Reasons to Upgrade or Replace Your ERP System
Deciding to upgrade or replace your ERP system is a big business decision. An ERP switch affects your financials, personnel and operations globally. So, what warrants an ERP upgrade or replacement? Here are the most common reasons why making the switch is worthwhile.
You’re Experiencing Growth
Business growth is one of the most common and motivating reasons to decide on an ERP upgrade. With any growing business, you need to look at all of your software systems to ensure they can handle your future requirements. Some growth indicators to look for include:
- More Business Transactions – With more business comes more data and the need to track it effectively.
- New Products or Services – When your offerings or business model change, you may require a more comprehensive system.
- New Markets – Expanding to new markets can mean new business requirements, like new tax requirements, languages, data formatting conventions, etc. Your current ERP system may not be able to scale globally.
- New Business Venture – If your business is evolving or adding new divisions, you need an ERP system that can handle all the different aspects.
You Have New Leadership
It’s common for new leadership to introduce new initiatives and want to take business operations to the next level. They may also want more advanced visibility or prefer a system they’ve used in the past. In these cases, a change in ERP system may be required to suit their preferences and where they want to take the business.
You’re Not Meeting Regulatory Considerations
Maybe the most motivating reason to upgrade your ERP system is to comply with regulatory considerations. If you’re not currently meeting them or know that your system can’t handle what’s coming, an ERP upgrade is urgently needed. More complex regulations are being released than ever before, and your system must include strong controls and functionality to mitigate risk and meet compliance standards.
You’re Undergoing Mergers & Acquisitions
With mergers and acquisitions come a lot of changes. If investor groups are analyzing your business, you may need an ERP switch to satisfy their needs and preferences. If other businesses are merged with yours, your ERP system must be able to handle all that comes with that.
You’ve Outgrown Legacy Technology
Legacy systems are often customized, and if your company has used a system for years and relied on those customizations, there may be fear around losing them, especially with on-premise software deployments. Many companies run into issues when relying on legacy systems:
- Their legacy system doesn’t perform the way they need it to anymore
- There aren’t vendors available to support this customized software
- Only a small percentage of personnel know how to operate it and they’re retiring
- Workarounds are common practice since the system does not support requirements
To save your company considerable overhead, an upgrade is a wise idea.
Benefits of an ERP Upgrade
If your business is unsure about whether to switch ERP systems, these benefits of an ERP upgrade may help you decide.
Profitability
Having an ERP system that optimizes your business from integrating your company to automating operations leads to increased productivity and efficiency. And we all know that those two things lead to cost savings and higher profits. If you’re weighing whether or not you should invest in a new system, the ROI is there.
Business Insight
Steering your business in the right direction requires sound strategy, and sound strategy requires visibility. This includes visibility into your financials, operations, processes, workforce, vendors, customers, etc. To do this you need accurate, real-time data. A quality ERP system provides this and more and gives you a single source of truth for your company that will allow you to make more informed, strategic decisions.
Compliance
Manufacturing businesses require strict compliance with various industry and global trade regulations. Upgrading to a dedicated ERP for manufacturing companies can help streamline the compliance process.
Communication
Silos can become an issue at companies of any size, and when this happens, errors occur and smart ideas never see the light of day. The right ERP system connects every aspect of your business, enhancing communication and collaboration for improved efficiency.
Supply Chain & Distribution Network Reliability
Using demand-driven MRP to forecast supply and demand makes for smoother operations and prepares you for fluxes in orders and supply chain. Many ERPs support a connected supply chain and tighter integration with suppliers so you can work proactively to mitigate issues and reduce surprises.
Scalability
A quality ERP will be able to grow you and grow with you. As your company adds requirements, an ERP will be able to accommodate and prevent lapses in operations while enhancing the user experience.
Customer & Supplier Management
Customer and supplier management are critical to a business’s success. An ERP can help you store and monitor customer, partner, and supplier management information and make it visible to appropriate parties instead of getting buried in silos.
Cloud Migration
A cloud ERP system comes with several benefits. Also known as Software as a Service (SaaS), cloud-based solutions allow data to be stored and accessed on any device with an internet connection. This improves implementation, integration, storage, updating and security.
Risks of Not Upgrading Your ERP System
While upgrading comes with benefits, not upgrading comes with consequences. Some of the risks and issues involved with keeping a system that doesn’t fully support your current and future business needs include:
- Less scalability
- Potential security issues
- Lack of compliance
- Increased human error on non-automated tasks
- Less adaptability in the event of widespread emergencies, shortages, natural disasters, etc.
- Less connectivity to supply chain, MRP, global trade or QMS systems if they’re siloed and not built on the same platform
- Compromised efficiency and productivity that lead to profit loss
Manufacturers are relying more on interconnectivity and real-time information. Lack of adapting and digitization can have a profound impact on growth.
Updating vs Replacing Your ERP System
When it’s time for an ERP switch, you have two options: upgrade or replace. The decision really comes down to which route provides the most business value. If you’re relatively happy with your current system and just need some advancements, an upgrade can be less disruptive. You’ll likely maintain the same vendor and integrations and can reduce any change management hurdles.
Replacing your ERP platform, however, could allow you to seize new business opportunities and grow exponentially. Since you purchased your system, there have likely been major software advancements that could provide you with capabilities you’ve needed but never had. Also, if you’ve experienced a merger or acquisition, you’ve possibly ended up with multiple systems. Replacing the multiple systems with one updated system not only provides new benefits, it simplifies and connects the new business aspects.
How Can You Plan an ERP System Upgrade or Replacement?
Once you’ve decided to move forward, it’s wise to create an ERP implementation project plan. This will help you make the best decisions along the way to ensure a smooth and successful implementation.
Key steps to include:
- Set expectations and establish scope and timeline. From external vendors to your internal workforce, communicate goals, requirements, project scope, timing expectations, costs and resources related to the upgrade. The key here is to ensure everyone is aligned from the start.
- Program mobilization and kick-off are next. In this step, you’ll want to form a project team and engage stakeholder groups. The team should draft a plan with deliverables and milestones.
- Make design decisions. Work with your team and vendor to ensure the ERP functionality you’re getting is appropriate to your business needs, compliance regulations and follows industry best practices for implementation.
- Test for issues. Test the system for errors or issues prior to deployment. Walk through the system and determine if there are any problems that affect the timeline.
- Get your go-live plan. With your vendor, establish when to stop the old system and start the new. Immediately after deployment, you’ll go through a hyper-care period where all hands are on deck to smooth out any bumps and get everything running smoothly. There should also be a post-project review.
For optimal success, we recommend:
- Getting executive buy-in as soon as possible
- Identifying pain points and clearly establish benchmarks
- Involving frontline users
- Preparing to handle data mapping
- Planning how you’ll educate and train users
- Managing scope creep
- Being realistic about timelines and the implementation aftershock that could disrupt your people and operations for a bit
How Do You Evaluate an ERP System?
Embarking on upgrading your ERP system begins with two factors: what problems you’re trying to solve and which opportunities you want to gain. With those established, you can begin evaluating ERPs within your budget for those requirements.
Here’s a checklist of questions to raise when evaluating each system:
- Does it meet your system requirements?
- Does it align with your company goals?
- Is it compatible with existing systems?
- Are there training and support options?
- What are customers saying about it?
- Does this vendor continue to develop new technology and adapt to changes?
After narrowing down your solution options, it can be valuable to review the benefits and features of the systems with key decision-makers at your company. Having the insight and support of these decision-makers can ease adoption and boost support of an ERP implementation throughout the organization.
Get Started with Your ERP Upgrade
If you’re not sure where to start with your ERP upgrade, QAD’s global team of ERP experts can help. From assisting companies with streamlining business processes to moving to the cloud, our Consulting and Transformation Services teams are skilled at guiding organizations through the process.
Our ERP implementation varies in scope, but it’s a scalable process that provides thought leadership and collaboration and adheres to manufacturing best practices. We offer global support, resources and in-depth training. Having an extended ecosystem of QAD partners also allows us to develop robust solutions and gives you the opportunity to work closely with ERP experts in your region and in your language to implement QAD quickly and efficiently.
When you’re ready to get started, we’re ready to help. Contact us today for more information on where to begin.
