8 Ways Legacy ERP Harms Businesses
Today’s Outdated State of ERP
When was the last time you upgraded your ERP system? Not just patched, fixed or tinkered with it—but implemented a substantive upgrade that enabled genuine business innovation, generated excitement and unleashed a wave of ideas and productivity from your users? You know—the same kinds of enthusiasm that greets web or iPhone apps like Instagram, Spotify, Netflix, etc.?
If you’re like your peers, then the answer is “not in recent memory.” In fact, according to Forrester, “approximately half of ERP customers are on releases that are two versions behind the current release, which may be four years old or more.” In today’s fast-moving environment, that may as well be in the Stone Age. More than likely, your ERP was designed in an era where fax machines were still relevant, channels were slowly grown over time, and going global meant owning expensive global infrastructure to support growth.
The fact is that the world is innovating faster than ever, but ERP installations seem to stay frozen in time. It’s hard to believe that an outdated, five-year-old ERP system can be relevant to a business in a hyperactive world.
Technology has transformed the broader world of business software and consumer applications. Workers now interact through mobile devices and social media, and applications are increasingly connected over the Web. But many ERP deployments have remained oblivious to these tectonic changes—it’s as if the iPhone was never invented, social media was a futuristic concept and connecting ERP to web channels was a kooky concept for the dabbling few.
It’s no wonder, according to a survey published in CIO magazine some time ago, that only 4 percent of IT leaders believe their ERP systems create competitive advantage. The competitive advantage vanished long ago.
On-premise ERP systems like Sage, Microsoft Dynamics GP (Great Plains) and SAP have locked businesses onto a treadmill with annual maintenance fees of more than 20% for the right to make a support call and download the latest software—but what good is it if you can’t upgrade your ERP deployment to take advantage of change and keep your business running efficiently?
The Danger of “Version-Locked” ERP
The sad reality is that for almost every business, “version-lock” is the Achilles heel of their on-premise ERP. Customizations to an ERP that seemed so innocuous at the beginning of an implementation years ago have built up over time like silicon plaque. Gradually, your ERP becomes hardened to change because an upgrade to on-premise technology means re-implementing and testing those custom schema changes, integrations, workflows and reports.
Faced with outsized risk, cost and resource requirements for what may seem like an incremental upgrade, your company can be effectively forced into “version-lock,” with an ageing ERP system that’s increasingly out of alignment with the needs of the business. Your users begin working around your system with unproductive manual processes and spreadsheets to fill in the functional gaps that have grown over time.
With businesses already spending an average of 5 percent of their revenue on IT operating and capital budgets, there’s little appetite to further erode margin by growing the IT budget without delivering sustained transformational value and real competitive advantage.
Does running an ageing, out-of-date ERP really damage your business? Does it matter if your ERP is “version-locked?” After all, isn’t it simply automating the same old accounting processes that haven’t changed in decades? The reality is that the damage is real, and while your ERP has your business stuck in quicksand, your competitors are not standing still. Your business needs ERP that supports real transformation, and that outdated ERP system you’re running simply isn’t aligned with the business environment in which you and your competitors operate.