Is Your Legacy ERP System Costing You Innovation?

Posted by Barney Beal, Content Director, NetSuite

The limitations and headaches that come with legacy, on-premise ERP systems become clearer every day.

Recently, on diginomica.com, Brian Somer, an industry observer, has taken on the subject, writing that Old ERP is way past its “Best When Used by” date. He writes:

They were designed when IT was constrained. These systems captured accounting and other internal/operational events and then pushed them from one sub-ledger or subsystem to another. They helped far-flung and disjointed firms finally co-ordinate activities. They brought a measure of efficiency to countless firms and the results were even apparent in the GDP statistics of countries globally.

Yet, these products were always doomed to obsolescence. Moore’s Law advancements in memory, throughput, processor speed, telecommunications, storage density and so on were always going to spell doom. Seriously, how many 30 plus year old technologies are still with us today? Who among you still uses land-line telephones, dialup modems, zip drives, floppy disks, fax machines?

Sommer hits on an important point many NetSuite customers have already come to understand. That highly customized, legacy on-premise ERP software systems not only present huge costs in terms of maintenance fees, hardware infrastructure and the IT personnel required to support them, they present a huge cost in lost opportunities and innovation.

Organizations that have already invested heavily in on-premise ERP are reluctant to rip it out and replace it. That’s understandable given the huge sunk costs they have in these systems and the disruption to the business replacing them can cause. SAP and Oracle ERP customers are well aware of the disruption that comes with just an upgrade to the system. Broken customizations and work flows have many companies on software versions that are two, three generations old.

Yet, the cost of doing nothing can be far more expensive and the internal disruption caused by launching a new ERP project pales in comparison to the disruption already going on in the industry. How can businesses held back by their legacy ERP, reluctant to even upgrade their systems, compete in today’s fast-moving business environment? They need to be investing IT resources -- too scarce already for most businesses -- in innovation, not day-to-day operations such as patches, fixes, support calls and otherwise managing infrastructure.

Companies that have moved to cloud-based software, true multi-tenant cloud software, not the same old software architected before the Internet even existed, are seeing the benefits of having someone else manage their infrastructure and customizations that carry forward automatically with every upgrade. Analyst estimates put costs savings as high as 50 percent or more. But these businesses are seeing even greater benefits in speed and flexibility.

Lengthy implementations that last 18, 24 months are just not practical for companies looking to rapidly move into new geographies. Nor can businesses seeking to adapt new business models like adding services to a hardware business or new product lines or target customers rely on inflexible business systems based on an industrial past. As Somer writes:

A radically different economy and kind of business has exploded onto the scene the last decade or so. Virtually every reputable consultancy out there is trying to help clients of every stripe, industry or size become a digitally reinvented firm.

Old-line retailers have got the religion and offer omni-channel methods for sales while also using big data feeds of weather forecast data to schedule store workers.

Indeed, draining innovation out of your IT budget is just one of the eight ways legacy ERP harms your business.

For more on the ways your old ERP system is holding you back, download the white paper 8 Ways Legacy ERP Harms Your Business.



 

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