Top 8 Signs It’s Time to Switch ERP Systems

As with every technology, there will come a time when a business needs to replace its legacy enterprise resource planning (ERP) system. Perhaps the software has become too expensive to maintain, or it can’t update in real-time or meet the needs of an increasingly remote workforce. Or, maybe a lack of functionality is forcing staff to use so many workarounds that workflows grind to a crawl. These reasons and more can serve as a catalyst for an ERP modernisation.

How to Switch ERP Systems

The lives of CIOs and IT staff would be but a breeze if swapping out one ERP system for another were as simple as toggling a light switch. The reality is, a successful ERP transition is backed by months of rigorous preparation, planning and communication throughout the business, including vendor vetting and product demonstrations; system selection; ERP design, including customisations and integrations; and establishment of project schedules, timelines and key milestones.

Then, when that’s done, it’s time to prepare for the actual changeover. Process re-engineering and data migration — specifically, data extraction — are often the most complex elements of any ERP transition. ERP systems require clean, consistent data to deliver the most accurate results. Migration involves building a universal data model for the new system and then carefully reviewing companywide data to ensure that it maps to the universal format. Incomplete data needs to be updated or removed, and duplicate entries need to be merged, before anything can be imported into the new ERP system. Thorough user testing helps ensure that data migration processes work properly; they also give users an early opportunity to test the new system and provide important feedback.

Once the new ERP project is ready to be launched, a company may opt to “play it safe” and continue running its legacy ERP system in parallel for the short term, just to be sure the live system works as expected. Companies should have communication channels set up to receive and respond to user feedback following deployment.

Key Takeaways

• Outdated ERP systems can create serious issues, including restricted growth, broken business processes, poor operational visibility and data loss.
• The long-term benefits of switching to a modern ERP system outweigh the short-term challenges typical of any software migration.
• Businesses are increasingly turning to cloud-based ERP systems.

8 Signs It’s Time to Switch ERP Systems

Choosing the right time to switch ERP systems reads a bit like Goldilocks’s well-known fairy-tale conundrum. Making the case to switch too soon, when an existing solution is still capable of handling the work, is likely to result in pushback about unnecessary costs and operational disruption. Switching too late means the business could feel the bottom-line consequences of hanging onto an outdated ERP. So when is the time to switch to a new ERP system just right?

1. Your ERP doesn’t match your company’s goals.

   A startup business may be able to track its modest goals using QuickBooks or legacy ERP software that is capable of managing a limited number of its operations. But as the business grows and its objectives change — exceeding what its current ERP can handle — it’s time to switch to a modern ERP system that can meet its new requirements and adapt to others down the line. For example, if plans call for expanding multiple lines of intricate products, the ERP must be able to handle complex production scheduling and detailed supply chain tracking. International expansion may necessitate greater compliance and reporting capabilities.

2. You’ve outgrown your ERP’s scalability.

   Scalability refers to an ERP system’s capacity to handle increasing (or decreasing) demand — from the number of workers and transactions and varying volumes of data to required functionality — without impacting system performance. For companies that run their own ERP systems, scalability is particularly challenging because it involves significant investments of time and money to purchase, upgrade and/or configure the necessary hardware and software.

3. Your ERP doesn’t integrate.

   As companies begin to experience growth, they can find themselves building a Frankenstein monster of hodgepodge operational software that needs to “talk” to one another. Furthermore, disparate systems increase the likelihood of inconsistent or incorrect data, which, in turn, can lead to poor decision-making across day-to-day operations. For example, if a salesperson is using an older ERP that doesn’t integrate with an inventory management system, they could be selling a product that isn’t in stock, which would lengthen the sales cycle or even put the deal at risk. A lack of integration can also result in duplication of effort and disjointed workflows and processes.

4. Your ERP slows down business processes.

   Technology is meant to improve business processes, so when the opposite becomes true over a prolonged period of time, a more effective system is in order. When it comes to ERP systems, lack of data access is the most common culprit for delays. That’s because older systems don’t provide fast, real-time access to data, which leaves companies unable to respond quickly and informatively.

   The limited scalability and functionality of an outdated ERP system also slows down operations, often forcing manual workarounds. Additionally, if companies use multiple systems for different aspects of ERP, they likely rely on manual workflows for processes, requiring more time and resulting in more errors. Of course, the more transactions, the slower processes become.

5. No one uses your ERP.

   Discovering that employees either don’t use a new ERP system or slowly start going around it to manage critical functions signals a problem. Both scenarios could have several roots. Employees often resist change when they don’t feel involved in the decision-making process, and it can be extremely difficult to change their minds once they’ve rejected the new technology. (That’s why change management has become so critical to the success of ERP implementations.) Another cause for low adoption rates or a gradual decline in usage of ERP systems is poor training. It’s essential that companies provide comprehensive training before and after going live with a new ERP system.

6. You’re losing valuable data or can’t access it.

   Legacy ERP systems typically rely on older database software and hardware that, over time, become prone to downtime or crashes. The situation becomes even worse if the data hasn’t been properly backed up or becomes corrupt, which happens when older ERP systems aren’t designed to scale to handle larger volumes of data. Security breaches are another cause of data loss, especially when an ERP system reaches its end of life (EOL) and loses vendor protection. Weak encryption and authentication protocols in older ERPs can also lead to data loss.

7. Your customers are impacted.

   An inadequate or failing ERP system doesn’t have direct consequences just for the business. It also hurts customers. Several of the warning signs discussed above, such as slower business processes and an inability to scale, can have a direct impact on customer satisfaction. Order processing and fulfilment, for example, take an obvious hit without real-time inventory data, leading to stockouts, shipment delays and customers taking their business elsewhere. Customer service also suffers when agents don’t have access to that same information when responding to customer enquiries.

8. Your ERP is too expensive.

   One of the more obvious signs of an outdated ERP system is a noticeable increase in costs to maintain, upgrade and patch the hardware and software. Another expense: needing to modify the ERP or integrate it with other software as the company grows and requires additional functionality — to say nothing of spending additional funds on consultants to keep it aligned with business needs. In the case of ERP systems that have reached their EOL, costs can grow considerably as vendor support and upgrades disappear, requiring more time, money and IT resources to take care of any issues.

Challenges of Switching ERP Systems

A modern ERP system can transform business processes, workflows and even company culture. But making the switch to a new system comes with challenges. The good news is, businesses can minimise or avoid potential obstacles by knowing what to look out for.

• Data migration

  Data migration is one of the trickiest parts of switching ERP systems because of the risk of data loss, especially when data is housed in multiple systems. In preparation for an ERP migration, data must first be extracted from existing systems, then cleaned, deduped and reformatted. The process of cleansing and reformatting is complex because data in disparate systems may use different fields to represent the same attribute, such as “mobile” in one system but “cell” in another. These fields must be mapped to a universal format. If it’s not done carefully or, most important, without backing up data, critical information can get lost in the process. Any errors in the data migration process can also lead to inaccurate reporting, poor decision-making and compliance violations.

• Business disruption

  Switching from one ERP system to another takes time, deep knowledge of company operations and careful planning — before, during and after the change is made. It’s critical that companies understand the impact this shift in focus can have on resources during the switch, so they can avoid potential disruptions to the business, such as increases in customer response times. To be on the safe side, companies should plan for some degree of downtime when switching ERP systems, as well as establishing a plan for worst-case scenarios. In addition, any issues with data migration, customisation or integration during the transition can also disrupt business operations. ERP readiness assessments help companies gauge the impact of an ERP implementation on business operations before problems arise.

• Employee resistance

  If you’ve heard it once, you’ve heard it a million times: Change is hard. Switching to a new ERP system often creates different workstreams and ways of working than employees are used to, and they won’t necessarily be enthusiastic about changing. Executing a thorough change management plan throughout the organisation that communicates important details about the ERP implementation, including goals, timelines and milestones, can build support and lead to greater employee acceptance and adoption. Training programs before, during and after the switch can also help.

• Time and money

  Switching to a new ERP system is a considerable investment — even when doing so will save the company money in the long run. Still, no company wants to be caught by surprise should it take longer or cost more than anticipated. Unexpected downtime, for example, can impact productivity and customer satisfaction. Consultant fees can also soar. These reasons and more point to the importance of building financial models to prepare for different scenarios. Total cost of ownership (TCO) assessments outline all the direct and indirect costs of implementing an ERP system and can help companies avoid unforeseen — and costly — issues during the switch.

• Customisation and integration

  Even the latest and greatest ERP system can require customisation and integration with other critical systems to meet certain business needs. For example, larger organisations with more intricate IT architectures, as well as public companies, may require customised reporting to meet regulatory obligations. In addition, companies may need to integrate their ERP systems with industry-specific software or business intelligence platforms. Any customisation or integration must be handled with care — and often the expertise of the ERP system provider — to ensure accurate data mapping, migration and data security.

Benefits of Switching ERP Systems

Companies that are considering switching ERP systems often use the opportunity to move to cloud-based solutions as a means to fuel growth, while also increasing flexibility and lowering costs. In fact, research from Markets and Markets notes that the global cloud-based ERP market is expected to grow at a 15% compound annual growth rate from 2022 to 2027. Regardless of the deployment model, switching ERP systems can offer a host of important benefits, including:

• Cost control

  Cloud-based ERP systems, in particular, eliminate the need for on-premises hardware and software, reducing a significant up-front cost for ERP implementation. It also decreases ongoing maintenance costs because ERP providers maintain their software in the cloud.

• Better decision-making

  New ERP systems offer all key stakeholders access to clean, consistent, centralised information in real time. This results in faster, more informed decisions that increase agility. ERP systems can also provide detailed access control for data, limiting who can view what, based on a user profile.

• Better collaboration

  When companies share a unified view of deeper company data, the effect is to have the entire organisation “singing from the same song sheet.” Greater insights tend to promote greater discussion and collaboration among teams.

• Added Automation

  ERP systems automate business processes and workflows, which not only improves efficiency but also reduces errors from manual data entry.

• Accessibility

  In particular, cloud-based ERP systems provide access to systems and data from anywhere, anytime, via an internet connection — a key benefit in our increasingly remote-workplace world.

• Scalability

  Cloud-based ERP systems also make adding more computing, networking or storage capacity as simple as a click, compared with on-premises ERP systems, where hardware and software purchases, as well as configurations, can take weeks.

• Security

  Updated ERP systems also offer access to the latest and greatest security features for encryption and access control.

Embrace Growth. Switch to NetSuite.

NetSuite ERP offers a comprehensive and integrated solution of cloud-based applications using a centralised database, resulting in streamlined, automated business processes; greater collaboration; and accurate, real-time insights into operations and trends. Its modular design also allows companies to add on advanced functionality — quickly and easily — in support of front- and back-office functions.

Companies switching from legacy ERP systems to NetSuite ERP benefit from a host of tools to make the process smoother. They can employ application programming interfaces (APIs) for simpler customisations and integrations. SuiteSuccess leverages the lessons learnt from thousands of implementations to create an implementation methodology that accelerates time to value. In addition, NetSuite Customer Success taps into hundreds of certified consultants who can work with you to understand your needs and pain points, while building a detailed implementation plan embedded with key milestones.

Remaining competitive in today’s economy requires flexibility, agility and the power to harness data to make better informed decisions. Not coincidentally, those same traits form the backbone of a modern ERP system that can drive company growth. As companies find themselves testing the limits of their ageing ERP systems, making a switch to a new system can be the spark that leads not only to growth but transformation.

Switching ERP FAQs

How do I change ERP systems?

Changing enterprise resource planning systems requires a thorough implementation plan that includes an analysis of current pain points and business processes, a list of business requirements and success metrics. A project team should be assembled early on to outline steps for discovery, design, development, testing, deployment and support for the ERP implementation, backed by a comprehensive strategy for communication and training.

Why do companies change ERP systems?

Companies change enterprise resource planning systems for many reasons. One of the most common is that their current systems have gone as far as they can go and no longer meet their business requirements. Outdated technology is another reason, impacting data reliability and companywide visibility, as well as being expensive to maintain. For many, making a switch to a cloud-based ERP system offers a way not only to spur collaboration, efficiency and growth but to reduce costs, as well.

When should you change ERP systems?

Ideally, companies should change enterprise resource planning systems before they negatively impact growth, security and productivity. Signs that it’s time to change include the system’s inability to scale, broken processes, data inconsistencies and increasing costs.

How often do companies change ERP systems?

Generally speaking, companies change enterprise resource planning systems every five to 10 years, though it varies, based on the size and complexity of the company and major advancements in technology, like the cloud.

What is change management in an ERP implementation?

Change management in an enterprise resource planning implementation refers to the ways in which companies effectively communicate about the new system so that all stakeholders feel involved in the process and, therefore, are more likely to embrace it. This includes early and ongoing communication about the reasons for the change, goals, timelines, milestones and expected impact.