Like anything else, enterprise resource planning (ERP) software systems tend to become less and less effective with age. If not replaced every seven to 10 years, ERP systems can interfere with the ability of the company to operate efficiently. So, how do you know what to you look for as far as signs that the old system is ready to be replaced? There are a lot of approaches to determining this. We’ll take a look at several.
* 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.
* FASB reporting changes – Your finance folks should be able to tell you about the status and requirements of any applicable Financial Accounting Services Board (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. Implement this option now with an eye on changing systems within a specified period of time. Typically, this will involve far less expense and resource commitment than the replace option.
* Replace the application with a new ERP software system. If you have the time, the people and the monetary resources, go ahead with a full migration right away. But, make sure you are indeed ready to start down this path. More ERP implementations fail from lack of preparation on the front end than from poor execution during the implementation phase. Rather than stopping everything to move to a new system now, fix up the existing system and start planning a migration and change project with a specific timeline. Think in terms of three to five years. If the existing system is beyond hope, and you don’t have the ability to commit to a new system, look at some vendors that offer quick-deployment ERP. This may well be enough to get you through the three to five years needed to select, implement and deploy a new full-blown ERP system. Quick deployment ERP is less costly, but also delivers a rich enough feature set to temporarily take the place of more highly evolved and deeply entrenching system architectures offered by the major vendors. It does offer a sort of middle option that is right for some situations. There are strategic decisions that should not be made in haste.
There are many techniques, tools and strategies for evaluating your ERP system. The least costly options available to enterprises are to extend or fix their current systems. However, ERP systems designed for different objectives at an earlier time do not have the ability to fully adjust to newer changes and continued benefit to the enterprise. Maintenance updates can extend the life of a system temporarily but ultimately a replacement must be implemented in order to achieve maximum efficacy.
This is an edited excerpt of “Is it Time for a New ERP System?”