan when and how to embark on such an upgrade. Experts from SMC outline five key questions that can guide the timing aspect of the decision-making process.

Is your ERP solution doing what it is meant to do?

The first question to ask is: are all parts of your business working seamlessly, efficiently and with minimal manual work and work-arounds?

By analysing this key question, you will quickly find the answers as businesses often reach the critical turning point to upgrade or replace their systems when they are triggered by the need for increased efficiency, improved enhancements and features to make the end-user experience better, and improved functionality provided by the new ERP platform.

Upgrading an ERP system. When is the right time?

The IT market is set for growth and enterprise software is changing all the time with newer systems offering so much more; integration with other software, features that were once non-essential that are often now standard, mobile functionality, enhanced analytics, ease of use and more.

If you can’t give a resounding yes to this question, then it is most likely time to take that first step, which involves analysing your operations, determining your critical requirements and then starting your research on what are the latest ERP technologies on the market today, that can modernise and streamline the way you do business.

Is your business growing or going through change?

There are several critical events that signal when a business is ripe for upgrading their ERP systems. The most obvious is when an organisation is experiencing significant growth or change. That can mean taking on new strategic directions, such as entering new markets, selling new products, or perhaps offering a new business line.

All these instances will require that the business is using the latest technology so that data can be tracked seamlessly, readily analysed and efficiently reported, easy to use, and with the desired business objectives being achieved.

If your current system is already struggling, it is fairly apparent that any new business growth will see your technology continue to labour, ultimately putting at risk, the success of any new business plans. A scalable ERP platform will support profitable future growth – meaning you won’t need to increase headcount at the same rate as revenue growth.

Are you keeping up with your competitors?

It goes without saying that your business is always at risk from your competitors. If your systems are not up-to-date and lacking in what are now standard features available in newer technology, you will be denied the associated competitive advantages.

Do your research on what technology is specific to your industry. Find out what systems your competitors are likely using, then make the decision to stay ahead of the pack with the latest technology, to keep or advance your market positioning.

Has your vendor stopped supporting your current technology?

Eventually, that much loved technology from your vendor becomes so outdated that even the vendor won’t commit to further updates. The enterprise software market is rapidly changing and sometimes when a vendor has sold their product there is a sunset clause and you are pushed to ‘upgrade’ to their flagship product, which may not be the best for you.

These are signs you need to bite the bullet and take the necessary steps to evaluate your options and potentially upgrade your business systems.

Are legacy systems expensive to maintain?

Custom built, legacy technology has usually been in the business forever, developed by who knows who, years ago. Often, no-one knows how they work or how they interact with other programs. Executives sometimes feel that changing these systems could have a devastating effect on the business, fearing the disruption that new technology could cause and deciding to leave well enough alone. This is despite the cost associated with maintaining the existing systems.

Legacy platforms are expensive to preserve and costs will continue to grow over time. Often it is very difficult to find people who can program old code and developers of today are mostly averse to working on antiquated technology when so much more modern technology is available on the market.

Further reading: Legacy IT slows profitability, customer experience and innovation.

Decision makers should be asking the question: if legacy software breaks down under a heavy load, how might the business be affected and specifically, can they afford not to upgrade?

Another reason why people put off modernising legacy systems is the adage, ‘if it ain’t broke, don’t fix it’. Decision makers can fall into the line of thinking that if software is doing its job, why spend the money and time to replace it. This thinking is further cemented when budgets are tight and there is a reluctance to fund new IT business projects, like replacing outdated business technology.

Still, it is important to make these critical upgrades for several reasons. Modernisation of legacy systems is about more than just setting aside the budget to do so. Organisations must evaluate the business risks of maintaining platforms that can’t easily adjust to changes in today’s business environment in order to remain competitive.

About the author: SMC (formerly Solution Minds Consulting) is a consulting company that specialises in digital transformation and enterprise software. SMC has four offices across Australia.