ERP Transformation – or not?
Are you under pressure to change, to transform and to update? Here are some thoughts for and against, as shiny and new isn’t always the best option.
“The “do-nothing strategy” was and still is the enemy of all new system deals. Somewhere in the region of 80% of deals are lost to “do nothing” strategies.“ Interview and opinions from an Enterprise ERP salesman.
Why do people do nothing?
• If the system is running the business, why change? Familiarity and a sense of calm, rather than embracing the disruption needed for a complete transformation, can be a powerful driver to do nothing.
“People want to stay with what’s familiar. If the current system is doing the job, it can be an uphill sales struggle without executive sponsorship and a driver for wholesale change.“
• Change requires a deep dive into the cost of ownership as legacy systems are often quite cheap to run. They have been written off the balance sheet long ago and they just tick along. This promotes a “leave well alone” policy for the base system but surrounding it with additional components that “get around” the issues.
“The project was stopped and all they did was optimise what they had. They practiced a do-nothing strategy towards system change, while they changed the rest of the business.”
• The decision to do nothing, can be as simple as the customer ran out of money – although they are unlikely to confess as such.
“They would give all the excuses under the sun, because they didn’t like to say that the project had been stopped because the money ran out “
• Staff changes and the move of executive sponsors will invariably halt projects in their tracks as, when the individual goes, so too does their objectives and drivers. In these circumstances it does not necessarily mean the project is no longer necessary, just that another priority has reached the top – in the guise of new management.
“There was a project where the strategy was VERY clearly set by central PLC, Chairman of board and the operating board – all wanted the new system. They invested heavily and then the market conditions changed, and the entire sponsorship team left or were dismissed. The project was stopped.”
• Projects are often cancelled or postponed simply because something else took priority.
“Priorities are a funny thing – especially when another fire starts burning brighter. Sometimes this comes about because of a wholesale change such as change of ownership of the company, but invariably it is a less dramatic realignment and there’s nothing more frustrating than not really knowing why!”
“Changing the ERP and business enterprise system is absolutely a strategic decision, but it is also so much more than an IT decision and only ranked as a priority when there are no other priorities above it. Interestingly replacing the ERP just isn’t seen as the “Must Do” strategic decision but as a “Nice to have” when the legacy system is coping.”
• Legacy invariably contains bespoke code as all businesses are different and therefore have a bespoke way of doing things. Cloud-based software tends to be a one-solution-fits-all ethos where everyone is using the same system, but some businesses simply don’t want to bend that way. While some businesses are fine with systems out of the box, there are nuances and peccadillo’s in every business and some that make “bespoke” a necessity and “out-the-box” simply won’t do.
“Let’s face it, no-one has invented a new way of moving inventory – there are only a certain number of ways stock can come in and go out and software can manage those in the old ERP or new. But then there are the strange processes that Jack in the warehouse or John in despatch use – but work. There is sometimes no getting around the will of man and the way they have always done things”
So, are there real threats caused by incumbent, legacy systems?
Market makers – the drive towards the perception that you need an App for that or perhaps artificial intelligence (AI), machine learning (ML) and Internet of Things (IoT) to drive efficiency.
Customers think they can have a business system on their phone presented in an App. But that still needs to be driven by an ERP and, you can’t always put an App on the front end of a legacy system. But you can put BI (Business Intelligence) and BPM (Business Management Process) tools around the ERP and those can render in an App. Since the App is part of the culture you need to find these ancillary solutions to deliver the user experience.
“In the 60’s and 70’s we were happy with disparate systems through bureau service; those were our clouds back then as someone else was running the infrastructure. Then in the 80’s all the sales ledgers and systems began to get joined up and that was a miracle back then and the dawn of ERP. We were comfortable but millennials want Apps – Microsoft have a lot to answer for this “
Visibility – often the threat is not that the data isn’t there, it’s just you can’t see it. Today’s executives need to see a dashboard and have that available 24/7 (on their phone) and be able to drill down, open the order and see what’s shipped today. This isn’t a strength of legacy ERP, so systems need to overlay additional functionality; something to mine the data and present it to management.
“30 years ago, the CFO didn’t need a dashboard – he was happy to ship today and see it on the ledgers tomorrow. Business managers are more educated and demanding for immediacy and visibility.”
Perception of the need for speed – the belief that the ERP “can’t do that” is perhaps a combination of the above two, as the culture of immediacy and visibility of modern Apps leads users to believe their old ERP is out of date. But in reality, Finance is updated, the data is there and so the challenge lies in accessing the information and making it available to the right people in the right format.
“Human nature being what it is, access to the data quickly is important – no matter what industry you are in these days. This need for immediacy used to be the remit of the larger financial institutions only and I know of one that spent literally millions stitching their old systems together and optimising rather than buying a new ERP system. Simply because they didn’t want change.“
Security – is it the legacy system that is exposing information to security breaches or is it the business practices? We have all heard the stories of breaches resulting from BYOD whereby an unprotected device freezes the network and so causes the ERP to crash. But the blame game lies in applying correct business practices, particularly around sensitive data which is invariably held in CRM not ERP.
“ERP is not the problem child when it comes to security. The data held in ERP is not likely to be the information cyber-criminals are looking to steal. I mean who wants the bill of materials?“
Accuracy and one version of the truth – legacy can allow time and familiarity to “bend the rules” as the internal teams will know how to access and manipulate the data – rather than leave the number crunching to the ERP. These “tweaks” to ensure consistency can cause a greater and greater divergence from the truth over time and inventory counts may simply not represent reality. Once again, correct business practices need to be applied, rather than blaming the ERP.
“New systems can expose the business to weak data management and mismatching. After 30 years of the same system (and yes there are plenty of instances when the ERP has been in situ that long), people know where the data is and how to make adjustments. The ERP is after all just a calculator so if inventory on the balance sheet doesn’t match that in the warehouse – someone’s been at the books!”
User Experience – if your ERP executes step one through 15 perfectly, why swap it for a system with just 5 clicks on a mobile? Increasingly, the user experience has become tantamount to gospel for system usage, but this loses sight of the benefits of having something that works and has done for years. Spending money on a license for a new colourful system on the phone that requires just 5 clicks can expose the business to far greater risk. Legacy systems, operated internally, are isolated, phones are not. And there are endless number of phones and updates to deal with.
“Legacy is robust whereas I have seen an Android update take down all non-native systems. Some of these things are only done once a month – why on earth wouldn’t you do those things in a highly regulated and secure environment?”
Stick to your guns!
Companies look to introduce a new ERP to drive increased efficiencies through the business. This decision will need to be accompanied by a sufficiently well-rounded ROI in terms of the efficiencies and positive changes compared to the magnitude of costs involved in transformation. Invariably the cost of change compared to the cost of ownership of a legacy system is not a convincing one as the legacy system can be maintained and optimised at relatively little cost.
“Don’t fix what ain’t broke is the adage but one that rings true when big transformation budgets are hard to come by and actually the system is working. It is OK to say to the salesman thanks but no thanks I am happy where I am.“
Enhancing legacy is an easy route to go compared to the step change of a new system, even though staff looking after the legacy system may well be approaching retirement. But there are specialist firms that can bring these skills into the team.
“One of the biggest pharmacy companies in the UK is still running on Infor BPCS 6.1 which is 22 years old. It is running on steam driven water-cooled systems. But it is a self-sustaining system. New systems need tuning, new hardware, new updates. Old systems don’t.“
There must be a huge business driver to change and something fundamentally wrong. Because if you weigh up the cost of change and disruption, you’d be inclined to take a pull and just allow your robust legacy system to continue to take the strain.
ReInforce Technology can help support, maintain, optimise and enhance your Infor ERP system and when you are ready for an overhaul or migration we can help too.