whirlpool europe: five reasons its time for a new erp solution 125356

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Five Reasons it’s Time for a

New ERP Solution

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Five Reasons it’s Time for a New ERP Solution

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If you were working in your company at the time when your present ERP was installed, you

would remember the changes, the turmoil and the complexity. Installing and getting to use the

ERP was not a trivial process. But software has a life and sooner or later it will be time to

change or upgrade your current ERP solution as well.

The decisive moment for change does not come with a sudden flash of inspiration or a

cataclysmic event. Over time, your existing solution begins to lose its crispness and a slow

decline in its capabilities begins to set-in. Competitors begin to gain a slight edge that will

continue to increase if the situation is not corrected. Perceptive managers recognize this

decline early; others will only see it when the results show up in the bottom line. But at some

stage the decline will be evident.

In this whitepaper, we look at five early warning signs that can give you early notice of the

coming need for change. Following these signs and using your own business sense and intuition

you can spot and correct the decline before it has had a chance to cause major damage. As we

also say towards the end of this paper, you can also take advantage of this change to freshen up

your business and bring in a new sense of excitement and growth.

Some Questions to Ask Yourself

Much before you begin searching for a new solution, ask yourself some searching questions

about the state of your company and the existing ERP solution. If there are fundamental errors

in how you use your ERP, then switching to a new one will not help matters either. Therefore it

is essential that you be very clear about your reasons for a switch.

Is there a problem with your company’s processes? Often, the problems lie within the company

and the blame is fixed on the ERP solution. You could have a problem with your business

processes, with training or with your organizational structure itself. None of these will go away

by installing new software. Therefore it is essential that you are really convinced that it is the

ERP software that is holding your company back before you start the change process.

Even if you do identify that your company has outgrown the ERP software it is currently using,

there could be higher end products available with the same vendor you currently use. An

upgrade will be far easier to manage, both in terms of the disruption to your company and in

cost. Besides, you can expect far greater support and financial incentives from your vendor if

you stay in their product line. There are also fewer risks associated with a move to a sister

product on the same platform.



Can your company absorb the disruption of putting in a new ERP? If you do decide to

implement a totally fresh ERP solution, there will be risks and costs involved. All stakeholders

must be made aware of what it entails. Since your existing ERP would have to continue to

function, there could easily be a large amount of duplication of hardware and work processes

to ensure that the new solution is established while the old continues to work. This involves

substantial project management effort that you need to be willing to put up.

Switching your ERP solutions has many benefits too. Once the dust has settled you could have

many enhancements to your processes and improved efficiencies may result. However, the

reasons for the switch have to be carefully debated and the migration path clearly planned out.

In the beginning of this whitepaper we spoke of early warning signs that your current ERP was

beginning to age and lose efficiency. The next section discusses these signs.

The Five Most Important Reasons to Change Your ERP Software

There are a large number of reasons why you may want to change your ERP Software. The top

five of these are discussed below –

The existing ERP forces a work plan which is not right for your business – the first

indicator of a need to change is when you find that your people are adapting your

business processes to fit the ERP, and the adaptation is very clearly not the best fit for

your business. Obviously, this was not the case when the ERP was first installed. At that

stage it represented the best practices in vogue. However, over the years best practices

evolve and if your ERP is not adaptable or flexible enough to incorporate the new best

practices, then it is evident that either your people will have to make do with obsolete

processes or they will need to find workarounds. If you are living with inefficient

processes, you would be lesser efficient than you should be and will be losing out to

competitors. If you see this happen with regularity, then obviously, it is time to change

the solution you are using.

The next red flag is when people start working outside the ERP system – when the ERP

you use no longer reflects the reality of your business, users start creating their own

methods of working. Take a situation where the business adds a process or a product

line that cannot be accommodated by the legacy ERP system. Under such

circumstances, users will go back to their spreadsheets and private databases. This

creates an island inside your company that is isolated from the ERP software. As a



result, silos of information would be created that the main system does not know

anything about. It also creates reporting inconsistencies and the system loses accuracy –

this is the very thing the ERP was designed to eliminate. If you find this is beginning to

happen to your system as well and the vendor is unable to provide support – it is a sure

sign that it is time to change your ERP system.

Costs - Your business is dynamic and grows. You may have calculated the total cost of

ownership with great care when you first purchased the solution. However, with the

addition of new divisions and the pruning of some old ones these calculations will not

be relevant any more. Newer ERP solutions, especially those with using the pay as you

go – cloud based “software as a service” model are priced very differently as compared

to legacy systems. Modern licenses are flexible and highly competitive. While you will

not base your decision on costs alone, it is important to be aware of how much a new

system will cost you as compared to what you are currently using.

Cloud Computing - you may not be very familiar with the cloud and may not have plans

to move to the cloud just yet, but it is only a matter of time. The cloud has already

changed the way many companies work and soon you will be moving some part of your

processes to the cloud too if you want to stay competitive. With legacy ERP solutions,

the software was loaded on your servers and you purchased some licenses to use it.

With cloud based systems, the ERP runs in the data center of the service provider and

you need nothing more than a PC connected to the Internet. Since very large numbers

of users from different companies could be using the same software, costs come down

substantially. You do not have to invest in high performance hardware and can increase

or reduce the number of licenses you are using with far greater ease and economy than

otherwise. Very soon, almost all except niche systems will move to the cloud platform.

You need to begin exploring options now rather than being left behind with inefficient

processes.

The last major reason to consider a new ERP is staffing and vendor reliance. When your

current system was new, there were doubtlessly many IT staffers who understood it

well. However, over the years the system has surely been customized beyond the

original specifications. Staff turnover would have also occurred and so you would be left

with just one or two old hands who understand the system fully and are aware of the

customizations that it required. What would happen if they were to leave or be hired

away by the competition? If you find that just one or two persons are irreplaceable in

your IT setup, it is time the alarm bells rang. Such a situation is a major threat to your

business and if the conditions discussed in previous paragraphs also support the



situation, it may be time to think of an upgrade where the customizations are built in at

the very start and well documented. A similar situation may exist with the vendor who

has supported your ERP and your customization. Keep track of the skills available to

service your software. If you find the required skills to be becoming more difficult to

find, maybe it is time to change to a newer platform. I have seen similar situations in

companies where perfectly satisfactory COBOL systems were changed over to Oracle

because COBOL skills were becoming extremely difficult to find.

Besides the main reasons discussed above, there are several other smaller reasons that will

nudge you to consider a change of your ERP solution. You could have installed other enterprise

class software such as a CRM solution and you now find that the two are not communicating

seamlessly – leading to need for manual intervention. Your vendor could be closing down

support for the version you are using and this will force you to hire expensive manpower a few

years down the line. Your own needs could have changed so drastically that the solution that

worked well does not suffice any more.

Managing the Change

Regardless of what your reasons were to change your ERP system, the change has to be

managed with great care. Even though the old system may not be as efficient as you’d like it to

be, it is still a working system and your workers use it to get their work done and keep your

company going. Your entire supply chain and back end work depends on the ERP you are

currently using and therefore you do not have the option of just shutting down your existing

system before the new one comes on-line and is tested fully.

The disruption is much lesser if you are switching over to a new product from the same

company. In such a case, many of the modules would be similar, the look and feel of the

solution would be similar, databases could be common and therefore the switch would be far

easier.

If you are migrating from an on-premise ERP to a cloud based one, there are many things that

are in your favor. The first of these is that you do not have to procure additional hardware to

make two ERPs run concurrently. As mentioned earlier, merely ensuring that your employees

have PCs that connect to the Internet will do. Also, you can start your migration with smaller

numbers of licenses. This keeps your costs low while allowing your critical users to test the new

solution. Data replication between the old and the new ERP can be a very tricky business. If you

negotiate well, this could be part of the new purchase.



As you begin the process of selecting a new solution, you must study the existing ERP

thoroughly as well. As discussed earlier, the old solution has a number of customizations that

represent the way you actually do business. This is business knowledge embedded into

software. You have to ensure that this is not lost in the transition. Your new solution must have

these customizations and methods built in as part of the initial set otherwise you will end up

starting from scratch once again.

A new ERP is also a great opportunity for your company. You have already got a fair amount of

experience with an ERP system and you know how it is to be handled. The new purchase will

allow you to use the experience you already have to get a better solution and ensure better

customization. The migration also allows you to clean up your data and ensure that all your

master and transaction data is correct, clean and does not have any duplicates or redundancies.

Changing your ERP has other benefits besides the obvious ones. It can be a driver to the

transformation of your business processes. Since you are going to look at the entire gamut of

processes afresh, this is also a good time for correcting and changing and incorporating the

latest best practices.

To Conclude –

While one would want to put off an expensive and difficult exercise like changing an ERP

solution for as long as possible, this should really not be the case. All ERP solutions have a life

cycle much like our own. There is a learning period, then a period of gainful exploitation with

rising efficiencies and productivity. This is followed by a plateau and then a period of slow

decline. As managers, we have to catch the software in the early stages of loss of effectiveness

and the beginning of its decline to ensure that the business is not adversely impacted by this

inevitable life cycle process. The tips given in this paper should help you initiate the change in

time and manage it well.

whirlpool europe: five reasons its time for a new erp solution 125356

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