Do you really need a new ERP system? No IT project is as complex and far-reaching as an ERP implementation. That’s why you need good reasons for it. You need to be able to assess whether and how quickly the investment will pay off for you.
The planned return on investment (ROI) is often calculated for such decisions. Is this really the right approach? In this article, we show which considerations speak in favor of a switch – and that just a few simple questions are enough to make a decision.
The ROI calculation usually does not produce a realistic result.
Arguments instead of ROI forecasts
You put costs, benefits and time in relation to each other and get the ROI as a key figure: so much for the theory. This is not wrong. However, you should not base your decision on it. For two reasons:
Firstly, the ROI calculation usually does not produce a realistic result. The costs for an ERP system (“total cost of ownership”) can still be calculated fairly accurately. The benefits, however, are impossible to predict.
How can you seriously predict for the coming years what turnover you will achieve simply because of the ERP changeover? How much you will save through more efficient or automated processes throughout the company?
Secondly, no one embarks on a project as big as an ERP changeover without necessity. So if you are thinking about it, you are probably facing major challenges. The future viability of your company is probably at stake. Sometimes banks or investors also put pressure on you to modernize your IT.
Instead of a key figure, you need cogent, strategic arguments for your decision. Which of the following apply to your situation?
Argument 1: The old ERP no longer receives support
Many ERP solutions were purchased at the end of the 1990s. (Fun fact: the predecessor systems would often not have been able to cope with the changeover to the 2000s). Since then, the software market has consolidated considerably: Today, 25 years later, many providers no longer exist. Or support for the old systems has been discontinued.
Many of the IT employees who were responsible for the launch are no longer with the company. The result: the ERP system has not been properly maintained and further developed for years.
Argument 2: The old ERP lacks important capabilities
Do you have plans that your current ERP does not support? 10 or 20 years ago, you didn’t have today’s requirements in mind when selecting an ERP. Now important capabilities and functions are missing. This can hinder and prevent your company’s development. For example:
- Internationalization, such as the leap to the USA or China
- Diversifying your offering and tapping into new markets, such as the transformation to e-mobility
- Introduction of new business models, such as usage-based billing (as-a-service models)
Even newer technologies cannot usually be integrated into older systems. A current example of this is AI-supported forecasting and optimization. Such technologies are critical for companies to remain competitive in the coming years.
Read also: Must-have requirements for an ERP for SMEs
Argument 3: The old ERP is inflexible
Until 10-20 years ago, the markets developed at a leisurely pace; in conservative sectors such as mechanical engineering this was certainly the case. The IT systems from this period reflect this. Configurations and processes are created once and can no longer be changed so easily. Data can only be used within the solution.
Today, technologies and markets are developing rapidly. It feels like there is a new crisis every year. Only companies that react and adapt quickly will survive. The ERP system must be flexible enough for this and, among other things, allow processes to be changed easily. It must be able to be integrated into the rest of the IT landscape and exchange data with other systems.
Argument 4: The old ERP is complicated and training-intensive
Multiple menus at the top and left, rows of mini-buttons, data deserts in rows and columns, text in font size 10 … The origins of ERP software from the 1990s can also be seen visually.
This is not only unsightly, but also hinders work. Employees have to search for data. Important information is lost. Frequently used functions are difficult to access. For field staff, data maintenance via mobile devices becomes a test of patience.
New employees have to be trained intensively; they need months to warm up to the system. It is generally difficult to get younger people interested in working with systems from the last millennium.
Argument 5: The old ERP does not support automation
Automation has been a matter of course in production for decades. Repetitive tasks are carried out by machines. And in administration? Clerks have to click on “release” umpteen times a day for standard orders, create bookings and much more. The problem: the outdated ERP does not support automated processes.
This wastes a lot of time on unnecessary routine work. Employees could be much more usefully occupied with other tasks. In view of the shortage of skilled workers, nobody can really afford this “luxury” anymore.
When is it worth switching to a new ERP?
Are you considering whether to switch to a new ERP system or whether the old one will “still do the trick”? Our recommendation: Don’t forecast ROI with fictitious figures. That won’t get you anywhere. Instead, ask yourself the following questions about your current solution:
- Does our ERP system support company growth and our strategic plans?
- Can we do everything we need to do to be successful in the long term?
- Will the solution help us to prepare for the challenges of the coming years?
If you answer no to any of these questions or are unsure, then a new ERP system is probably a sensible investment. It will probably pay for itself relatively quickly. This cannot be calculated in detail. But we are observing a welcome development. For a long time, ERP projects were expected to take around 5-7 years to reach ROI. Thanks to the increased capabilities of modern ERPs, this time has now been significantly reduced. For our customers, the ERP changeover usually pays for itself within 2-3 years of going live.
Practical guide: Introduction of an ERP system
Are you planning to change your ERP system? Read our free white paper to find out how to create a specification sheet, select the right system and avoid major mistakes during implementation.
