Systems such as Enterprise Resource Planning (ERP) are at the heart of business operations such as logistics, purchasing, sales, and marketing. They enable businesses to collect data for intelligent decision-making. However, like all software, a system can be outgrown either due to business scaling or gaps emerging in its functionality.
When this happens, businesses must pick between keeping and upgrading the current system or replacing it with a new solution altogether. There are operational and financial implications that come with either option.
What Does a System Upgrade Really Mean?
An upgrade will often mean getting a newer version of the current system from your current vendor. The current version gets a few improvements to meet the additional requirements that it currently does not. An upgrade is the best solution when the current system meets your current and near future needs from an operational perspective. It also works best when there is a useful working relationship with the vendor, and they provide an adequate level of support when called upon.
When opting for an upgrade, it is important to investigate the future and decide whether the new version can keep up with technological advancements. Are your end users happy with how the system works? Upgrades represent a lower risk than replacements because your staff already know how it works. As such, there are likely to be fewer interruptions because of learning.
Benefits of Upgrading
Typically, upgrading a project will not result in major interruptions of the workflow. In most cases, it is a matter of installing the new system. Hardly any new hardware is required. Staff members will not spend too much time getting familiar with the new version of the system. Most importantly though, it is easier to predict the time, scope, and cost of an upgrade as opposed to a replacement project.
Signs that System is Due for Replacement
You may find that the software or system that you currently use no longer receives support from vendors or even third-party solution providers. It may be a sign that it is too old. In such scenarios, you may struggle to recruit technical staff who understand how to use the system. The organization ends up using money to train newly hired staff on how to use an old system. The total cost of ownership may exceed that of replacement.
Another sign that replacement is the best solution is when there are a lot of performance and stability issues. Frequent breakdowns and high costs of maintenance should prompt a replacement cost analysis to see whether a new capital investment is necessary. Frequent breakdowns hurt customer confidence and this should be factored into your analysis.
Growth and Business Intelligence
Managers must investigate the short-term and long-term goals of the business. If growth is expected, the current system that supports operations must be scalable. When that is not the case, the system will be a handicap. In this decade, the system should be capable of giving decision-makers some form of business intelligence from the collectible data. Legacy systems may be unlikely to have provisions for the collection of data for business intelligence.
Systems that do not serve Automation Needs
Modern ERP systems should take away the heavy lifting from your employees when it comes to automatable tasks. For instance, there are systems that can generate reports from real-time data. A good example would be being able to generate a stock report using real-time data because the system gets updated each time sales and purchases are made. Such integration also means that your entire workflow relies on fewer or a single system instead of multiple independent software pieces.
When the System is not Adaptable to Change
An important factor to consider is how well your current system adapts to change in your operational workflow. For instance, if you withdraw or introduce a new product or department, can the system cater to such changes. How well does it integrate with other technologies built using more recent technology? A negative answer to these questions may suggest that a replacement project is inevitable.
Further, it is crucial to realize that most organizations have moved towards cloud-based systems. It makes for leaner operations. Cloud-based solutions mean lesser hardware costs and offices in multiple locations can share resources.
Managers must also consider the security vulnerabilities of their systems. Modern systems are built with the awareness of current threats to information integrity. As such, they have greater robustness. Providers of cloud-based ERP are continually monitoring their systems for vulnerabilities and making upgrades on a continuous basis. If your current system keeps suffering security breaches, replacement may be a good solution.
The Benefits of Replacement
A replacement project is almost certainly more expensive than an upgrade. However, it allows the company the chance to forge a new relationship with a vendor, especially when the previous vendor did not provide an adequate level of support. A new system is also likely to provide future proofing against shifts in technology.
Approaching the System Replacement Project
A system replacement project is less about the system and more about the vendor. All vendors have working software. The bigger question is whether they can deliver one that suits your company.
System integration can be done by the vendor, an in-house team, or an external party. Your company needs to figure out how to manage this process. It is usually best when the vendor helps with the integration and provides technical support for a specified period. They should also commit to delivering periodic updates of the software to suit changing needs of your organization. To learn more on choosing a vendor partner, click here.
If possible, you can organize meetings with some of their previous clients or read extensive case studies on projects they have done for other companies. System replacement is an expensive capital investment and as such, all information that is possible to find should be sought.
Transcendent Software is a fully-fledged IT solutions company with over 20 years of experience in helping clients with building custom software. We assist clients to build, customize, and integrate systems with their workflow. To understand our services further, check out our website.