Should you upgrade or replace your ERP system? Most mid-sized companies and large enterprises have to wrestle with this decision every 10 to 20 years.
The average single-site Tier II ERP implementation for a mid-sized business costs between $600,000 and $2,000,000 with durations that can span eight months to more than a year. Larger multisite ERP implementations can cost significantly more and take significantly longer. This all sounds daunting, and nobody really wants to take responsibility for such a large investment. However, the decision doesn’t have to be as daunting as it sounds.
If your company operates a legacy ERP system that has a modern version, you might consider upgrading. An upgrade could be relatively straightforward if the new version has session, file and database table structures that are similar to those of your current ERP system. Companies will generally choose this option if the new software largely meets their needs and upgrade efforts are estimated to be at least 25% simpler (and cheaper) than a full implementation of a new system.
In contrast, if your vendor significantly changes functionality and the system’s core architecture, you might consider alternatives. Companies are more likely to consider multiple solutions when upgrade effort and cost make the project more akin to a full ERP implementation.
Both are viable options. At Pemeco Consulting, we understand that. We are system agnostic and are able to give you a comprehensive analysis of the opinions, including costs, benefits, implementation complexity, and risk, among other things.
The path forward starts with an understanding that your company needs to make a change and an understanding of its options. For example, your company might optimize its current system, upgrade to a newer version, or open its search to other new vendors and solutions. What is most important is understanding what the desired outcome is for the business before worrying about the software choices.
Here are five steps to systematically deciding whether to upgrade or replace your ERP:
Step 1: Define your business requirements
Modern systems have evolved tremendously over the past 15 years. Functionality improvements offer you new and better ways of business processing. So, when drafting your requirements, your company’s business process flows, data flows, integrations architecture, and requirements lists should reflect your company’s “to be” needs in a re-engineered and optimized future state.
Step 2: Define your enterprise architecture options
Generally, an ERP decision has implications on edge software needs, the platforms that enable and integrate various technologies, and the infrastructures that house those technologies. So, the next logical task is to map out enterprise architecture options capable of supporting your business needs.
Step 3: Build supporting project roadmaps for each architecture option
For each viable architecture option, it’s important to break down an implementation and support plan. The roadmaps should span initial technology evaluation and extend out to post-implementation optimization and support. It’s equally important to develop your resource plans and budgets – covering both internal resources and consultants.
Step 4: Build your business case: from TCO to ROI
A TCO (total cost of ownership) and ROI (return on investment) analysis should quantify the financial implications of the business needs, technology architecture options, and implementation plans. Generally, TCO and ROI are both prepared over 10-year periods.
Step 5: Define your decision-making methodology
The process is similar, regardless of whether you’re inclined to upgrade or expand your search. In Steps 1 to 4, above, you’ve defined your various business, budgetary, technology, and project needs. In this stage, you’ll want to evaluate how well the vendor, technology and service providers stack up against those needs.
Making Your Decision
In conclusion, no matter what your plan, you might not know how to start the process, or even what systems are out there. Since 1978, Pemeco has led more than 700 major transformation projects with zero failures. We drive our clients’ success by assuring that the quality of our methodologies and the strength of our consulting team are second-to-none.
Your business is not only extremely complex, but also extremely unique. Our years of experience spanning many industries has equipped us with methodologies and best practices that we can tailor to our client’s individual digital transformation needs.
To learn more about selecting ERP, download our guide: 5 ERP Selection Best Practices