Most companies rarely think about taking a hard look at their ERP system to ensure it’s still supporting critical functions properly. That’s understandable since implementing an ERP can be a painful and costly process. However, it’s important to evaluate whether the current ERP meets business needs, especially if the organization is experiencing significant growth (positive) or inefficiencies (negative).
It’s easy to view a new ERP as a potential solution. Still, given the complex nature of ERP implementations, the evaluation needs to happen at the right time. When do you know it’s time to reevaluate your current system? Here are four signs it’s time to think about a new ERP:
It’s time to consider a new ERP if people are constantly digging or asking for information that’s inaccessible. Maybe a team member has certain reports they regularly generate that slow them down. Maybe an executive realizes they need to send pertinent information to a board member, but they’re unable to access it. As a result, work slows down and the company can’t access the data they need or provide the right information to stakeholders. People’s inability to get the right information for decision support becomes more obvious the longer they continue to use an ERP that needs replacing.
If a department or division has requirements the ERP solution cannot fulfill, and they often resort to another solution or app that’s a fit for their particular purpose. The department is typically satisfied with the new tool or app once implemented.
The problem is, other departments are doing the exact same thing. Everyone ends up with their own set of tools, and when it’s time to work together, data is siloed in various places. It creates a huge mess. On top of that, individual departments often end up purchasing software with identical functions and features (i.e. two different CRMs—one for sales and one for marketing). Similar data ends up in two separate places.
This is especially important when it comes to financial information or information that drives financial decisions. Storing this type of information in applications separate from the ERP leads to inconsistencies that drive low quality financial information or two versions of the truth.
It’s easy to see why this is a problem—there are extremely low barriers to entry to try a new software or app vs. examining how an ERP solution can meet the same needs.
Forgoing a new ERP system in favor of saving money is like patching up a sinking ship. Supporting an antiquated ERP system will often result in excessive spending to keep the system alive. Our research shows that companies in this situation waste an average of 1% of revenue per year patching the ERP solution.
Some common hidden administrative costs include:
These hidden costs are just the tip of the iceberg. Operational inefficiencies have a much larger impact on the organization. This includes addressing asset utilization, customer profitability, manufacturing efficiency, and project forecasting to name a few.
Organizations have spent millions of dollars customizing an existing ERP system to try and meet additional needs. In reality, the same ERP that worked for an organization when they were smaller doesn’t always work as the organization grows. As organizations grow in complexity, add product or service lines, and expand into new facilities, a new ERP is often necessary.
The problem with too many customizations is that the organization eventually ends up with an entirely custom application. When it’s time for an upgrade, the organization must go through all the testing to prove the customizations work properly and meet audit requirements. If a critical customization breaks, it could result in rework and a potential internal control risk or material weakness uncovered in an audit.
If any of these warning signs are familiar, here are some next steps to decide if a new ERP is the way to go.
Assess: What process challenges and technical challenges does the organization need to address? Perform an honest internal assessment of what the organization needs. Keep in mind: before you decide to add something new, review what you have first.
Develop a Vision: Plan for where you want to go. Don’t simply replicate what you’re doing today in a new system. What do you want to do with AI and process automation? What are your customers’ expectations? Know where you want to go from a process improvement perspective.
Compare: Based on where you want to go, can the current ERP system solve these problems? Or are there too many gaps? In some cases, the current ERP just isn’t being used correctly. If there are too many gaps and the existing ERP doesn’t fit business needs, it’s time to evaluate alternative solutions.
Review & Demo: Review and select a couple of solutions. Ask for demos to see how the ERP’s capabilities fit with business requirements. Ask for references who have used the same ERP to address specific concerns your organization has.
When an ERP seems beyond its useful life, it’s often more efficient and cost-effective in the long run to transition to a new ERP that meets key business requirements. If your organization is facing any of these symptoms or needs assistance evaluating ERP solutions, our team at Trenegy is available to help you find a fit-for-purpose solution. Reach out to us at info@trenegy.com.
