This is a question many ERP customers asks themselves at some point, but it’s a loaded question.
Generally companies will switch ERP systems once every 7-10 years; but some may need to switch sooner while others may be able to hold out a bit longer.
So, how can you tell when an ERP system replacement is right and when it’s wrong? Here are a few things to consider.
When an ERP System Replacement is Right:
- Your system can't keep up with operational changes. If you’re adjusting operational processes to fit the ERP system instead of the other way around, maybe your business or industry has changed and perhaps your ERP is no longer a good fit.
- ROI is down and TCO is up. Over time, the cost of an ERP system may creep up on you due to added functionality, additional users, customizations, etc. Take a close look at your system and compare the Return-on-Investment (ROI) and Total-Cost-of-Ownership (TCO) to what it looked like just after the initial implementation. You may want to consider a modern ERP system that offers opportunities to lower the total cost of ownership.
- Users are not using. If the system no longer makes their lives/jobs easier, users will stop using it! Employees will find their own ways to work outside of the system and as a result, independent of each other. In turn you will be back to where you were before having ERP; in a world of spreadsheets, data silos, disconnected processes, and incomplete or unreliable reports.
- Only a few people REALLY know the system. Chances are, employees who originally helped customize the ERP system and build workarounds will move on, retire, or no longer be available to your company; then what happens if something breaks or stops working? If you feel as though the majority of the knowledge of your ERP system is held by one or two people, it’s time for a change so you can maintain your system no matter what happens in HR.
- Data, data, data- One of the biggest advantages of an ERP system is helping businesses make better faster decisions based on information; to do that you need to be able to quickly and easily access and analyze critical data. It’s the world we live in today and if you're unable to get to the data in your ERP system, you may as well not have it.
When an ERP System Replacement is Wrong:
- If your challenges can be solved with a software upgrade; if you're running a very old version of the ERP software, sometimes an upgrade is all you need to unlock new functionality and process efficiencies. But be sure this is a real solution to your issues, not just a Band-Aid or temporary fix.
- A lack of knowledge of the system. Many companies are unaware of some of the ways to adapt or extend their current ERP solution to solve their problems. Before jumping to any conclusions about the need for a full ERP system replacement, make sure you're aware of all the features within your existing application and business intelligence tools, add-ons, and third party products available to you. If you do this and still find that your system leaves you wanting, a replacement may be in order.
- A new executive does not have to mean a new ERP system. In some cases, new executive personnel will want to bring with them past experiences and preferences for technology. Hear them out, but carefully consider the pros, cons, and potential ROI of changing ERP systems vs. making better use of what you have already.
- When system configuration the problem. Many ERP systems come with multiple configuration options and sometimes changing the configuration of your system is enough to fill the holes or address your frustrations in your current system.
- If you're using it incorrectly. Companies will often blame their ERP system when the underlying problem may be a lack of training or absence of a reliable technology partner to guide you. If you replace the ERP software and carry these bad habits over to the new system, the result will not be any different.
The above is not a definitive and comprehensive list but it should be enough to get you thinking about whether an ERP system replacement is necessary or if a few smaller adjustments in your current system will suffice.
Here’s another tool to help you decide. Our ERP evaluation template is another way to decide if it’s time for a full system replacement. It is an interactive template that grades your system in 8 different categories. Responses to the questions are weighted against your defined need for a particular feature. The template will grade your current system for each category as well as an overall grade for the entire system.
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