Updated [June 2024]: We’ve recently updated this post with new information to provide you with the most up-to-date and relevant content possible. We hope you find this updated post helpful and informative.
Your business relies on your ERP system, and in the fast-paced digital economy of today, it must support all critical functions. Additionally, it should be flexible, user friendly and encourage innovation and future growth.
But how do you know when it's time to move on from your legacy ERP system?
When it starts costing you money and hindering your competitiveness!
According to a survey by Panorama Consulting Solutions in 2020, 59% of organisations reported that outdated ERP systems increased operational costs and reduced competitiveness in the market.
And so here are some of the warning signs that it's time for an ERP upgrade:
Skyrocketing Operating Costs
A clear sign that you need new ERP software is when the costs to operate your current system becomes excessive. This often results from steadily increasing support fees, sometimes with minimal updates included.
Or as you uncover more gaps and inefficiencies in your software, costly customisations and add-ons keep piling up. Chances are you're also running on legacy hardware nearing the end of its lifespan, requiring frequent maintenance or replacements.
A Forrester study found that 63% of businesses reported escalating maintenance fees as a major factor prompting ERP upgrades.
If the costs of your old ERP system continue to rise, you should assess the true cost of owning it. This includes not just upfront costs, but also ongoing support, maintenance fees and continuous improvement costs. Don’t forget to factor in the cost of wasted time and resources. By evaluating the total cost of ownership, you can make informed decisions about the future of your ERP system.
Often, switching to a new ERP system is cheaper in the long term than constantly spending on an outdated one.
Downtime costs money. Here are some key questions worth asking yourself…
- Is your current system becoming very expensive to operate?
- Have your support costs risen significantly without seeing any additional benefits?
- Are your support issues dealt with efficiently?
- Has your vendor discontinued a product and removed all related support services?
- Have you got access to local support services from front line support personnel to the development team?
- Are you constantly paying for modifications?
- Have you got access to useful tools and resources to help you utilise your software solution more efficiently e.g. hints/tips/manuals?
- Are you running on old and unreliable hardware?
The Hidden Cost of Workarounds
Often it is only when you take the time to carefully plan and implement a new system that you realise you had a lot of inefficiencies and processes that were costing you thousands every year. Small inefficiencies easily go unnoticed, but compound quickly over time. This is why we strongly recommend conducting an annual ERP system health check! Finding problems early can save time and money. Addressing them before they get worse can prevent the need for a complete system overhaul.
While sticking to what you know seems easier, tolerating makeshift workarounds can severely undermine your business. Even in 2024, you'll find companies are still heavily reliant on Excel for analytics and reporting. Modern ERP solutions now offer more streamlined reporting features, eliminating these outdated inefficiencies.
With outdated or fragmented business management systems, it’s not unusual to see employees frequently resort to unauthorised workarounds to complete tasks. This can happen when your systems are not efficient or user-friendly.
“If a particular function in your business cannot be accomplished within your ERP system, then you are not getting the benefits you paid for and the system is not supporting your business needs”.
When end-users start to improvise, things can get messy, leading to errors or security risks. It's important to address the root cause of the problem and find a more sustainable solution.
Your ERP system must be your central hub, used by every department across your organisation. Notebooks and spreadsheets scatter your important information, indicating an issue with your ERP system. This can lead to inefficiencies and errors in your business operations.
By bringing together your information, you can streamline processes and make better-informed decisions.
Are any of the following a problem for you right now?
- Is your software inhibiting users from completing tasks?
- Are staff resorting to manual processes to carry out their jobs?
- How much time and resources are wasted carrying out tasks outside your system? E.g. excessive use of Excel?
- Are you entering the same data more than once?
- Are staff frustrations and complaints rising?
- Can you maintain effective stock levels to maximise profit margins and manage cashflow?
- Can you easily customise end user screens and dashboards to reflect their unique requirements?
- Can you automate processes using workflows to simplify repetitive tasks?
- Can you manage user restrictions and access capabilities using role-based security policies?
Outdated Technology Suppressing Innovation
Often, it takes a threat to core operations before you seriously consider overhauling the systems that run your business.
For years, the limitations of your aging ERP system may have dictated your business processes. As your company grows quickly, you may find the system becoming harder to use, slower, and less flexible. It may lack vital modern capabilities like business intelligence, collaboration tools, and integration with new technologies.
The result? When innovative processes emerge in your industry, your outdated system prevents you from keeping pace with competitors. Or perhaps your business model has pivoted, but your rigid ERP cannot accommodate the changes.
“Intact iQ is streets ahead of what we had and more progressive than anything else on the market. We now have the same functionality available to us that bigger companies have been using for years. It’s up to us to utilise it”
Dave Gavin, Managing Director, KCR Builders Provider
Justifying an ERP replacement is crucial. The way you operate is frequently what sets you apart and maintains your competitive edge. But that's rarely possible running on legacy software too old to adapt to new technology trends and advancements.
New ERPs have open, flexible cloud-native architectures. These designs make it easier and cheaper to customise, allowing you to easily adjust to changing needs.
The shift to remote/hybrid work has also transformed the business landscape. Upgrading old ERPs for mobile use is expensive and complicated.
New cloud ERPs are built for mobile use. This is to improve productivity, make faster decisions, increase profits, and enhance customer satisfaction. With remote employees saving over 240 hours annually (iPass data), embracing mobile ERP access is non-negotiable.
Are you holding onto your old system even though it's holding back progress and flexibility? An outdated ERP could severely undermine your competitive edge in this dynamic digital age.
Some questions to evaluate include….
- Are you still relying on a DOS-based system (yes, they still exist!) or other outdated legacy software to run your business?
- Have you had bespoke work carried out and are now unable to update your system?
- Are you able to modify your software to facilitate changes in your business operations without having to rely on your vendor (e.g. pursuing new markets, acquiring other businesses, increase your product line)?
- Are you confident in the security of your data?
- Have you got the ability to back up your data online
- Have you got access to full historical traceability throughout your system?
- Can you carry out business electronically?
- Are staff downloading software to bridge gaps in your software capabilities?
- Are you able to take advantage of the new technologies that are now mainstream, e.g. mobile solutions, online stores?
Lost Sales and Customer Churn
Inadequate business management systems and ERP software are among the biggest culprits behind missed opportunities and business failures. Without detailed customer data, it's hard to make effective marketing campaigns that boost sales. Having insights into your most profitable products, customers and channels allows you to focus resources optimally.
In today's experienced economy, you win and lose customers daily based on the service quality you deliver. Your brand reputation hinges entirely on the customer experience you provide. Both customers' social circles and review platforms amplify both positive and negative interactions.
When systems do not connect, you may find it difficult to collaborate, share information, and maintain efficient processes. This can lead to poor customer service and losing potential customers. An inadequate ERP makes you miss out on revenue opportunities. According to Forrester Consulting, ERP Impact Study, 2020:
Organisations that replaced their outdated ERP systems with modern solutions saw a 10-15% increase in sales within the first year.
On the other hand, upgrading to a better ERP system can significantly boost your sales and improve your customer service. Modern ERP systems are important for maximising marketing efforts, generating leads, and maintaining customer satisfaction. They also help in establishing strong relationships with clients when used effectively.
Poor customer service spreads like wildfire. How efficient are you in the following…
- Are you able to effectively communicate with your customers?
- Are you able to fulfil requests for statements / invoices to be sent via email?
- Can you access vital customer sales information at order / entry point of contact?
- Can you target special offers or marketing campaigns to different categories of customers?
- Can you manage your customer credit terms and debtors days?
- Do you have a returns policy that enables you to deal with queries efficiently and effectively?
Lack of Visibility and Actionable Insights
Legacy ERP systems often lack transparency and visibility, which can be a major obstacle. Older systems have a lot of data but it's hard to access or analyse without manual work. Decision-makers become frustrated by struggling to get the insights they need to understand performance and make informed decisions.
In many organisations, outdated ERPs operate as isolated applications with little integration between modules like finance, inventory, point of sale and more. This disjointed architecture eventually breaks down one of an ERP's core purposes - centralised reporting and analytics.
You need a clear and organised system to gather and analyse important information for your business to move forward. This system should gather all necessary data and make it easy to understand.
“Intact iQ has created greater efficiencies in our business. It frees up time and gives us additional opportunities to do more with the business. From the bottom up it provides us with greater visibility of the information we need and we know there is still a lot more it can still give us going forward.”
Mike Webb, Financial Director, AVS Fencing UK
Having a unified system means all information is in one place. Transparency ensures that all data is easily accessible and understandable. This system is crucial for the growth and success of your business.
New cloud ERP systems encourage collaboration, integration, and real time information sharing across your business. They provide a "single source of truth" by merging data across ALL core business functions into one cohesive system. This integrated approach enhances process reliability, reduces errors, and unlocks exponential time/cost savings.
Your sales team gains instant access to real-time customer and inventory data to provide correct quotes and updates. Supply chain managers can proactively forecast demand based on integrated sales orders.
Your management team can analyse detailed reports and focus on specific metrics to make data-driven decisions. This will enable them to identify problems and take advantage of opportunities.
Without critical insights, your business may miss opportunities to improve performance, save money, and grow. A modern ERP system gives you a clearer view of your business, helping you make smarter decisions for a more profitable future.
Are any of the following an issue for you right now?…
- Are reports difficult to generate?
- Can you create ad-hoc reports when required?
- Are you still manually exporting to Excel for analysis purposes?
- Do you have access to ‘live’ up to the minute real-time data?
- Can you quickly and easily create mini on-screen reports with a few clicks?
- Have you got the ability to drill down to the finer details of your reports for further analysis?
- Can you unlock the value of your data to make accurate forecasts for the future?
- Do you have seamless access to data to support a more efficient and robust decision-making process?
- Can you set up scheduled reports with automatic emails sent to a pre-set list of recipients?
- Can you get KPIs automatically delivered to your email or smartphone?
The bottom line…
In today's digital age, if you’re still running on outdated ERP systems, you will almost invariably benefit from conducting process reviews and implementing modern ERP solutions. The potential cost savings and productivity gains are too big to ignore!
When evaluating a new ERP, it's critical to not only address your current pain points but take a long-term view of your business' trajectory and future needs. Look at the technology being used; is it old and outdated, creating limitations or new and progressive, creating opportunities.
