The move to the cloud has been gaining momentum over the last several years, with more organizations globally considering if the time is right to make the shift. Less than 25 percent of ERP was SaaS-based four years ago. In 2018, Panorama Consulting reported that 64 percent of users reported SaaS deployments, illustrative of accelerated cloud solutions. Industry analysts note inquiry levels for 2021 are up, showing that the market is resilient as more organizations seek to move from their legacy and outdated on-premises, license-based solutions to the cloud.
With organizations actively evaluating ERP or considering a move to the cloud, this prompts the question of why the interest, considering most organizations only use a fraction of the functionality offered by enterprise systems.
According to a study by The Standish Group, “On average, only 7 percent of an enterprise application features are "always" used, 13 percent of the features are "often" used, and 16 percent are used "occasionally." That leaves 64 percent of the features in an average enterprise application as either "rarely" or "never" used.
When analyzing software gaps, it’s worth considering missing functionality as well as modules that are being underutilized or not at all. Take inventory of what exists in your current system against your needs and evaluate the opportunity to optimize before making a switch. If there are capabilities built into your current system that are not being used to its full extent, it may make sense to explore optimization before your ERP system selection.
If you are considering moving to a new vendor for your cloud deployment due to outdated processes and lower productivity, will replacing your incumbent vendor yield different results? The answer depends less on software and more on organizational change management, process redesign, user adoption, and ongoing optimization.
Implementing an ERP is the opportunity to make meaningful business changes that advance goals and deliver on the vision for the future. Consider your vendor's track record, service reputation, and integration with other systems. If the goal is to quickly implement quality software and free your team to focus on innovation, staying with your incumbent ERP may be the smartest decision your company makes.
How to Know if You Should Stay with Your Incumbent ERP
There are several considerations when determining your future ERP strategy:
- Are your legacy system's support days numbered?
Understanding when your current ERP vendor plans to end its mainstream and legacy system support is important. End of support dates are publicly released information, so use that knowledge to inform your strategy. This will enable you to establish a clear roadmap for when software and services contracts need to be executed and when the project needs to conclude. When considering project timing, be mindful of certified resource availability. Other organizations will face the same decision with the impending end of support, so resources will be limited. It is best to avoid waiting until the last minute to plan your path forward.
- Does your current system meet your business needs?
If your incumbent solution offers a solid product for supply chain and financials, you may introduce functionality gaps when selecting an underdeveloped application in one of those areas. Gaps in ERP functionality are a constant source of cost overruns on ERP projects. Conduct a fit-gap analysis to identify gaps and confirm the software vendor has industry-specific functionality, demonstrated thought leadership, understands the volatility in the market, and has a clear roadmap with the funding to support it. A platform change may not equal better capabilities; it may not even equal what you currently have.
- Is your current system industry-tailored?
While there can be an argument made for a non-industry-specific ERP that does the job in financials, human resources, and supply chain management, some industries are complex. Not considering the specific needs of an industry-specific system comes with hidden costs of add-on applications, third-party systems, and integrations. ERP built with industry-specific functionality may offer industry-specific systems a full-platform application that meets business needs in the back office and limits costly configurations for strong ROI (return on investment) out-of-the-box.
- Does your incumbent vendor have a clear product roadmap?
Every system has room to improve, so it is important to understand your vendor's commitment to future innovation and how they are prepared to help you compete in the future. Many professionals who have been using the same system for years are unaware of the advancements in capability in the latest versions from their current vendor. Attending user groups, conferences, and talking with organizations that have made similar decisions are ways to learn how current users are benefitting and what they plan to do next. Understanding the product roadmap can ensure development aligns with your vision, strategy, and priorities.
If the product roadmap aligns with your strategic plan and you have confidence your vendor will do what they say they will do, continue the journey. There is also a cost advantage to using an incumbent vendor over the vendors seeking to replace them. Your incumbent software provider wants to keep you as a client, giving your organization a position of leverage. Use that to your advantage to negotiate a competitive proposal.
- Does your current vendor offer the flexibility to grow with your business?
The pace of technological change is faster than ever. Your business needs to evolve, but there are also standards to adhere to, records to keep, and industry requirements that make it difficult to rip and replace. It is essential to embrace change to become more efficient and drive strategies to work effectively against business imperatives. Yet, successful implementation of new ERP is a combination of the software partner offering the proper functionality and an intense understanding of your organization's operations and workflows. Consider the effort required to modernize and how familiar your software and implementation partners are with your business.
- Is your current system designed for world-class security and business continuity?
It is vital to understand the infrastructure your cloud environment is built upon. For example, cloud ERP built on Amazon Web Services (AWS) delivers the benefit of a "defense-in-depth" strategy. Multiple layers of overlapping security safeguard customer data and are enforced by a team of specialists who continuously monitor and improve security to stay ahead of threats and vulnerabilities.
- Does your current system offer good user experience?
Good user experience can improve adoption of applications from users of the tool and reduce any pain points. Including any ongoing user, enablement training can ensure employees properly learn the system rather than struggling to learn new ways of working; be sure to start from the initial end-user or onboarding training. Look at the simplicity of the interface, built-in automations and collaboration tools, and mobile access when considering usability factors. Rather than switching systems, consider retraining and user personalization sessions to ensure the system is being used properly and fully.
- What is the cost of staying versus switching?
If your vendor offers a cloud version of the technology you are currently operating, you may be able to modernize at a lower cost. Consider whether implementation accelerators and data migration tools exist from your current provider to streamline transformation at a lower cost and with less risk. Staying with your incumbent vendor is less complex than a full implementation of a new system yet will provide the transformational benefits of a modern cloud ERP platform. ERP Optimization: Four Steps to Consider
- How long will it take to complete a software evaluation?
Evaluations are time-consuming. Based on an ERP report by Software path, on average, organizations spend 17 weeks selecting an ERP. While many organizations embark on ERP projects hoping for a better future, getting value has more to do with executive leadership, business alignment, how change is managed, and the application selected. Your competitive differentiators are what drives success, not how the accounting system records journal entries. You may want to skip the cost and disruption of a traditional RFP process to kick-start your transformation program if your incumbent meets the functionality needed for your business and the product roadmap aligns with your vision for the future.
- Does your team have the bandwidth for a large-scale project?
Learning a new system is hard on busy staff. According to the World Economic Forum, Future of Job Report 2020, nearly half of all employees (40%) will need significant reskilling by 2022, and more than one-third lack the advanced specialized skills needed to successfully adopt digital technologies. Keeping change to a minimum and leveraging change management strategies to adjust to new ways of working can accelerate time to value and alleviate the stress that typically comes with new software implementations. Modernizing with the vendor your team is already familiar with can result in lower training costs, less strain on resources, faster adoption, and quick wins.
- Do your current partners understand your business and culture?
An ERP system is a relationship that may last a decade or longer. Consider the relationship you've built over the years with your vendor and how you communicate, make decisions, manage errors, and drive innovation. A strong culture match can make a world of difference in a large-scale organizational change like an ERP implementation. If your long-time partner has proven ability to deliver service, quality, and the business practices needed to help you in the future, consider that companies with shared values and history have a better chance at success.
Click here for ERP Optimization: Four Steps to Consider, which also includes tips on ERP budgeting.