Enterprise Software: The real cost of ignoring the warning signs
Your business depends on your ERP system and in today’s economy it must support all critical functions, be flexible and easy to use whilst foster innovation and future growth.
But how do you know when it’s time to split from your old piece of legacy ERP?...
When it starts to cost you money.
And here are just some of the warning signs to look out for.
The cost to service/high operating costs
A key cost indicator that it’s time to move on from your old ERP system is when it becomes very expensive to operate. This may be due to continuously rising support charges or worse, no longer being supported by your vendor. As you discover gaps and process inefficiencies, you may also find you’re constantly installing modifications to the system. And, it’s highly likely that you’ll be running on old and unreliable hardware that needs replacing too.
When you start to see operating costs rising year on year, it’s time to consider the total cost of ownership of your current system; often, it is cheaper to install a new modern ERP system in the long run.
Downtime costs money. Here are some key questions worth asking yourself…
The cost of work-arounds
Often it is only when you take the time to carefully plan and implement a new system that you realise you had a lot of inefficiencies and processes that were costing you thousands every year. It may not seem this way but small costs can add up very quickly. This is one of the reasons why we advise you to do an annual review of your ERP software. Spot issues early and they are generally much easier and cheaper to fix than letting things linger to the point that your business is crippled and you need a completely new system.
While it is very easy to keep doing what you’re doing, ‘making do’ could be detrimental to your business. You don’t have to look far to find a company still relying heavily on Excel to carry out much of their analysis reporting. If you’re working on an aging system or juggling multiple systems, workarounds are often implemented by staff in order to carry out their jobs. When end-users start to improvise, things can get messy. While Excel has its advantages, working outside your system for analysis purposes is costing your business valuable time and resources.
“If a particular function in your business cannot be accomplished within your ERP system, then you are not getting the benefits you paid for and the system is not supporting your business needs”.
Ideally, your ERP system should be used by key individuals across every department in your business. If you find employees using notebooks, spreadsheets or other disparate software programs, then your critical business information becomes separated from your ERP system. This is a clear indicator that your ERP software isn’t working for you and is costing you money.
Are any of the following a problem for you right now?
The cost of ageing technology suppressing innovation
It’s not unusual for businesses to hold on to their systems long after they realise it has become a common growth barricade to them.
We find it’s typically only ‘operations-killing’ endeavours that cause businesses to evaluate changes to such an integral system.
For years your business processes may have been driven by the functionality of your aging ERP system but now your company is either growing or evolving faster than the system can support. You may find your ERP system difficult to use, slow, and inflexible. It doesn’t support current business needs like business intelligence or collaboration. The result is that when new business processes appear in your market, your current system is preventing you from competing. Or perhaps your business model has changed and your system is unable to accommodate it.
Recommended Read: Justifying the decision to replace your ERP system
The way you run your business is often what makes you stand out from the crowd or gain a competitive edge. It is not unreasonable therefore to assume your ERP system should enable you to maintain (and even enhance) your competitive advantage. This is not often the case if you’re trying to run your business on old legacy ERP software that is too slow or rigid to keep up with the latest trends or advancements in technology.
In the past, ERP systems were traditionally structured through heavy customisations for each business which can become a burden to your IT team. Today, modern ERP software is based on open, flexible architecture that makes customising more fluid and intuitive. You are given much more freedom to make changes to your system without affecting the core product or incurring expensive development charges.
“Intact iQ is streets ahead of what we had and more progressive than anything else on the market. We now have the same functionality available to us that bigger companies have been using for years. It’s up to us to utilise it”
Dave Gavin, Managing Director, KCR Builders Provider
Business environments are also changing dramatically and with an explosion of mobile devices like smartphones and tablets, working from remote locations is now more accessible than ever before. Incorporating mobility into outdated software however can be costly and complex.
Modern ERP embraces mobility; increasing productivity, accelerating decision making, boosting profitability and improving customer satisfaction. When you consider that companies who facilitate mobile working gain an extra 240 hours of work per year from their employees (iPass), it’s something that can’t be ignored.
It’s understandable to want to hang on to the familiarity of your existing system but at what cost to your business?
Some questions to evaluate include….
The cost of lost sales and loyal customers
An inadequate business management system or ERP software is a major factor contributing to missed opportunities and often business failure. If your system can’t provide you with the kind of valuable buying and customer information you need to create smart, targeted and effective marketing campaigns, sales will be lost. Knowing what products or customers generate the highest returns will help you to become more efficient and enable you to focus on the most profitable operations.
Customers are also lost and gained every day based on the level of service you provide. Your reputation is only as good as the customer service you provide. Whatever experience your customers have with your business, you can be sure they will pass on their encounters, both good and bad, to a wider network of friends and family.
If your systems don’t enable your staff to collaborate closely across departments, integrate and share both information and processes business-wide, customer service will suffer and opportunities will be missed.
"We now have a centralised quotation system which stops branches inadvertently competing against each other and the integrated Intact CRM system will help us create centralised promotional campaigns"
Sean Haugh, MD Provincial Floorcoverings Ltd (read more here).
Replacing an inadequate ERP software system can lead to improved sales and a superior level of customer service. Properly modelled ERP systems are an essential tool for any company or organisation. When implemented correctly you can achieve the maximum return on you marketing, fully capitalise on sales leads and prospects and cultivate on-going, lifetime relationships with current and established customers.
Poor customer service spreads like wildfire. How efficient are you in the following…
The cost of lost insights
One of the single biggest obstacles businesses running legacy ERP software will come across is the total lack of system visibility. Older systems are often full of information that cannot be accessed without significant investment of time and energy. The decision-makers in your company are constantly frustrated by poor or no access to the information they need about the business.
In many companies, legacy ERP systems can contain a lot of disparate functions with very little communication between each. This can eventually obstruct one of the main functions of your software; data reporting. Without transparency throughout your enterprise software and a seamless structure connecting all of the reporting functions and departments of your software, you cannot collect all of the mission-critical information your business needs to succeed.
"Intact iQ has created greater efficiencies in our business. It frees up time and gives us additional opportunities to do more with the business. From the bottom up it provides us with greater visibility of the information we need and we know there is still a lot more it can still give us going forward."
Mike Webb, Financial Director, AVS Fencing UK
Newer ERP systems are built to foster an environment of valuable collaboration within your business. They tend to be fully integrated systems promoting transparency and process reliability that cuts down on costs and significantly reduces the likeliness of errors. They give your sales team instant access to real-time information to accurately communicate with your clients. Your warehouse managers can plan for upcoming stock demands. Your management team will be able to make on the spot decisions to resolve issues or take advantage of opportunities as they arise.
Legacy ERP software is dated and almost always unable to integrate successfully with the cloud, many 3rd party applications or web-based technologies. By replacing your old system you can immediately boost your business, and start reaping the inherent benefits of scalability, flexibility and cost efficiency that come along with modern ERP software.
When you can't get the information you need to make sound business decisions you can miss out on the crucial ways to improve your bottom line. Are any of the following an issue for you right now?...
The bottom line…
Most businesses running on old or outdated ERP software systems will almost always benefit and indeed save quite a bit of money by conducting a review of their current processes and implementing or upgrading to new modern ERP systems.
Unfortunately many businesses don’t see this as an opportunity until it has already cost them a significant amount of money. And some often fail to reap the benefits of a new system because of poor implementation and configuration practices. It is therefore important not to only look at solving current needs but to also consider future needs down the line.
Look at the technology being used; is it old and outdated, creating limitations or new and progressive, creating opportunities.
Want to learn more about ERP software? Our 'What is ERP software and do I really need it' is a comprehensive overview that covers all aspects of ERP software; from the benefits to how to successfully implement it.