The pace of business and innovation has accelerated dramatically in recent years, placing stress on the business processes tracked and managed through companies’ enterprise resource planning (ERP) systems.
Worker expectations have changed around how they want to engage with business systems—and customers have changed the way they want to engage with a company. Businesses can go global in an instant, e-commerce has created new sales and customer service channels, and the last decade has seen the birth of several hyper-growth companies.
Using an ERP solution that can only be upgraded every four or five years is no longer enough to stay competitive in the current business landscape. While there are extensive benefits to having a system that keeps pace with phenomenal growth, it’s also compelling to explore how an aging ERP program might be detrimental to your business.
Below is a look at eight key ways your business could suffer if you maintain status quo with your current system.
Drains Innovation from an IT Budget
Measuring how much of a company’s IT budget is devoted to innovation rather than day-to-day operations, such as patches, fixes, and support calls, can help determine how aligned a company’s ERP program is with overall imperatives.
Analysts from Forrester to Gartner measure this allocation closely and find that maintenance spend can range from 50% to more than 90% of a typical IT budget, leaving only a fraction of the budget for meeting business needs.
Fails to Keep Pace with Changing Business Regulations
Accounting and regulatory environments are in constant flux as governments tighten fiscal policy through sales and corporate tax changes and accounting bodies implement more stringent requirements. Such requirements include Financial Accounting Standards Board Accounting Standards Codification® Subtopic 605-25, Multiple-Element Arrangements, which governs revenue recognition for multi-element products and services.
These changes place enormous pressure on finance organizations that an out-of-date ERP wasn’t designed to accommodate.
This results in spreadsheets and headcount meant to fill the gap between a company’s ERP program and the current business operating environment. Revenue recognition schedules migrate to spreadsheets, local tax reports get massaged through comma separated value (CSV) exports and manual entry, and sales-tax calculations start becoming error-prone affairs.
Holds Back Business Velocity
The web enables businesses to go global instantly—reaching millions of customers in a year where it used to take a decade or more to make that type of progress. Some of today’s fast-growing, publicly traded companies are able to grow so quickly because they aren’t bound to an on-premise ERP system.
A company’s ability to compete is diminished if it’s running an aging installation of a software designed for when businesses grew incrementally and IT budget, resources, and time were the constraining factors for business growth.
Incompatible with Increasingly Mobile Workforce
The millennial generation entering the workforce wants easy-to-use systems that mirror social tools and online shopping, increasingly blurring the lines between work and home life. And at the end of the day, putting the right person in the right place with the right tools remains the best way for any company to stay competitive.
Worldwide mobile phone users are on pace to hit around 5 billion units by 2019, according to Statica. But legacy ERP programs were designed for when work was done in the office, and consumer and business computing were clearly separated.
Using outdated ERP solutions can have the following effects:
- Being unable to access information from anywhere outside the office
- Struggling for access over slow Citrix connections
- Enduring slow client-server experiences over virtual private networks
- Having no visibility into business operations when on the road or having to go into the office to approve a sales order
The result is employees who are less productive than they could be and decisions that are made based on outdated information.
Hampers Increasingly Decentralized Businesses
It’s not just workers that are becoming mobile—businesses are also becoming more distributed. To compete, companies are looking to achieve agility and fluidity in their business structure. In a globalized world, businesses need to be able to choose where work takes place based on three factors:
- Ability to maintain and adapt an elastic workforce
Today’s businesses are running operations in multiple locations and increasing efficiency with offshore and remote workers. Last generation’s ERP programs weren’t designed with that in mind, however, requiring companies to maintain desktops at multiple locations, regularly upgrade local clients, and deal with information fragmentation across local desktops.
Businesses want to decentralize while maintaining visibility and control, but legacy ERP systems often hold them back from achieving those goals.
Fails to Provide Real-Time Information
For companies running on a legacy ERP system, it can take days to assemble bookings, billings, and backlogs reports—or to complete periodic budgeting and forecasting processes. These businesses may be struggling to unlock data that’s buried in the ERP software and other disconnected systems and spreadsheets.
While businesses can now measure ad performance, marketing campaign responses, and the number of unique visitors to their website in real-time, core financial-management reporting is often still measured in weeks and business days.
Disconnects Businesses from Suppliers, Channels, and Customers
Everything has become connected through the cloud. For example:
- Customers are no longer content to wait on the phone to check an order; they want to browse a website to get their order status right now.
- Suppliers stand ready to drop-ship orders in real time rather than forcing a company to tie up capital in inventory.
- Channels like Amazon are ripe to drive additional sales.
A company’s website is increasingly its principal storefront, and customers judge a business by the level of service it provides. This means operations need be interconnected with customers, suppliers, and partners, enabling real-time information exchange on demand.
Legacy ERP software wasn’t designed as a service-oriented system meant for such an interconnected world. This means companies using this type of out-of-date software are often required to bridge this gap by deploying expensive adapters, third-party applications, and CSV exports.
Erects a Barrier between Employees and Self Service
To determine if a company is self-serve, begin by asking these questions:
- Can employees enter time and expenses themselves into the ERP program, or does someone need to rekey it for them?
- Can an accounting manager quickly implement a new purchase order process, or does he or she need to wait for IT to do it?
- Can a finance team easily change the invoice template or add another field to a customer record themselves?
If the answer to none of these questions was yes, it’s likely due to an outdated ERP system. Legacy ERP solutions were designed when businesses were top-heavy in general administration and it was standard practice to have someone assigned to rekeying purchase orders or time-and-expense entries.
The cloud frees businesses from the inflexible and change-resistant ERP programs of the past. Businesses can now run a version-less cloud ERP solution that provides the latest innovations automatically—from new features to support for the latest regulations.
The most common reasons businesses move to the cloud:
- Improved business agility
- Speed of implementation and deployment
- Faster delivery of new features and functions
- New capabilities that support business innovation
These systems enable enterprises to experience ERP innovation as quickly as consumers do, allowing for better alignment with business operating environments. Companies can also customize their ERP program with confidence because the cloud allows customizations to migrate automatically with every new release.
We’re Here to Help
ERP system selection is a complex process with many operational variables to consider—all of which may impact every level of your organization. However, the process of choosing a system and implementing it doesn’t have to feel overwhelming. For more information about implementing an ERP solution within your organization, contact your Moss Adams professional or email ERP@mossadams.com.