Upgrading From a Legacy ERP to a Modern ERP
A legacy ERP system might have served you well once, but it can easily become outdated and cumbersome.
According to a recent ERP system study, almost 50% of companies are planning on acquiring or upgrading an ERP system. The main reason? Replacing an outdated legacy system.
Our cloud software experts at SCS Cloud have helped many clients upgrade their ERP systems, so we know the common reasons and roadblocks associated with moving to a new ERP system. Plus, we have a few helpful tips to make the process as smooth as possible. Here's what you need to know about upgrading from a legacy ERP to a modern one.
What is a Legacy ERP System?
In short, legacy ERP just means it's an older, outdated system.
ERP started as material requirements planning (MRP) for manufacturing companies back in the 1960s. IBM worked with a traction and construction manufacturing company to develop an MRP system. This system helped the company keep track of raw materials, inventory, and deliveries.
Eventually, this morphed into what we know as ERP systems. ERP first appeared in the 90s, when other large software companies wanted to replicate the software manufacturers were using for clients in all industries.
The Evolution of ERP Systems
Initially deployed as an on-premise solution, ERP systems required extensive setup and maintenance. However, they were capable of a lot more than just managing manufacturing data – they pulled in data from other departments, such as finance and marketing. Developing software companies started to take note.
NetSuite was the first to launch a cloud-based ERP system in 1998. This allowed businesses to manage data in ERP systems from anywhere they had an internet connection. It also saved companies a lot of money since they no longer needed to purchase servers or IT staff to maintain them.
Phasing Out Legacy ERP Systems
In the last decade or so, many legacy ERP systems were bought out by large software companies with modern ERP systems. While the parent companies might have left a few select staff members to support each legacy ERP, it became increasingly difficult to update them and they lacked many features that come standard in a modern ERP.
That's what brings us to our main point – upgrading from a legacy ERP to a modern one. If you aren't sure whether or not to make the switch, we're here to help you decide!
Legacy ERP vs Modern ERP
New ERP systems are referred to as modern ERP systems. The main difference between a legacy ERP and a modern ERP is how they're deployed and what they're capable of – modern ERP systems are deployed from the cloud, whereas legacy ERPs were on-premise only solutions.
Deployment: On-Premise vs Cloud
Cloud software has many advantages over on-premise solutions. Mainly, you don't need to pay to keep servers and computers at your business location or hire a dedicated IT team to keep them updated and running.
Plus, without cloud software, the data from the ERP system is only accessible if you're at the physical location of the business. This also includes any updates or customizations needed – cloud software can be updated remotely, while on-premise solutions require a dedicated staff member to handle changes at your office.
ERP systems are designed to store and manage large amounts of data. From customer relationship management information to inventory and financials, ERP systems serve as the centralized hub for everything, so it's important the ERP system you use is highly capable. Unfortunately, most legacy ERPs just aren't up for the job.
This could be due to many reasons, such as a lack of updates, outdated technology, and inability to integrate with other systems. But the point still stands: they're simply outdated. Most companies that bought out legacy ERPs are just slowly phasing them out, anyways.
4 Signs It's Time to Replace Your Legacy ERP
Based on our experience helping clients move out of legacy ERPs, these are the top signs it's time to upgrade your ERP system.
1. Difficult to Integrate with New Technologies
ERP systems handle many different aspects of a business. One of the most important roles of any ERP system is its ability to directly integrate with other software, systems, and vendor networks to pull in relevant data.
However, an older ERP system usually has issues integrating with new technologies. If it was built during a time when a certain software or functionality didn't exist yet, it might not even be possible to integrate.
Lack of available integrations can become a huge problem, especially for a system you rely on to combine business metrics used in decision making.
2. The ERP System is Slow
Legacy ERP systems need to be updated manually. Unlike cloud software, updates for on-premise solutions can't be pushed live unless there's IT staff there to perform the update. These manual updates are optional but highly encouraged. If for some reason, your business didn't spend time making sure your ERP system was frequently updated or you lacked the resources to do so, it could quickly become outdated and slow.
Some legacy ERPs suffer from a lack of technical support from the vendor. If updating an ERP system becomes difficult due to limited resources from the vendor, or it's difficult to find knowledgeable third-party developers, it's going to become expensive to maintain. Plus, that means it's only a matter of time until there isn't any support offered at all.
3. Lack of Functionalities
While the ERP system you use might have been perfect for your business at the time, modern-day software requires frequent updates to keep up with rapidly changing technologies. If your ERP system isn't keeping up with the changing needs of your business, or lacks features that are now essential, it might be time for an upgrade.
From our experience, we've seen a lot of ERP systems that have issues tracking data for manufacturing and distribution companies. This includes problems keeping track of inventory, revenue, and manufacturing requirements. One of the main reasons companies switch ERP systems is due to needing the latest technology.
4. Unable to Support Business Acquisitions
Some ERP systems aren't capable of combining data from two companies during a business acquisition or supporting multiple subsidiaries.
Companies that acquire additional businesses without upgrading ERP systems will either end up buying a second instance of their current system or trying to manage data out of two separate programs. Neither of these options is ideal for a new acquisition – data will be disconnected and difficult to combine, creating unnecessary work for many employees.
Plus, if you made an acquisition to realize economies of scale, completely separate business data and processes will only hinder growth.
What is the Best ERP System?
The best ERP system for your company depends on exactly what you're looking for. That said, there are a few top players:
- Oracle NetSuite - NetSuite was the pioneer of cloud ERP systems. Even though they were the first, continuous updates and optimizations ensure this is consistently one of the top ERP systems on the market. (As NetSuite implementation partners, we can attest to the endless features and functionalities of NetSuite's ERP system and how they contribute to the success of our clients).
- Microsoft D365 - this ERP system offers two separate solutions: one for small and mid-market businesses and another for large companies. It's quickly becoming a favorite among companies of all sizes.
- SAP S/4HANA - this software has the most advanced capabilities out of any other SAP software. Comparing SAP to NetSuite, they're similar ERP systems. However, SAP S/4HANA offers on-premise, hybrid, or full cloud implementation whereas NetSuite is only a cloud ERP.
How Long Does it Take to Switch to a New ERP System?
In general, it can take anywhere from 6-12+ months to implement a new ERP system. However, the timeline for implementing a new ERP system is different for many companies.
The length of time it takes to migrate from a legacy ERP to a modern ERP depends on a few factors. Mainly:
- The amount of data that needs to be migrated
- Level of customization needed
- Business processes that will be put in place
- Employee training required
Benefits of Upgrading Your Legacy ERP
Having been in the industry for years, we understand the hesitation and concerns associated with moving out of a legacy ERP system. However, the benefits far outweigh any issues or learning curve you might be worried about.
As long as you choose an experienced implementation partner, it should be a smooth transition! Here are some of the top benefits most clients see when they move to a modern ERP system.
New ERP systems have a lot of automation built into them. This is something legacy ERPs lack, but is incredibly beneficial for any type of business.
Automation is used for business functions like sending invoices, automated billing, inventory purchasing, and more. This is a huge time saver for employees! Plus, it makes scalability all that more attainable. (For a sneak peek at some of the automation tools NetSuite has to offer, check out these NetSuite bundles.)
While the automation mentioned above is a huge boost for productivity, so is using a completely up-to-date system. Many times, outdated systems become a headache – especially if you're trying to make them work for modern solutions.
Instead of employees spending time on tedious tasks, a modern ERP system handles it all for you.
A Centralized Data Source
While this should be standard for all ERP systems, older ones weren't very efficient at integrating with different programs. Many clients using legacy ERPs complain of data silos and the difficulty of combining data from multiple sources into one actionable report.
Modern ERP systems should easily integrate with any other software, programs, or vendor networks you use. So instead of pulling one report through your ERP and another one from a separate program, all of the data is in one place, ready for your thorough analysis.
Quick Tips for Upgrading Your ERP System
Before upgrading, there are a few important items you can address within your business. Knowing the answers to everything mentioned below will help a cloud software company better understand your needs and set you up with a solution that fits them.
- Know exactly what business needs aren't being met
- Have a clear picture of all custom modifications that need to be made. (The main reason ERP implementation goes over budget is that companies don't realize they'll need customization until after the project has already started)
- Have an idea of new business needs that might arise as your company grows
- Make sure all employees are properly trained on the new ERP system
Need Help Switching ERPs?
We're dedicated to helping your business grow through the use of top-notch cloud software solutions. Schedule a FREE consultation today so we can walk you through how NetSuite's ERP could benefit your business.