Legacy ERP systems are a key area of focus for companies seeking to lower IT costs and increase flexibility. In the early days of ERP, companies implemented heavily customized ERP solutions in the pursuit of increased agility and responsiveness. However, as a 2014 report by Gartner notes, “Early ERP adopters, particularly large enterprises in energy, manufacturing and distribution industries, are paying the penalty of a decade or more of excessive customization.”
The good news for businesses is that they can now take advantage of all the benefits of a postmodern ERP system, such as native functionality that is better suited to fully address many specific business requirements for a lower total cost to ownership and without massive customization.
If your organization identifies with any of the following signs, it is likely time to explore how a new ERP system will provide a long-term, strategic advantage.
The Five Signs It's Time To Replace Your Legacy ERP System:
1. Increasing expense associated with maintaining current ERP software updates and customizations
Over the last few decades, ERP implementations were usually large-scale and highly customized, involving burdensome implementations that carry a hefty price tag. The solution to a highly customized, monolithic ERP system involves a shift to a hybrid approach. This approach is characterized by blending cloud-based applications with on-premise applications, which Gartner refers to as ‘postmodern ERP.’ Additionally, ERP systems today have evolved to include features such as integrated warehouse management, streamlined navigation, and user-interfaces, and native integrations with existing third party systems, which removes the need for expensive customizations.
2. Lack of visibility and access to all data from a single source
The challenges posed by a legacy ERP system include how to organize, analyze and extract critical data because it has primarily been to function as a repository for limited types of data (e.g., financials). Fortunately, modern ERP systems are designed to enable businesses to consolidate data across various functions into the same application. For example, data associated with a specific sales order, such as the customer, inventory and financial information, can now be captured in a single system. This is a major benefit since it means that everyone within an organization can leverage and work from the same set of data.
3. Inability to integrate with other business systems or technology platforms
One of the most impactful developments within the ERP industry has been the advancement of the cloud deployment model. Business looking to move away from a legacy ERP system gain access to cloud-based point solutions that are either unable to integrate with legacy ERP software and hardware or not natively available in a new ERP system (e.g. EDI, Business Intelligence, WMS). Also, business that have been burdened by outdated, rigid ERP systems gain immediate flexibility by deploying an ERP system in the cloud.
4. Dependent on a veteran IT professional for knowledge transfer and maintenance related to the legacy system
Oftentimes, one of the most difficult roadblocks associated with operating a legacy ERP system is not the software and hardware but the people responsible for its maintenance and support. The move to a postmodern ERP system in the cloud benefits both employees and the business. IT professionals responsible for system maintenance and training appreciate the ease of addressing system updates, hardware failures and support tickets.
5. Current system lacks the out-of-the-box functionality to support changing business requirements
As businesses grow and evolve, changing demands and market conditions can wreak havoc with business processes that are governed by limited legacy ERP functionality. Modern ERP systems have expanded to include a full range of integrated solutions that once existed as standalone systems. For example, ERP systems now include robust out-of-the-box features such as an integrated warehouse management systems, business intelligence, mobile functionality and e-commerce platforms.
Want to read more? Click the graphic below to download our white paper about replacing a legacy ERP system.
By Jeff Ritter