Your company’s ERP system is a key part of your IT strategy. And, just as important, it is one of your most critical and sensitive corporate assets. When it comes to evaluating the future of your ERP system, you have three basic options: stay put, upgrade or replace you legacy system.
But any ERP investment decision requires careful consideration. Staying put seems like the low-cost option – unless your current system lacks capabilities the business needs to stay competitive. Upgrades can be expensive and time consuming, but they add business value by providing new functionality and improving business processes. Then again, sometimes the most strategic option is replacing the legacy system.
ERP systems typically have a 15- to 20-year useful life, but over that time they need to be maintained and enhanced to protect their value and serve the changing needs of the business. Because ERP systems help manage critical functions like accounting, inventory, manufacturing, sales, human resources and business reporting, companies need to plan for periodic updates to ensure the reliability and effectiveness of mission-critical applications. When ERP is integrated into other software such as customer relationship management (CRM), electronic data interchange (EDI) and business intelligence (BI), the result is highly complex and expensive.
When evaluating your ERP strategy and reviewing the options, take time to consider the following:
- Unmet business needs: Does your current ERP system support the business efficiently and cost-effectively? Are the system’s capabilities adequate, or are they inhibiting the company’s ability to compete and grow? Are there significant internal control, process, supply chain, compliance or software integration issues?
- Return on Investment: What does the business expect to realize from its ERP investment? Is the current system putting the business at risk? Are you spending more than you should on maintenance? Would an ERP upgrade provide greater ROI? Can the company accommodate the time and cost of an ERP upgrade or migration?
- Organizational capability: Does your enterprise have the ability to take on a disruptive and costly upgrade or migration project? Is the right leadership in place to guide the company through the necessary procedural and organizational changes to gain the most from an ERP switch?
In the past few years, significant improvements have been made in the technologies and functionalities available with ERP systems. ERP deployment options like hosted delivery or software-as-a-service (SaaS) are reliable and cost effective, and make upgrading simpler and less expensive over time. Mobile ERP has evolved from its early adoption phase to a strategic performance enabler. Many companies experiencing improved financial performance following the worst of the recession are taking a fresh look at an ERP upgrade.
Whether you decide to stay put, upgrade or replace, make sure that you approach decisions about the future of your company’s ERP system strategically.