At the time your homegrown ERP system was developed and launched, it was probably the best possible solution. But what if it has outlived its usefulness? There is a proven, minimally disruptive, results-oriented path toward replacing homegrown ERP customized and created in-house with modern technology that can grow with you.
Some business and technology executives are convinced that there is no better ERP system than a homegrown one. Nothing else is as effective in meeting their companies’ specific requirements and in supporting their unique business activities.
However, there are not many businesses that this could apply to. What makes most companies unique and valuable is not how they function, but how people work and communicate in a primarily templated environment to create value through products and services. Many of the foundational processes are mostly alike. Businesses have more in common than not in how they pay their invoices, solicit and evaluate resumes, manage inventory in the warehouse, or dispatch technicians to perform warranty repairs. Companies within the same market segment may display even more significant similarities. Logistics services, real estate firms, discrete manufacturers, or healthcare providers share not just basic processes, such as accounts receivable, but also run similar, industry-specific operations.
ERP has come a long way
The companies that create and deliver today’s modern ERP systems understand this. Each of the leading ERP providers may best fit companies of a specific size or outlook, but within their target markets, they can meet most of a customer’s requirements with standardized software. Industry solutions can bridge most remaining functionality gaps.
It wasn’t always so. Years ago, ERP implied extensive, expensive, complex technology that took many months or even several years to deploy, and which required a team of skilled technologists and developers to manage it and keep it aligned with changing business needs. Every initial deployment and each significant upgrade involved customization in adjusting the software for the organization’s requirements. Some companies found that productized software did not give them enough of the capabilities that were important to them and created their ERP systems. When organizations successfully aligned developer and IT teams with their business interests, their investment could pay off and deliver more in terms of productivity enablement and ROI than any vendor’s software product.
When homegrown ERP lingers past its prime
At Sikich, we often find companies where these homegrown systems were so well made and robust that they still serve their purpose many years later. But, they almost always become harder to manage and update, and the returns from doing so are steadily diminishing. Many times, the skilled visionaries who created the custom ERP system have moved on or retired. Generations of upgrades and adjustments make it more difficult and expensive to keep the software stable and secure. Integrations with product design, logistics, manufacturing, or other specialized technology of similar vintage may still work but are more challenging to build and maintain with modern software tools than they should be.
Connecting an older, homegrown ERP system with data sources in the internet of things (IoT), advanced analytics resources in the cloud, machine learning tools for predictive maintenance, or other, newer technologies is likely to be difficult and can require a significant investment in terms of specialized skills, time, and budget. What’s more, when custom-created ERP once may have been an excellent solution for safeguarding intellectual property and sensitive data, over time, it may evidence vulnerabilities that put companies and their customers at risk.
Most companies are justifiably reluctant to let go of legacy ERP created in-house once these systems are woven into the fabric of the organization. Their homegrown software may have become harder to maintain, but it’s also comfortable for the users who know it. When it is associated with the company’s history of success, it may seem unwise to incur the risks and disruptions of discarding and replacing it. A modern ERP system may offer valuable functionality, but the company may not see a viable path toward managing a smooth transition.
Understanding obsolescence risks
On the other hand, the undertaking of once again creating an ERP solution may be prohibitively expensive and risky, even if an organization owns the needed agile developer and project management talent or has a relationship with a trusted vendor. Industry findings show that large IT projects run over budget by 45 percent, and one in six does so by 200 percent and with a schedule overrun of 70 percent. Seventeen percent of such efforts have such dismal results that they jeopardize the viability of the company. Even if they succeed, they deliver 56 percent less value overall than companies projected.
Still, not doing anything about your aging homegrown ERP is not an option. The longer you wait, the more unwelcome the consequences are likely to be. When the users familiar with the legacy software retire or leave, younger workers used to perform just about any task in an intuitive screen on a robust device, anytime and anywhere, will not look kindly upon the latency and other quirks of the ERP software. When you compete for talent in a tight labor market, that is not in your favor. If you cannot recruit and empower the best people for your open positions, eventually, your competitors may catch up or outperform you.
Timing ERP and infrastructure change
Maybe a key criterion in timing and preparing for an ERP technology refresh should be something as relatively simple and ubiquitous as employee mobility. If it’s too laborious, technically difficult, or expensive to provide access to ERP data and capabilities securely on your employees’ mobile devices, that’s a problem you need to address promptly. The workers you will invite to become part of the company will look to you to provide the necessary resources for their success. They will expect always-on mobility as part of that.
Some businesses inflict an additional handicap on themselves when their older homegrown systems run best on hardware that was powerful and dependable back when they were written. The cost and workload of managing and running aging equipment will, at some point, no longer be in a sustainable ratio to the effort’s productivity returns. The skills to keep it going will become hard to find, no matter whether you aim to hire or outsource.
In some organizations, homegrown legacy ERP supports back-office, administrative processes that are not seen to have any impact on a company’s ability to innovate and compete. These companies may run, for instance, product design, manufacturing, or sales on contemporary solutions, relying on integrations to exchange data. Even so, the technology environment is still fragmented, is more vulnerable to breakdowns and security risks than a connected business management solution on a modern hardware infrastructure. Also, treating a group of users and their activities and resources as if they did not matter to the business will sooner or later get in the way of the organization’s viability and ruin morale.
Incremental approach to ERP modernization
Sometimes you may urgently have to replace aging software or hardware before it fails and disrupts the business. Even when that is the case, replacing homegrown ERP does not have to be a risky, disruptive, budget-breaking event that upsets users and temporarily causes productivity to tank. Modular, cloud-based ERP systems like Microsoft Dynamics 365 can supplant your legacy system in stages. On many projects, we start with your most important processes and the users who would most benefit from an update. Activities and roles that years ago required custom code may well find a good match in modern standard software that is either part of the new ERP solution or can easily be integrated with it.
In ERP deployments led by Sikich, we bring together the key contributors, including back-office managers who long made do with aging software, as well as business and technical executives. Often, workers are much less invested in the status quo and are far more ready to suggest valuable process improvements than companies expect. We know how to channel pent-up employee demand for more usable, efficient technology in a productive, non-confrontational manner that encourages the best possible outcomes. We document everybody’s concerns and build consensus around an incremental, low-risk approach to replacing homegrown legacy ERP with an integrated solution that allows the company to run smoothly. We usually start with a working model and a pilot project, both of them incorporating clients’ actual data and representing real-life operating conditions.
Enjoying freedom from legacy technology
Once you begin replacing homegrown ERP modules with modern, standard solutions, you will likely free up IT skills and time that used to be absorbed by maintaining the legacy software. You may also be able to replace custom integrations between ERP and specialized software tools used, for instance, in product life-cycle management (PLM), logistics, warehousing, quality assurance, or supplier management. All of which can have standard integrations that can easily be maintained and secured in the cloud.
Some of the questions coming up next will be how IT team members should best use their time and what employees can accomplish with their newly enhanced productivity. We’ll be glad to offer suggestions, but more than likely, employees and the organization already have innovative ideas and goals that are finally possible.
If you want to discuss replacing homegrown ERP with modern technology, working with people who contribute professional empathy along with industry and technical expertise get in touch with us.
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