Like anything else, ERP systems tend to become less and less effective with age. It’s not that the system itself wears out; it’s a matter of the application getting out of step with the processes they were originally meant to streamline.
Most ERP systems last an average of seven to 10 years. That lifespan may be determined by licensing date through replacement date or go-live date through to the next go-live date. It doesn’t really matter; the key is that the systems need to be replaced, or at least evaluated, fairly frequently.
There are a lot of approaches to determining this.
* Review the existing system RFP and Vendor Proposal. You may have to pull it from offsite storage, but, it will tell you a lot about your mindset going into the selection cycle years ago. The questions you asked 10 years ago and the responses supplied by your responding vendors will tell you what used to be important to you. Is it still important? Here is an example. If you requested a system with English-only screens and you are now operating plants in Mexico or China, then English-only is probably not high on your list of desirable attributes.
•* Your finance folks should be able to tell you about the status and requirements of any applicable FASB standard operating procedures. These can radically alter your own reporting requirements and in some cases alter the very way you do business. Your ERP system should support these requirements, not inhibit your ability to fulfill them.
* Compare your business now with your business of 10 years ago. Let’s say 10 years ago, you had a single location and one factory. Now through several mergers or acquisitions you are running multiple factories in multiple countries manufacturing products that did not exist 10 years ago. Does your system handle all of that?
* Check with your IT folks and see how many modification requests have been submitted by year since the initial deployment. Are you writing go-rounds and tweaking the code more and more?
* How has use of spreadsheet software changed over the past few years? Are people writing Excel apps to make up for non-existent functionality?
* Government regulation is an area where changes may manifest themselves. Has your industry become subject to the scrutiny of a regulatory body?
* Have you acquired companies or spun off business units since your system went live? These can represent huge accommodations on the part of an existing system.
* Have you changed your distribution model? Are you moving away from a direct sales force to an indirect model? Has this affected your revenue accounting or compensation systems?
* Have you implemented different manufacturing strategies such as Lean or demand-driven strategies or perhaps new quality or compliance initiatives? Some of these processes can conflict with processes that interact with your ERP system.
There are many factors to consider when evaluating the alignment of your current ERP system with your enterprise. The longer it’s been since the last ERP implementation, the more likely the difference in your enterprise will be pronounced enough to reduce the effectiveness of your existing solution.
This is an edited excerpt of “Is it time for a new ERP System? How to Evaluate the Effectiveness of Your ERP System.” To read the full paper, including an ERP system evaluation form, visit here.