ERP took root in the 60s and 70s, so legacy systems are not uncommon. Knowing when to re-evalaute an ERP system is not an easy task, but if your system was launched 15 years ago, it’s a good idea to consider all the new capabilities available in the current market.
Companies often debate adding another software layer onto the existing system vs. replacing what they have, which almost always requires a higher price tag. While it’s tempting to eschew upfront investments, it’s risky to downplay the risks of keeping an old system or downplay the benefits of ERP replacement.
Aberdeen Group did a research study which found, “Companies with ERP systems between 2-7 years old had 30% more reduction in costs than those companies with systems 15 years or older.”
So what makes older systems lose their benefit?
So how do you know when it’s time to replace your system?
One key question to ask is, “Can the existing system scale up to meet the growing needs of the company?” Sometimes, existing ERP can scale short term, but looks less effective long term. Since business changes fast, companies need to have systems that can respond quickly, and waiting to install a new ERP system, right as the need for the new system becomes apparent, is not an ideal option.
To test and measure old system capabilities vs. new, create a Business Process Model, which is also an essential tool in new system implementation. This involves reverse engineering requirements and ideal functionality by understanding where the current system falls down and how a new system might better meet those needs. If the difference in capability is dramatic, it’s a sign to get moving on an update.
Perhaps one of the biggest reasons to get serious about change is unhappy customers and poor ERP feedback from staff and vendors. If your partners and clients are consistently asking for better functionality, better access to information and more streamlining of processes, all which you cannot provide, take note. Businesses unable to meet the basic needs of their customers, suppliers and distributors are businesses that can not, in the long run, thrive.
Do you have an aging ERP system and are wondering about your options? Give Parallel Solutions a call at (440) 498-9920. We are a full service provider and our experienced staff can help assess all your needs from software to training and support.
Even if benefits of ERP seem overwhelming and obvious compared to a legacy system, selling large-scale change is never an easy task. Part of the challenge of selling to management is their primary focus on the bottom line. At this level, money talks, which means getting management enthusiastically on board with ERP, means providing firm numbers and crafting a compelling financial argument.
These are the 5 key features at the heart of a compelling ERP pitch:
True Cost Projections
No one intends to sugar coat numbers, but the complexity of ERP can sometimes lead to overly generous or deleterious estimates. The project point person needs to truly understand ERP costs and pass that knowledge along to the decision makers. This often means working with a vendor to understand software, hosting and hardware costs along with service costs like customization. When it comes to estimates, it also important to determine maintenance estimates for 5+ years because no one likes expense surprises.
Accurate ROI Projections
The costs of existing processes and systems must be understood to accurately calculate ROI. Consider and measure the costs, as much as possible, of time consuming work arounds, duplication of efforts and other time wasters within the current process and system. From there, show how ERP will increase efficiency and lower costs over the long term.
Be sure and also highlight more difficult-to-measure objectives such as better customer service and more time for sales and other company-wide initiatives. And finally, look to educate management on the highlights of optimizing ROI during ERP purchase and implementation.
Well Defined Objectives and Metrics
In a nod to the points above, objectives must be set and then clearly measured to truly understand the value of the ERP system once its up and running. Let management know the details of the ongoing cycle of measuring objectives and results. This comes down to defining key performance indicators (KPIs) for different departments such as sales margins, lost accounts and new accounts, overdue or past due receivables, inventory turnover, return volume and delivery errors, just to name a few. Assign dollar amounts to KPI objectives and the ROI estimate will be much easier to craft and more convincing than general estimates.
Streamlined Process Blueprints
While the numbers will undoubtedly talk louder than chat about smooth day-to-day processes, visuals showing how streamlining lends itself to lean, turn-key operations is a solid selling point. This means crafting a blueprint or Business Process Model for each department illustrating process both before and after ERP implementation. Detailing the work flow of each department and determining how they work together, goes way beyond the sales pitch. A detailed BPM will not only sell management, but will also guarantee that the enterprise application will fit the different functions within a business.
Change Management Strategy
Company culture is a key element in ERP success. After all, it is the people, not the software, who implement the changes. Help executives understand how the project management team plans to manage the Change Curve to reduce any resistance during initial launch stages and accelerate the movement toward acceptance and enthusiasm. Also highlight the training initiatives that will help motivate staff and keep the new project moving forward toward 100% adoption and ROI success.
Looking for an ERP partner to help with these and other essential ERP tasks? If you’re considering a vendor, or have more questions about cost projections, ROI calculations, Business Process Modelling or other imperative planning, give call Parallel Solutions a call at (440) 498-9920. We are a full service provider and our experienced staff can help assess all your needs from software to training and support.
Mary Jo O'Neill