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I am often asked, “How do I know whether I need to replace my ERP system?”  The other variant is, “How do I know if I need to move to an ERP system?”  As with all things ERP, there is rarely a clear answer.  That said, there are often signs that this may be the right move for your company.

ERP replacement or implementation is not a decision to be taken lightly.  The effort required is significant.  The resources to make it successful are immense.  Additionally, in many cases, the executive team of the company is rightfully busy with profitability, growth, and other key strategic issues.  They are not typically going to be experts on ERP systems or what they do, nor should they be expected to be.  ERP is a technology that can support the business objectives of the company.  However, it is not a substitute for proper management and strategy.

Reasons to Consider ERP Replacement

  • Obsolescence somewhere in the technology stack.  This could be the platform that the current system is built on.  It could be the database platform.  It might even be something like the current system only runs on Windows XP, or some other unsupported technology. Or it could be that your system doesn’t play well with server virtualization.  Or possible some other hardware limitation forces you to change systems.
  • Your business is running on Spreadsheets.  Typically what you will find in this scenario is that core financials are in a system, but everything else is running with the assistance of spreadsheets and ad-hoc databases.  This may not be a problem if the ad-hoc tools are highly nuanced.  However, if you are managing pick tickets and order pulling in a spreadsheet, that’s a pretty good sign it may be time.
  • Scalability is an issue.  If you are in a mode to buy businesses and integrate them into your current operation, you will want to have a system in place that is robust. The new system must easy enough to bring a new user base on quickly, and with minimal pain and suffering.  Other cases for scalability would include being at or close to the cap on the number of users that need access to the system. Significant performance degradation when too many people are logged in is another potential problem.  If new hardware cannot fix the issue, a change my be necessary.
  • Not Extensible.  If your current system does not have a robust API, it may be time to change.  If your system cannot otherwise be easily adapted, extended, or integrated, you are likely to have issues in the future that are going to be a drain on your resources.  The pace of change in business is increasing exponentially.  Your needs as a business will expand faster than the release cycle of any ERP system.  That being the case, you need a system that you can plug into with relative ease.
  • Information Delays.  I am not making a blanket system that it is to a point where business information is “real-time or death”.   In fact, true real-time has a cost that you may not be able to justify.  However, if the speed of delivery of actionable information is slow,  it may be hurting your ability to understand what’s going.  If you cannot make sound decisions to drive the business, then you are at a competitive disadvantage. If this sounds like your situation, it is time to consider a change.
  • Regulatory Constraints.   Your system must tolerate the pace of change in the regulatory environment.  If you cannot keep up with changing regulations, it may be time to change.

Closing Thoughts

There is never a perfect time to replace your ERP system.  It is a disruptive exercise by its very nature. Usually, ERP implementation has the effect of creating some strain on your corporate culture.  It is always difficult for some people within the company to make the leap to something new.  Some people struggle to change since “the way things have always been” was successful in the past.  They will not see that assuring a solid future requires change.  Complicating matters further, in many cases, the main beneficiaries of the system change are not always the same people as the groups that have to change their behavior the most.  Clear and concise communication is important if you choose to pursue a system change.

Once you have crossed the threshold and you are ready to take the ERP replacement plunge, allow me to leave you with one final piece of advice…commit.  Do not take a half baked approach to system replacement.  Fund it, assign sufficient people and resources to the project, develop a robust plan to implement, and then execute on that plan fiercely.  Commit to putting the people and resources in place to make the change a successful one.  However, if commitment levels fall short,  I wouldn’t recommend doing it.   You could end up worse than when you started.


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