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 can still handle 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 Switching too late means the business could feel the bottom-line consequences of hanging onto an outdated ERP.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 right to switch to a new ERP system?

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

A startup business may be able to track its modest goals using legacy QuickBooks or ERP software capable of managing a limited number of its operations. But as the company grows and its objectives change — exceeding what its current ERP can handle — it’s time to switch to a modern ERP system. One that can meet its new requirements and adapt 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 the salesperson is using an older ERP that doesn’t integrate with the inventory management system they could be selling a product that isn’t in stock. This can 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. An outdated ERP system typically has limited scalability and functionality which slows down operations, often forcing manual workarounds.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 become 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. To ensure the adoption when changing to a new ERP system, companies must 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 can be 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 only have direct consequences just for the business. It also hurts customers. Several of the warning signs previously discussed, such as slower business processes and an inability to scale, can impact customer satisfaction. Order processing and fulfillment, 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 information when responding to customer inquiries.

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.

Benefits of Switching ERP Systems

Companies considering switching ERP systems often use the opportunity to move to cloud-based solutions, increasing flexibility and lowering costs. 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 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, centralized 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 organization “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 improves efficiency and also reduces errors from manual data entry.
  • Accessibility
    • 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
    • With Cloud-based ERP systems, a simple click adds more computing, networking, or storage capacity. Whereas 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.

Zastro has provided NetSuite Implementation and Consulting Services for over 20 years.

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