The four part series titled "Where
is ERP Headed (Or Better, Where Should It Be Headed?)" introduces
a number of key issues about the future. But everyone starts his or her
individual journey to the future from somewhere - the place they are today.
If the place you are today is with an "old ERP" system, many questions
exist about how to get to the future.
what is an old ERP system? If your system has green screens, you have
an old ERP system. If your system has a GUI (Graphical User Interface)
but not something that looks like most Windows applications, you have
an old ERP system. If the system was introduced in the 80's, you have
an old ERP system. If your vendor is no longer enhancing the system in
"new areas", you have an old ERP system. If your vendor is becoming a
"have not" of the ERP industry, maybe old age is approaching.
you have an old ERP system and you need some of the business functionality
offered by Supply Chain Planning (SCP), Business Intelligence (BI), Customer
Resource Management (CRM), New Product Development (NPD) or e-commerce
you have a dilemma. Do you replace what you have first and then add
these new functions or do you keep what you have and add these functions
around your existing ERP system? Every vendor of ERP or any of the functions
listed above will have advice for you. But you can rest assured the advice
is what is best for the vendor in almost every case. (To be sure, there
are some conscientious sales reps out there that will give you honest
Realities of Replacement
Why are you thinking about getting rid of your existing ERP system? What
ever your answers, they must be compared to some of the realities of replacing
the old system. Those realities include cost and time, but these two issues
go much deeper. You have to pay the cost of buying and installing a replacement
ERP system. You have to suffer the cost of disruption, typically a dip
in operational efficiency and effectiveness, before, during and after
the implementation. You will have to suffer the pain of ripping out the
existing system and putting in its replacement. Will the replacement of
the existing system be more or less painful that what you experienced
the first time? This is a good question, which has no standard answer.
the replacement system is installed, will it give you adequate ROI on
the replacement investment? The time involved in implementing the replacement
ERP system means that the ROI on the added function you are seeking is
delayed. Yes, you could try to implement both the replacement ERP system
and your shiny new SCP or e-commerce system at the same time, but are
you willing to accept the risk and even greater disruption in doing so.
The "big bang" horror stories of the late 90's should make you very adverse
to this approach.
ERP system is the backbone of your operations. You need to make absolutely
certain that any replacement system functions as well as or better than
what you have. The word old means mature. Will the replacement system
offer all the function that your old, mature system has today? Your people
may not like the existing ERP, but they know it. Can you guarantee that
the new system will really be an improvement for these people? Maybe the
most important thing that can be said about the old system, which may
not be true of the replacement system is, "It works!"
you are looking for a replacement ERP system as a way to get to some of
the newer functions like BI, SCP or NPD, you need to pick a system that
is both better than your existing ERP system and provides the best functionality
in the new areas you are seeking. You will have to pick a single vendor
who is up to both tasks. Although the offerings from the integrated ERP
vendors have improved to the level of functionality of the best of breed
vendors specializing in a single area for many situations, the exact function
you want and the specifics of your industry may mean that the integrated
vendor is not up to the challenge.
Are You Replacing Your Existing ERP System?
So, why are you thinking about getting rid of your existing ERP system?
If the answer is simply your need for some of these newer and more advanced
applications, you have not thought through your options - you can reach
these objectives with or without replacing your existing system.
the answers have to do with technology, you need to look deeper. A CIO
recently told me that he was going to replace his old ERP system because,
"My users think it is old and ugly." Unhappy users are always an issue.
How much you weigh this issue versus the cost, time and disruption issues
is part of the trade-offs involved in making this decision.
the existing technology itself is old and ugly. If the underlying hardware
and systems software is creating frequent disruptions or have become very
expensive to maintain, you have another issue to trade-off. But if the
existing hardware or systems software puts you at risk of a lengthy or
permanent disruption of service, you have no choice but to go to a replacement
Realities of Additions
Why would you add the new function around your existing ERP system? If
you add the function you require on to the existing system, you should
get the benefits you seek faster. You can proceed directly to implementing
the functions that will deliver the ROI. That project will have to include
some consideration of integration of the new function to the existing
ERP system, but the overall schedule is typically shorter.
many cases, the functionality provided by a specialist or best of breed
vendor will be better than that offered by many integrated vendors. As
the above-mentioned article discusses, the future of ERP means sharper
vertical focus. For many industries or verticals, significant operational
advantage can be gained by going with a vendor who focuses in their industry.
The best of these focused vendors typically limit their target market
to a few, closely related industries. Note, industry focus means application
function, not industry specific brochures.
But what is the true cost of going the best of breed route? Integration
is one of the answers. It is not free. It is another issue that must be
traded off. The reality is that the integrated vendor should have better
integration and they will bear the cost of maintaining that integration.
This is almost always true if the vendor wrote all the pieces themselves.
If they acquired some or all of the pieces, this should be true, but you
should test the vendor's commitments in this area. If the components come
from a "strategic partnership", it means that as long as the relationship
makes money for both parties and they do not evolve into a competitive
situation, the integration will continue to exist.
of the integration trade-off has to do with the quality of the integration.
A single vendor, integrated solution should have better integration. The
question for the best of breed option is, "Can these products be integrated
in a practical way." Practical does not mean best, it means acceptable
given all the other trade-offs that will always have to be made. You will
have to live with extra code, the integration code that needs maintenance.
You will have to live with duplicate files that may get out of synch.
You will be the one who deals with the finger pointing between the two
vendors when one or both of the two systems are not working correctly.
You will have to deal with the new release cycles that will prove to be
always perfectly out of synch.
selection of an add-on product must include the ability of the product
to integrate with the existing systems. Was it built to be integrated?
What integration technology does it support? What will be the cost and
risk of maintaining the integration?
Whether you choose replacement or adding-on, integration must be your
key consideration. This article has pointed out the trade-offs you face
as you decide what to do with your "Old ERP" system. For detailed information
on the various ERP vendors and vendors of the functionalities you want
to enhance your systems see the Business
Applications Research Channel on this site.
Olin Thompson is a principal of Process ERP Partners. He has over 25 years
experience as an executive in the software industry with the last 17 in
process industry related ERP, SCP, and e-business related segments. Olin
has been called "the Father of Process ERP." He is a frequent author and
an award-winning speaker on topics of gaining value from ERP, SCP, e-commerce
and the impact of technology on industry.
can be reached at Olin@ProcessERP.com