Angie Henson - July 28, 2023

Is It Time for an ERP System Upgrade? 12 Key Considerations + Best Practices


Learn how to choose the best ERP system for your business’s needs

An ERP is a software system that aids in managing daily business activities. It facilitates strong goals and controls, strategic decision-making, and solid financial management based on evidence and results. However, outdated ERP models lack efficiency and can negatively influence business results. For this reason, nearly half of all businesses are planning to adopt, upgrade, or replace an ERP system in the near-term.

Pop-up definition:

ERP: An ERP system brings together functions like accounting, project management, manufacturing, compliance, supply chain management, and procurement. By linking data between various business processes, an ERP aids in planning and reporting.

Let’s explore potential benefits, costs, and best practices of upgrading an ERP system, so you can make informed decisions.

Assessing your current ERP system and identifying upgrade needs

Consider these points when evaluating your current system:

  • Do all functions share data, with communication that easily flows across functions—or do some operate independently, in silos?
  • How fast is your system? Are you regularly waiting for data to load?
  • Does your current system handle all business functions? How have your needs evolved since adopting it?
  • Does it provide advanced reporting?
  • Is it cumbersome to maintain?
  • Does it have an intuitive user interface, or is it difficult to navigate?

If your current system falls short of meeting evolving business requirements, it’s time to upgrade or move on.

Pros and cons of upgrading vs. replacing your ERP system

An upgrade can give you access to specific new features you want to add on, like an inventory management or shipping logistics tool. If you’re lacking one specific feature, but are overall pleased with your system’s performance, this may be the best option. Additionally, an upgrade often costs less than changing to a completely new system—plus, it requires less adaptation time.

If you need several new features, a new ERP may fulfill your needs better. In addition, a new ERP often provides faster performance and more sophisticated reporting. Or, if you’ve scaled up but your system can’t scale with you, opt to replace it.

Cloud deployment and modern ERP technologies

What are the key differences between cloud-based and on-premises ERP solutions?

  • Cloud-based systems keep your data backed up off-site, ensuring you always have access to it.
  • On-site solutions offer greater customization; an engineer can build them to meet your specific needs. On the other hand, cloud-based software also tends to offer many opt-in features and add-ons.
  • Cloud-based solutions tend to have a high level of security. At the same time, custom on-site solutions can also add a heightened level of security that lends peace of mind.
  • You and your colleagues can access cloud-based solutions from anywhere, which is beneficial for a hybrid or remote team.
  • The upfront costs of a cloud-based solution are typically lower, since you’re essentially paying for a subscription rather than paying a lump sum. Weigh the monthly amount you’d pay against the total cost you’ll end up paying over the period you expect to use the system. Would you save money in the long-run with one or the other?
  • You may need dedicated IT personnel to keep an on-site solution running smoothly. Scaling it up will also take more time and effort, since you’ll be doing it manually. On the other hand, if you have good IT staff, you can easily plan and implement changes tailored to your needs.

Evaluating the ROI and business value of ERP upgrades

Make a list of the features you need in an ERP. Then, price ERP systems with those particular options. This can increase cost savings and the efficiency of your system, as you won’t be paying to maintain features you don’t need.

Evaluate the opportunity costs of an ERP with less than ideal performance. How many lost hours of productivity does it cause? If it’s affecting employee satisfaction, how much will you save through greater employee retention and engagement? Looking at long-term investment impact will help you make the business case for the upgrade (or new system).

Similarly, look at the costs of less than optimal financial reporting. With improved decision-making, leaders will act more strategically and minimize wasted time in meetings. They’ll be able to respond to opportunities in the moment; they’ll forecast sales and prepare inventory accordingly. Work to estimate the costs of missed forecasting opportunities over the past year.

Integration, compatibility, and emerging technologies

Ensure your new ERP will integrate seamlessly with the existing tools that you use. Try to predict future technologies you’ll need it to communicate with, like AI, Internet of Things (IoT), and machine learning tools. Then look for ERP systems that are compatible with these emerging tools. For example, as Forbes notes, a partner might opt to use IoT sensors to track product deliveries, requiring your ERP to integrate with such tools.

Choosing the right ERP solution provider

Let’s review the main criteria for selecting a reliable and capable ERP provider.

Features and support

Evaluate support, customization, and data migration options of a potential system:

  • How easily can you migrate data from the legacy system to a potential new one?
  • Does it integrate with any other products you use?
  • Can it work at multiple sites, if need be?
  • Will the provider support you through the data migration process?
  • What training support will the provider offer?
  • What maintenance support is included?

A good provider will give you a dedicated team of experts to support you throughout the implementation process and beyond.

System structure

Today, you have the choice of cloud, on-premises, and hybrid ERP models. Consider which meets your business’s needs and preferences best, based on the pros and cons outlined above. Do you have a robust IT staff that will maintain an in-house system, or would you prefer to outsource a solution? Alternatively, you could add in certain cloud features that are compatible with your existing in-house ERP to create a hybrid model.

Developing a comprehensive ERP upgrade plan and best practices

How can you ensure minimal disruption to your business during the upgrade process? There will be hurdles, but they don’t have to be major. The biggest obstacle to overcome is the initial lack of comfort people may feel with a new ERP system.

Outline a detailed project plan with realistic milestones and deadlines, like these:

  • Appoint a project manager (PM) for the upgrade. The PM can convene stakeholders and gather their input.
  • Survey managers and employees to learn about pain points of the current system.
  • Create a data migration strategy, working with data experts.
  • Plan how to integrate the new system with any other tools you’re using.
  • Test your new system, making sure it’s running smoothly.
  • Plan how to roll out each new feature, partnering with leaders and managers.
  • Provide user training for each department.
  • Conduct periodic post-upgrade evaluations.
  • Collect feedback on the system’s performance and address any concerns.

Taking these steps will help minimize risks and ensure a smooth transition.

In Conclusion:

An ERP system will strengthen your decision-making processes, operations, and reporting. During the first several weeks of adapting to a new system, people will still be getting up to speed, but users will adapt to change more effectively when you ask for and respond to their concerns. Through these steps, you’ll promote a seamless transition from your legacy system to the new iteration.

Sources

https://www.forbes.com/sites/forbestechcouncil/2022/12/30/ready-for-an-erp-upgrade-heres-how-to-find-the-right-solution/?sh=3f6eb1d64304

https://www.forbes.com/sites/forbestechcouncil/2022/11/02/what-to-look-for-in-an-erp-technology-partner/?sh=502e4387eabe

https://www.linkedin.com/pulse/breaking-free-from-legacy-erp-limitations-yasser-radwan-mba/

https://www.linkedin.com/pulse/cloud-vs-on-premise-erp-which-right-option-your-business-/

https://dynamics.microsoft.com/en-us/erp/what-is-erp/

https://www.techtarget.com/searcherp/feature/The-decision-to-upgrade-a-legacy-ERP-system-vs-replace-it

Tags: Business Growth Business Leadership

  1. About the Author:

  2. About the Author:

    As a Principal at Valesco, Angie Henson serves in key roles related to new investment origination, portfolio management, and investor relations. She directs the firm’s strategic acquisition planning and program management as acting head of research and business development operations since 2002. Angie holds a Bachelor of Science from Tarleton State University and a certificate in entrepreneurial studies from Southern Methodist University.


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