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Why You Shouldn’t Buy a New ERP System

Companies frequently undertake large ERP replacement programs that are totally unnecessary.

 • Unclear understanding of the rationale behind their current ERP solution. Very few executives can articulate the business rationale behind the selection of their companies’ current ERP packages or the process designs that went into their configuration. They also often lack the strong combination of business process and package expertise required to determine how to adapt the software to their companies’ evolving business model.

Together, those three dynamics often lead to a decision to replace the existing software even when a much lower-risk, lower-cost solution can deliver the desired business benefits.

A Better Approach
In the information-technology world, the term “legacy” typically carries a negative connotation. But legacy systems usually represent years of development and investment and provide mission-critical capabilities upon which the business has come to rely.

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In fact, most user complaints about these legacy ERP systems are not about whether the system delivers the required business functionality. Instead the complaints center on the perceived failure of ancillary features, like inadequate tools to access and analyze data, insufficient reporting capability and poorly designed user interfaces.

For example, a mid-sized manufacturer that was running a legacy ERP system had come to the conclusion that the system could not provide the insight to plant productivity required to effectively run the business. That ERP system had been installed for a number of years and had been enhanced to meet some very specific business requirements that a new ERP package would not likely support.

In fact, the root cause of the problem was the configuration of the plant-floor scheduling module and the ability to correctly combine the actual production data from the manufacturing-execution system with the schedule data.

By changing the ERP configuration and implementing a data-analytics solution to combine the plan and execution data to provide the business with the metrics required to effectively manage the business, the company was able to address the business issue within its existing ERP system.

In cases like this, targeted investments to resolve specific business issues are less risky, less expensive and deliver bottom-line value more quickly than entire system replacements. In particular, companies can derive significant value through targeted point solutions aimed at optimizing specific planning functions and providing business-decision support.

Consider the use of specific point solutions. Most ERP packages today are very good at processing transactions (customer orders, purchase orders, manufacturing orders, accounting entries, field service orders, shipments, returns etc.).

11 thoughts on “Why You Shouldn’t Buy a New ERP System

  1. Although it is an interesting overarching theme for the article, the suggested alternative courses of action aren’t preferable from a strategic standpoint.

    Implementing point solutions is not necessarily cheaper, as single pieces of a system are often more expensive than bundled packages. The smaller the purchase, the less negotiating leverage you have when dealing with vendors. Point solutions also require integration work to be incorporated into legacy systems which comes with costs – sometimes substantial. Additionally, ERP systems, just like all other technology products, become antiquated, and the investment to overhaul their current use via process analysis and installation of additional tools is a temporary fix.

  2. This is a very good article that explains the initiatives that companies should consider before implementing a new ERP. We have found that one more initiative should be considered — process improvement. Some of the inefficiencies surrounding an existing ERP may have been created right after implementation. End users have trouble giving up their old ways and no one ‘convinces’ them to perform their day to day tasks in a different manner. This could be done through change management or through ‘percussive persuasion’. The following article demonstrates how this could be done. http://trenegy.com/publications/change-management/2012/12/13/changing-the-approach-to-change-management/

  3. Interesting article. Businesses are no longer wanting to spend multi-million dollars on revamping their current ERP applications – its too expensive and takes too long with a lot of inherent implementation risks. However, they do want the functionality that can provide them with the insights, transparency and increased controllership, which is where smart, opex based bolt-ons come in handy.

    Please find below the link to an article highlighting a recent case in point. http://www.everestgrp.com/2013-12-why-the-avon-sap-news-is-important-for-your-business-sherpas-in-blue-shirts-12555.html

  4. More and more organizations are experiencing the value in what they’ve already paid for. Software vendors will continue to sell with additional license fees until the consumers smart up to the fact that they already have what they need. The challenge is in change management and integration governance, and the ERP vendors don’t teach that. Search “revealvalue” on YouTube and listen to customer stories where they have saved loads of money and seen significant increase in customer service through better use of their existing ERP system.
    See http://www.revealvalue.com for a cost effective change management methodology that works

  5. Good article with some valid points – as always, a correct and thorough understanding of your current ERP system is needed with ongoing review and development.

  6. Wise article indeed…Finding a judo solution (one that delivers maximum efficiency with minimum effort) is all about getting the most of out doing the least.

    Whenever you face an obstacle, look for a way to judo it. For instance, if your challenge is to get a bird’s eye view, one way to do it is to climb Mount Everest. That’s the ambitious solution. But then again, you could take an elevator to the top of a tall building. That’s a judo solution…

    Problems can usually be solved with mundane solutions. That means there’s no glamorous work and that you don’t get to show off your amazing skills. You just build something that gets the job done and move on.

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