Is purchasing a new ERP system justified?

What are the reasons to replace your legacy system?  When the pain of using outdated technology, difficult to learn and use software, and absent features and functions becomes too great, or when your current solution simply cannot support your business needs, it’s time for a new ERP system.

Of course, there is a certain level of subjectivity to this type of decision.  Each company has its own unique tolerance for pain.  If there are no plans for the business to grow, and no pressing need to improve performance, your current legacy solution may be just fine.

A number of businesses that had purchased an ERP solution were asked why they replaced their legacy system. Some of their top reasons for replacing their existing software were:

Software vendor issues – Variations within the software vendor’s business, such as acquisitions or mergers, directly impact the support of the software and its future direction.  If the package itself is in “sunset” mode, meaning the vendor is still supporting the software, which is very profitable, but is not making significant programming additions to the base package, or the vendor has a completely “new” package, you should probably consider “sunsetting” them as well.

Business processes – Business processes driven by older, inflexible systems become rigid and constricted.  The capabilities of your ERP software drive the business processes.  If the business processes don’t promote maximum efficiency and productivity, we must consider whether the software system is imposing constraints on those processes.  If the system forces the users to operate in a non-optimal manner, there is a problem.  Systems from 10 or 20 years ago were rigid in their functionality, and forced companies to conform business processes to the software instead of the other way around, or required significant customization the software.  As processes evolve, the software remains static. This means the software doesn’t meet the new requirements of the business. It eventually reaches a point when the processes in the system actually constrict the ability of users to efficiently run your business.  New enterprise software applications offer flexible business processes based on best practices and process tools such as workflow.  New applications typically include many capabilities such as electronic routing of documents, event notification, and automated processes based on triggers.

Lack of control – An indication that an upgrade is necessary is that many processes are manual and data is scattered in file cabinets, offline spreadsheets, and across desktops.  If data transfers repeatedly between desks, adding little value and introducing the risk of errors, it may be time.

Difficulty meeting customer demand – Inventory levels are rising, yet you’re missing ship dates. How can you better forecast demand, lower your inventory, and produce just-in-time?

Inability to scale with growth of the business – If the business needs to grow but is “running blind”, and not able to understand where the real profit centers are within the company, that may indicate a need to replace the ERP system.

Integration issues – Are you trying to merge data from more than one software package? Can this be alleviated by having a single ERP solution?

Support resources weak –Increasingly difficulty finding support resources for the technology you are using may indicate a need to replace the ERP system.

Weak reporting – Older systems are often full of information that cannot be accessed in a useful format without significant time, energy, and effort

Industry requirements – The need to take advantage of new capabilities such as EDI in order to make technology a competitive advantage, or comply with requirements for your organization may necessitate an upgrade.

If some of the above reasons sound familiar, it is probably time to interview new software packages.

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