Has Your Legacy ERP System Become a Money Pit?
Your current ERP system may have been selected and tailored for your business after a long, strategic, and thorough project that brought together the top minds in your company. It may have been cutting-edge at the time, using the best available technologies and the most experienced consultants. And, it could have also been a boon for your company, streamlining processes and uncovering ways to optimize operations.
But now that ERP system is 20 or 30 years older, and its age is starting to show. It’s slower than you remember it being not so long ago. Some things don’t work as well as they used to. It can’t keep up with, or maybe even talk the same language as, some of the younger systems you’ve deployed to modernize and improve other areas of your business. You’re also hearing more complaints from workers about how frustrating the ERP is to use and how convoluted some tasks have become.
It’s time for a new, more modern, and more capable ERP system, and you know it.
But just knowing isn’t enough. There must be a justification. Where are you wasting money on it and where is it holding you back? Is your ERP a money pit, swallowing up valuable resources and keeping you from realizing stronger growth?
There might be a thousand granular areas where your ERP system is wasting time or money. Maybe it’s the extra five minutes every day to run a report or the manual download of data to spreadsheets every month that adds time to planning and invites all to common errors. Those add up, for sure, but the real costs might be right in front of you, and they might be huge.
Here are five distinct areas where your ERP system might be costing you sizable amounts of money and resources.
1 – Worthless Maintenance Fees
Not so long ago, it was common to pay millions of dollars to deploy a top-tier ERP system…and then pay another 15 to 25% on top of that cost annually for maintenance, support, and upgrades. That’s substantial. In fact, less than a decade ago, more than 70% of the average IT budget was consumed by maintenance fees.
What’s worse is that maintenance fees aren’t providing much value, especially for older systems. You’re paying just to use the ERP you paid for long ago. And there’s a good chance that your vendor has stopped offering upgrades or maybe even security patches to very old systems, so you’re really paying for nothing.
Your CFO probably knows the maintenance cost of your ERP software off the top of their head, given its relative size. That alone might be enough to justify drilling down on an ERP modernization effort. Once you do, you’ll start to find more maintenance costs for all the related software and middleware required to keep everything operational.
2 – Expensive Internal Maintenance Costs
IT workers aren’t cheap. They’re highly educated, in considerable demand, and there aren’t enough, all of which results in higher salaries, obviously. For you, that means higher costs to simply maintain the servers (or even a private cloud) and to keep it running. But for older ERP systems that might need more hands-on care or that suffer frequent outages, those human resource costs could skyrocket.
Older technologies are also inherently more expensive to manage just because fewer people have the expertise required to maintain them. Workers move on, retire, forget, and otherwise go in different directions. The older your ERP system is, the more expensive it will be to find the talent to manage it.
And then there’s the cost of the internal hardware and software stack required to run your ERP system. Everyone is moving to the cloud because of the much lower costs compared with building, running, and maintaining the hardware and accompanying software required to support something as demanding as an enterprise ERP system. What’s more, if your hardware was installed with your software years ago, it’s becoming more expensive to manage for all the same reasons. Older hardware requires premium parts that might be hard to find, if they’re still made at all.
3 – Your Legacy ERP System Is Too Slow
Those “five extra minutes” we mentioned earlier can add up quickly. If everyone who touches your ERP system must wait (or waste) 5 more minutes doing common tasks, you’ll start to rack up days or weeks or even months of wasted hours. That’s easy to quantify and estimate, but there’s also the frustration that comes along with slow software. (Just think about how you felt the last time a webpage loaded slowly!)
But while those small delays do add up, there are also the big delays and obstacles that really consume large chunks of time. Your business has likely changed since your ERP was deployed, but it’s common for an older ERP to fail to keep up. That results in more steps to do the same operation or manual workarounds that can result in errors or even more wasted time. It might even have slowly creeped in to the point were you have extra workers who could be redeployed if only your ERP system were faster and more efficient.
But the most common culprit here is the tired ERP system itself. Even with expert maintenance and a crack IT staff, the years wear on both the hardware and the software. It also wasn’t designed to manage the mountains of data it’s processing or the customized integrations that have been added over the years. This all works together to slow things down, including your business.
4 – Your Legacy ERP System Drags Down Your Entire Business
When you add up the three items above, you’re starting to waste money, effort, and time on things that don’t contribute to growth. IT becomes focused on just keeping an older ERP system operating, and the rest of the business is hamstrung by its lack of speed, insights, and flexibility.
Meanwhile, your competitors are working with better, faster, cheaper ERP systems that empower them to wring costs out of their operations, improve their products and how they get to their customers, and explore new opportunities for revenue growth and customer satisfaction. Plus, the money their IT team is not spending on propping up an older ERP system can be funneled into new projects or better infrastructures. The increased efficiencies of a modern, cloud-based ERP system also helps competitors be more agile and move with more speed and intelligence. So no matter how much better your products may be, faster and more flexible competitors can edge you out of important markets.
As customers increasingly demand more from vendors, these differences start to matter more than just price as well. Customers are willing to pay more to get the service and support they require. More than ever, that means having the technology to integrate with their ordering, delivery, scheduling, supply chain, financial, and other systems. If your operations rely on older software, you won’t be able to meet the technical requirements of those customers who have recognized the value of modern technology.
5 – Negative Impact on Workforce
Let’s face it: the best talent doesn’t want to work with out-of-date tools. Most of the best people today want to use modern, mobile ready systems. They want to excel at their roles and they don’t want to be held back by slow, old technology.
Basing your business on older technology causes several challenges. New hires might quickly leave, more tenured workers might get tired of the frustration and either “check out” or start to look for other opportunities, and technical workers in and out of IT will want to build their skills on technologies with more appeal. The associated costs are admittedly hard to measure—training, recruiting, salaries—but they are real. Money and time are wasted finding and training a new employee who quickly leaves.
It also makes it more difficult to find new workers. With unemployment rates at historic lows, it’s already tough to find and retain talented workers. That puts hiring companies at a disadvantage out of the gate. Smart recruits won’t find it attractive that they’ll be working on software that’s a couple generations old. More workers also want, and expect, the flexibility to work from their tablets and smartphones. Older software will keep them tied to a terminal or PC, so they won’t be out in the operation or won’t have the flexibility or speed to work remotely.
What’s your old ERP costing you?
You’ve probably already ballparked in your head what this small set of hard and soft costs add up to. It’s more than you expected, right? A quick call to your CIO can fill you in on more of the associated costs of your current ERP system, and you’re probably already hearing complaints about how it slows down your business.
Ultimately, here’s what’s crystal clear: an older ERP system costs more to run, yet gives you so much less in return, than a modern cloud ERP system.
Isn’t it time you stopped throwing money down this old ERP pit?
Want to learn more? A great source of information is “50 Ways to Get ROI from Cloud ERP.”