With large, well-known enterprises on one end of the competitive landscape and rising startups emerging on the other, growing businesses face an interesting dilemma. How do you stay ahead of the curve while still staying in tune with the legacy ERP systems that made you successful? Outgrowing your ERP is a challenge but not an insurmountable one. If you’re considering a move, here’s how to do it successfully.
Some quick facts before we dive in:
A 2008 study found that over 50% of all businesses were managed by an ERP system; by 2017, this number was down to 13%.
The average size of a company using an ERP system is over $2.4 million in annual revenue.
According to the 2016 Research and Markets (RM) ‘Global Industry Forecast: Enterprise Resource Planning (ERP) Software Market to Reach $66.6 Billion by 2022’, the ERP market will grow at an estimated compound annual growth rate (CAGR) of 6.3% from 2015-2022.
Popular platforms that are being used today include SAP HANA, SAP ERP, Oracle EBS, Oracle Coherence, Microsoft Dynamics NAV, Microsoft Dynamics GP, and Microsoft Dynamics AX.
While a move on its own isn’t necessarily a bad thing, it’s important to assess the circumstances and evaluate whether a digital shift will increase your competitiveness. Ultimately, you’ll want to consider technological trends, the maturity of your organization, and the state of your business processes.
Since it’s impossible to completely comprehend the potential impact of a change without doing your research and testing it out for yourselves, here are some warning signs that will indicate when a legacy ERP shift should be considered.
1. Your business is strained by limitations in your legacy platform.
ERP systems were designed to manage large companies on a traditional scale; however, with more companies embracing lean strategies and looking for ways to increase productivity through digital transformation, there are often times when these legacy systems simply can’t keep up with the demands of today’s modern business world.
To determine whether this is the case, assess the capacity of your legacy ERP. Is it capable of performing within the capabilities of your business processes? Or does it require significant changes in order to function in today’s tech-friendly climate? If it requires an overhaul, then you’ll need to begin considering a digital transition.
2. Your cost structure is dramatically increasing with constant usage and maintenance costs on your ERP.
The average length of time companies tend to use their legacy ERP system is eight years; however, you’ll want to keep this number in mind if any further changes need to be made or if a new system must be implemented. With this in mind, most companies put increased strain on their ERP systems as business needs evolve. If you find that your company is spending more money on its system than it should be, a legacy ERP upgrade may be necessary.
3. Your tech team is overextended with the demands of maintaining the legacy platform.
Additionally, many companies struggle with what to do when their team members are bogged down by the demands of maintaining a piece of software that was designed for a much smaller operation than yours are facing in today’s data-centric world. With this in mind, especially if you’re considering an ERP upgrade, make sure your tech team has adequate training and support for the new system. Not only will this decrease the level of stress on your team, but it will also ensure that the move is successful.
4. You’re losing market share to young businesses that are leveraging digital technology.
With new businesses growing in popularity and sustainable growth at the forefront of today’s major companies’ minds, this trend isn’t slowing down anytime soon—especially since companies who are still working with legacy systems tend to be viewed as outdated, unreliable, and archaic by their customers and clients. If your business is feeling this impact, then an ERP upgrade may be necessary to stay competitive as a market leader.
5. Your current ERP doesn’t have the proper level of functional support for your business processes.
Are you currently suffering from a shortage of features that are crucial to your sales, marketing, manufacturing, or customer service departments? If so, then an ERP upgrade may be the best choice for your business. While it’s impossible to determine if functionality should be added based on internal needs, a good rule of thumb is to ask yourself if your business processes can benefit from any additional functionality. If so, chances are it will make sense to add in some services and offerings.
6. Your business processes are inefficient as a result of not using the latest technology.
We’ve mentioned this aspect already, but it’s worth mentioning again, especially since it’s often one of the main reasons that companies still invest in outdated ERP systems. While in many cases these systems do their jobs admirably, sometimes they’re simply not efficient enough to keep up with emerging needs, as well as current advances in tech and business trends. If your company isn’t keeping up with current efficiencies in your ERP system, then upgrading may be necessary for your survival.
7. You keep hearing about new data-centric trends in the industry.
Finally, when you have the ability to stay on top of trends and adapt accordingly, you’ll be one step ahead of your competitors. If you’re not doing so, it will be difficult to overcome the shortfalls of an outdated system. One way to stay on top of trends and make sure you’re able to handle current industry changes is to actively research and investigate new platforms as they emerge in the market. By staying educated and up-to-date on industry changes, you can easily identify a path forward for how your business will be able to accommodate remaining competitive in a changing market landscape.
A Digital ERP Shift Is About More Than Moving Data
While it’s important to take a look at your business to determine what factors are keeping you from evolving, it’s also crucial to find out why you’re considering a shift. For instance, many companies don’t realize how much more their business can grow and achieve when they take the time to invest in a digital transition. As more and more businesses are realizing that they can thrive in today’s marketplace with the right tech strategy, they’re quickly putting an end to the days when all business owners and CEOs had was a fax machine on their desks.
Interested in learning more on how ERP could help your business? ERP Can Be The Secret Fuel For Midsize Companies, or Intelligent ERP – Why CFOs Are Migrating To It discusses how ERP is used in business today.
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