People frequently ask me how long an ERP system should be expected to last. I always have this image in my mind of line after line of rusting code, bits and bytes hanging on by a single little cyber-rivet and feeble little characters barely glowing on an otherwise green screen. This system is clearly on its last legs.
Of course, that’s not what they mean. The question they ask is valid. How long should an ERP system be expected to last? The answer would be as long as your company doesn’t change, as long as your goals and strategies remain the same, as long as you don’t restructure, acquire or spin off part of the business, as long as your product set and supply chains remain static, your ERP system should be just fine.
The obvious catch here is that companies don’t remain the same. At least they don’t remain the same and remain in business.
• Expansion/Contraction – either through acquisition or internal growth the enterprise becomes more complex. Product lines are added, new business units are opened and new markets are entered. Conversely, some businesses shrink, down size, right size or lose market share. In either case the business is different than it was 3, 5 or 10 years ago.
• Increased regulatory involvement – The trend is clearly toward increased government involvement in more and more business activities. In some cases this may be direct, operational participation and in others it may be increased reporting requirements, regardless, the data required must be available to fulfill the requirements driven by these changes.
• Changes in your business model – Many companies are looking to indirect sales for the first time. This is a major change, frequently with cultural impact on the company. It brings with it a whole new set of requirements.
• Implementation of lean or green strategies –If your company is making genuine changes involving these strategies, you will be facing a lot of new requirements for data and for systemic changes needed to make these strategies work.
This brings us back to the ERP system. All of these changes are going on around your enterprise, but your ERP system is pretty much the same as it was when you went live with it ten years ago. The ERP system is now misaligned with the enterprise it is trying to support. The frequent result of this misalignment is the ERP system and the enteprise moving toward separate goals.
In the same sense that you can’t study History using an Algebra text book, you can’t effectively run your enterprise with an ERP system designed for what your enterprise used to be.