Is It Time to Replace Your Legacy ERP System?
Enterprise resource planning (ERP) systems have been around since the 1990s, helping organizations manage and integrate business processes. However, as companies implement digital transformation strategies, it will be essential for the CIO/CTO to take a look at the status of the current ERP system, which at many companies is still an on-premise legacy system used to manage HR, finance, procurement, and other critical tasks.
Transformative Digital Capacity and High Consumer Expectations Demand Upgraded ERP Systems
The pandemic significantly accelerated the drive toward digital transformation across all industries. Over the last few years, consumer expectations changed, and companies are retooling to meet them. There’s also been a shift in employer-employee relationships. Workers have more leverage now, so employers are looking for ways to improve the employee experience.
ERP Systems Affect Both Consumers and Employees
ERP systems are a relevant factor in both the consumer and employee experience as well as a core part of the organization’s digital transformation effort. Access to best-in-breed business applications can help companies operate agilely and improve the value and speed of service and/or product delivery. In addition, the use of advanced technologies like AI and machine learning can streamline routine tasks to improve the employee experience.
A genuinely modern ERP system that is purpose-built to operate in the cloud can free companies from the limitations imposed by legacy ERP systems that confine users to a single ecosystem and can’t easily accommodate the latest cloud-based business applications without extensive workarounds. A modern ERP system can also remove limitations to the company’s technology roadmap.
Signs That Your Legacy ERP System Should Be Replaced
If you’re looking at ways to accelerate your digital transformation journey and improve organizational agility, evaluating the status of the ERP system is an excellent place to start.
Here are three signs that will let you know if the system your company uses needs to be replaced:
- You’re spending more time and money modifying the configuration and customization(s) of the ERP to accommodate changes in your business processes: One sure sign that the ERP system is past its sell-by date is if you’re seeing an increase in the time and money departments are spending on modifying configuration or customizations in the ERP solution for it to reflect changes in your business processes. In addition, this often increases vendor expenditures as vendor service reps are called in to help employees adjust the ERP solution.
- You’re finding data integrations increasingly complex: As business users deploy newer technologies to improve workflows, it can get expensive in terms of both time and money to integrate data. Legacy ERPs lack newer integration technology, such as APIs that simplify data flows. As a result, you may see an increase in integration projects as business process owners need workarounds to make their applications function with the ERP.
- Employees are unhappy with the ERP system: Legacy ERP systems tend to have complex forms with multiple fields, so employees find it a hassle to accomplish routine tasks like filling out timesheets and submitting expense reports. If you’re unsure how employees feel about using the ERP system, it’s a good idea to survey users. If there’s a high degree of dissatisfaction, it’s a sign it may be time to upgrade the ERP system.
Any one of these signs is reason enough to consider an upgrade. However, using consultants to make the ERP conform to changes in business processes can quickly get expensive and time-consuming — and there are high costs to building integrations and workarounds.
Sources of employee dissatisfaction should be addressed as a retention issue and also as a way to free employee time for more strategic tasks.
Moving Toward a Composable ERP Strategy
In 2020, Gartner coined the term “composable ERP” to describe an ERP approach that incorporates agility and flexibility by integrating multiple applications and platforms. Gartner describes the concept as a modern strategy that enables mid-sized enterprises to adapt quickly when markets are disrupted and prepare for growth, achieving a balance between flexibility and a more “monolithic” system.
From the CIO/CTO perspective, the platform question looms large because technology leaders want to minimize enterprise software constraints on their own digital roadmap. Unfortunately, a composable ERP system where all business applications are plug-and-play with integrations taking place seamlessly in the cloud doesn’t exist yet because there’s no common standard for application communication.
An ERP System With Infrastructure That Can Run in the Cloud
According to the Tambellini Group research firm, there are a few ERP systems with an infrastructure designed specifically to run in the cloud. Cloud-based ERP systems that simplify point solution integration (like finance, talent management, etc.) come closest to the idea of composable ERP.
Technology trends are often cyclical, and composable ERP represents the ultimate decoupling of business applications, the next stage in the cycle after the legacy ERPs created a mega-suite solution to replace old-school point solutions like accounts payable and accounts receivable systems.
The cloud makes it possible for organizations to choose best-of-breed point solutions while putting the onus on vendors to handle the integration in the cloud. That’s an attractive proposition for CIOs and CTOs.
What Technology Leaders Should Look for in an ERP Upgrade
The ERP space is in flux, but if you’re in the market for an ERP upgrade, keep in mind that a modern, cloud-based platform that doesn’t require you to access vendor services when you need to customize workflows will save time and money. In addition, no-code and low-code solutions are ideal, and vendors should be willing to allow you to test their functionality.
Questions to Ask Potential Vendors
Also, ask potential vendors about their product roadmap and vision. It’s critical to get an accurate read on how they envision the future in terms of interaction with software. In addition, it’s essential to make sure they have a clear idea of where the marketplace is moving and a good read on your industry vertical (i.e., which business applications you use) and associated customer needs.
Skip the Cloud Pretenders
Also, be on the lookout for “cloud pretenders,” which are solution providers who say their product is cloud-based when it’s basically just a hosting solution. Very few ERP solutions are built from the ground up to run in the cloud, but many claim that they can easily move customer processes to the cloud when they’re actually describing hosting rather than true cloud operation.
How Will You Increase Your Overall Productivity?
Lastly, make sure the prospective ERP solution improves user satisfaction and productivity. For example, in one real-world use case, a municipality with approximately 55,000 employees used a cloud-based ERP solution to automate timesheet submissions, saving each user 10 minutes per week. That translated into millions in recovered productivity.
Many examples show the benefits of replacing the legacy system you now work with that will bring you enormous savings potential from consumer and employee satisfaction and overall productivity.
Garnering the vast savings potential that a modern, cloud-designed ERP can provide is an exciting possibility within a business’s reach. With the right system, you can improve the employee experience, reduce dependence on vendor consultants and lower the demand for integration projects, all at the same time.
So, if you’re thinking about replacing your legacy ERP system, keep these possibilities in mind.
Image Credit: by Ivan Cujic; Pexels; Thank you!