For nearly 20 years we have seen many organizations wrestle with the thought of buying new ERP software. Should they “bite the bullet” and migrate to a new ERP system or can they wait just another year or two, which is many times just pushing out the inevitable. The hesitation can be due to a number of factors such as affordability and budget, resources, other competing projects and priorities.
The Major Warning Signs
- Your current software vendor no longer supports you. We hear this often. If you’ve had your business software system for many years, you might have received notice that your software vendor is going out of business or has been recently acquired and your system will no longer be supported. You may receive 6 to 18 months advance notification on this change. If that is the case, it is certainly time to change.
- Your old software system will not support your company’s growth plan. Many of the older systems, do not have the functionality that exist in today’s modern ERP systems. Your company may be growing naturally or by acquisition, and you now need a system that supports say, multi-language and multi-currency because you plan to conduct business internationally. Even operating domestically can be a challenge if you lack functionality such as multi-plant, bar coding, CRM or WMS capability. Also, Business Intelligence (BI) is now available in most of the larger ERP Vendor application suites. BI is essential for organizations to compete and operate efficiently. BI provides the right information, to the right people at the right time for effective decision-making.
- Your staff have been working outside the current, old software system. Watch out for this. When your staff is performing tasks outside the system, such as double entry work, cut/pasting reports together, walking blocks between plants or warehouses to record/deliver shop floor information, then it may be time for a new ERP system. These manual and redundant efforts (aka work arounds) result in major inefficiencies and are costly.
- You have only one or maybe two IT people who know your current system. Older legacy systems can be running operations for over 20 -30 years. Whether it’s custom code, or just a old, heavily modified software package, there might be only one or maybe two people that know the “nuts and bolts” and they become quite valuable to the organization. What if he/she decides to leave, then there is nobody to internally support your old, out-of-date information system.
Do You Have the Funds to Purchase and Implement a New ERP System?
If you are experiencing many of the above signals, and conclude YES, it’s time to buy a new ERP system, you still need to have the funds for this investment. How much? There is no one answer that fits every organization. This requires careful planning, research and discussions with management, the various ERP vendors and ERP consultants. One measure we use is that we see manufacturers budget approximately 1 to 1.5% of their annual revenues on the purchase and implementation of the new ERP system. Distributors may spend .75 to 1%. This is just an estimate, since there are other variables to consider, such as the number of company’s locations, number of named users and also the growth (revenue) plan over the next 5 -10 years.
In conclusion, it’s never an easy decision to make on the timing to invest in a new ERP system. However, by paying attention to some of the signals above, performing the required research on the new ERP technologies available and also having the ability to motivate your troops (employees) for change, will all increase your probability of success with your ERP initiative.
If you launching an ERP selection project, we can help. Ultra’s consultants can guide your through the selection process all the way through ERP implementation.