An ERP system is one of the most expensive software purchases a company will ever make. Not only is it traditionally expensive, but companies rely completely upon it.
However, according to a recent report, more than 29% of ERP implementations fail to achieve even half the planned business benefits.
Why is it that many struggle to implement such a system or limp along for years using a in-house system without the functionality they need.
In this article we will highlight the main reasons your ERP is failing.
Software and Hardware is out of date
Many legacy systems were coded in languages that are no longer staples of modern programming. This means that there aren’t enough qualified people who can keep maintaining the ERP software. This problem can also occur when the ERP system was initially developed in-house by an ex-employee and replacements don’t have the necessary knowledge, or if the vendor of the software has long been out of business. All of this means that companies incur increased costs to get the appropriate support.
Discontinuation is not the only problem with age, and obsolescence not only applies to your ERP but also the OS and/or hardware that it runs on. Hardware costs, too, become burdensome when it is becoming increasingly more difficult and expensive to find parts for the technology needed to keep your legacy system up and running. Some companies are still running DOS, UNIX or AS/400 systems that have been live for 20 years or more. But technology moves on. Windows has become the standard OS, with PC’s falling in price and many more staff knowing how to use them. Nobody wants to pay maintenance on bespoke hardware that it is increasingly difficult to find spare parts for, or pay an ever-shrinking number of people that are experienced enough to support legacy OS, network or application software.
Cannot access information or integrate
One of the biggest setbacks business owners incur due to legacy systems is the inability to access centralised information as fast as they need to, which often impairs decision-making. This is also a problem if a company has a mobile workforce. If your employees cannot access important information from a device other than their office computers, their performance may suffer.
Additionally, if your company software isn’t compatible with newer tools and applications like a new CRM or a chat bot, chances are you are not running your business as efficiently as you could.
Doesn’t support changing legislation
Often companies decide to upgrade their in-house systems due to regulatory mandates. For example, companies in the financial services industry, often undergo changes when it comes to regulatory environments. To ensure the integrity and compliance of their operations, they must have a properly integrated ERP system in place.
In our experience, this never gets resolved. Legacy ERP systems are notorious for their high operating costs. Largely due to the decreasing number of support professionals who can keep the systems running smoothly, the costs of such services tend to increase.
This aspect makes it or breaks it for an ERP tool. Most companies these days understand that customising their ERP system adds risk, time, and cost to the project. In fact, customisations, along with interfaces and data conversion, are the main areas of technical risk in ERP implementations.
Perhaps more surprising is that in a recent survey, less than 20% of respondents implemented their ERP system with little or no customisation. Despite the risk and expense of customisations, most companies find it enormously difficult to control the project scope by turning down customisations. Customisations always start out small but incrementally grow to become the technical challenges that derail these projects. Few ERP implementations have zero customisations, but take a very firm line on justifying even the smallest ones and manage them tightly.
The management shouldn’t hurry to start using the tool without adequate training to users. Today’s modern ERP systems are being used by more and more personnel within a company. Beyond the Finance and Accounting departments, modern systems also cover procurement, supply chain functions, compliance, customer relationships, sales, and much more. If the system includes human resources or expense reporting, then essentially all employees use the system. Training hundreds or thousands of users, to the right depth, at just the right time, is no easy task. Leaving training to a small phase at the end of the project makes it very difficult for users to get the training they need to understand the system and have a positive first impression at the rollout.
An engine can still run when it’s poorly tuned, but it’ll drink fuel and suffer from poor performance – the same can be said for a poorly implemented ERP system.
Unlike an off the shelf package e.g. MS Office, no two ERP installations are the same, as the companies they are there to serve will want to work in their own unique way. Companies are often led down the consultancy path to customise the system beyond all recognition, but pass ownership of the problem to an external consultant that may not ultimately understand their business.
Having sponsorship from the top, the system should also be championed from within, rather than wholly trusting consultants that do not have a true understanding of your business and only their own commercial considerations at heart.
By all means employ an expert to assist with specifics such as server implementation or data migration, but the overall project should be managed from within. A core internal team covering all affected departments should be set up to understand the workflow. Many believe they have to write a specification spanning reams of paper, but this simply leads to customisation that may not actually be needed. A simple ‘top level’ bullet list of core functionality is all that is required.
It is preventing you from scaling and growing
At the dawn of their establishment, companies typically have limited needs, but as they grow and expand, their software requirements become much more complex.
A growing company needs agile software that can scale along with it. Moreover, as more of your competitors switch to newer and shinier systems, you’ll find yourself increasingly behind.
In order to keep your competitive edge, you must invest in software that is as dynamic as your business.
In conclusion, although deciding when to change your ERP software is never easy, it is essential you regularly review your processes to determine if you’re using an outdated system.
Evaluate how your business’ requirements have changed over the years against how the system is currently performing. With new technology and developments, replacing your ERP system can be a catalyst for a wide range of positive changes throughout your business and, with the right training, all your employees can be experts on a new ERP system.
Just make sure you don’t leave it too late!