Legacy, liability or future proof business platform?
Workshop A lot of Enterprise Resource Planning (ERP) systems in place today were installed in the 90's as part of the consolidation of point solutions or to deal with Y2K. At the time, a lot of effort generally went into selecting the most appropriate supplier and system, and significant money and manpower was invested in implementation – sometimes, it could be argued, to quite an excessive degree.
For some time afterwards, it was common to hear of executives questioning whether it was all worth it and whether the return on investment was really there, particularly if they'd had their arms twisted to commit substantial sums of money on the premise of potential Y2K catastrophe, a threat that may or may not have been real depending on who you listen to. Of course the truth is that aging point solutions would have caught up with everyone eventually, so it was only a matter of time before putting a more robust joined up alternative became an imperative.
Regardless of the realities, rights and wrongs, the big ‘Was ERP worth it?’ debate subsided when other things came along to take the heat away, such as the rise of Customer Relationship Management (CRM) activity – another reason to write big cheques to software companies and consulting firms – and, of course, the whole dot com boom and bust. Since then ERP systems have just been accepted as part of the fabric of many businesses – they are there, they mostly do what they are supposed to, and there’s an established set of processes and resources in place to look after them.
When you think about it, though, a whole decade, the noughties, has come and gone since the initial ERP investment wave during which a lot of systems were first put into place, meaning that there is a strong possibility that the package you are running today was originally designed and built 10-15 years ago. Given that technology and associated ideas have developed significantly in the intervening period, it begs the question of how well these systems have kept up, and, more to the point, whether they are capable of meeting requirements going forward as economies pick up again and the pace of business change continues to accelerate.
There’s a whole bunch of considerations mixed up in this question, which brings to mind recent wrangles between some vendors and their customers over ERP maintenance fees. Some argue that vendors have not modernised systems enough to justify the ongoing charges levied, while others, conversely, protest about being forced to pay for upgrades that they don’t want or need. If you net all this out, it’s clear that the state of current ERP installations is a function of both customer and supplier attitude and action.
But it’s not just down to software architecture or capability per se; the way ERP packages were originally implemented also has a big bearing on how future proof current systems are considered to be. As an example, a CIO we spoke with a while back declared that the biggest project ongoing at that time in his company was an ERP replacement. When asked what was being replaced with what, he explained that they were actually re-implementing the same package. The original implementation ten years earlier involved a lot of customisation and extension, meaning things were expensive and risky to change thereafter. Analysis highlighted that a lot of the requirements that led to bespoke developments were now catered for by standard functionally as the core package had evolved, and most other ‘special’ requirements could now be achieved through soft configuration rather than hard coding. The point here is that where an ERP system has become too constraining on the business, it is often not the package per se that is at the root of the excessive cost and inflexibility, but the customisations that have been made to it.
The upshot of all this is that reviewing where you are with ERP is probably something worth doing if you haven’t done so already. Those with long memories of implementations past may take the view that the last thing they need is the kind of cost and disruption they experienced first time around, but there is no getting away from the fact that both the business and technology landscapes have changed considerably over the past decade.
If you were selecting a new system today, for example, you would undoubtedly use a different set of criteria, with much more emphasis on openness, flexibility and the ability to cater for a wider range of users beyond the traditional target of so called ‘transaction workers’. This includes both internal and external users with differing requirements and access needs (e.g. portal, mobile, extranet, internet, etc). Previous feedback from ERP users also suggests that information analysis and business intelligence would also be pretty high on the agenda.
So how would your current system stack up if you were to judge it according to criteria such as these? And if you are running an older release of a package, would the latest incarnation address the shortcomings? We’d be interested in your feedback on this. And looking at this question in another way, what would you say are the key indicators of whether a system has reached the point of needing a serious overhaul or even replacement?
One of the other things we would like your feedback on, particularly if you work in a larger enterprise environment with a complex group structure is whether it makes sense for every division or subsidiary to run the same ERP package. If the same ‘big iron’ system has previously been forced on more fast moving operating companies, for example, have recent developments made the software more suitable for use in that environment. If not, what are the pros and cons of allowing operating companies to break free of the mother-ship and go for a selective replacement?
If you have views on any of these questions, or other thoughts on the current state of ERP systems, we would appreciate your feedback in the comment box below.