This being the summer holiday season and with some time on my hands, I have started reflecting on why we continue to look at ERP in upgrade cycles. Firstly, it is worth considering the word UPGRADE. How many times have I actually participated in a like-for-like upgrade of an ERP system? Probably a handful of times in 20 years; all the other projects have been re-implementations or replacements of obsolete technologies.
So why do we persist with talking about “using standard”, “avoiding modifications” etc. when, at the end of the day, we are highly unlikely to ever upgrade our solutions as such?
Obviously, a key reason is that it is difficult to persuade senior management to investment a high proportion of the company’s profits in a solution that is likely to be replaced after 6-8 years. Talking about upgrades when building the business case seems more appropriate.
Also, by using the upgrade argument to limit modifications, we are able to contain the project scope and therefore speed up the implementation. By avoiding modifications, the chance of success is also higher because we do not have to regression test added functionality – this being a highly time consuming high risk activity.
Anyway, back to the main question: Why upgrade?
Very often the key drivers behind an upgrade project are:
- Obsolete technology.
- Skills unavailability.
- Functional shortfalls.
The above challenges seem to drive most replacement projects where the solution has been in use for a long time and have probably reached its expiry date a while back, but the organisation has been unable to find the necessary resources to carry out the project.
There is a number of other reasons, but in the main, businesses seem only to invest in ERP upgrades when forced to. This would indicate, that vendors and service providers are not able to sell upgrade projects on added business benefits – this also seems to tie in with my admittedly anecdotal experience.
So where does this leave an IT leader looking to keep this core part of the IT application landscape up-to-date?
Clearly, in many companies ERP is no longer considered to significantly contribute to generating a competitive advantage (unlike the golden ´90s era), so IT investment is channelled toward other technologies. If this is fair or not, I will leave to others to judge. Also, most mainstream ERP packages today provide sufficient functionality to adequately support most key business processes, so businesses are unlikely to require additional functionality.
ERP vendors are then seeking to add non-core features such as Business Intelligence suites, eCommerce sites, retail capabilities etc. to tempt customers to upgrade, but often businesses already have solutions in these areas and the benefits are not seen to outweigh the massive upgrade investment.
With this in mind, we should ask the question, with ERP in the cloud, will we be entering an era of buying into a mainstream vendor technology stack and staying with them for 20+ years? In a recent blog post, I shared some of my thoughts on the current state of cloud ERP. Albeit, I was slightly hesitant to buy into the cloud idea, wholesale, I can definitely see us moving into the cloud within the next few years. Whether this will, as some argue, make the issue of upgrading redundant because the software will be continuously updated, remains to be seen. I still think, as most enterprise cloud deployments will be customer-specific private-cloud affairs, we will see major upgrades with need for full regression testing.
Some while ago, in another blog post, I argued for using best-of-breed packaged software to augment the core ERP solution. In many ways, using additional software packages allows you to upgrade parts of the application without having to upgrade the core ERP solution. In future, hopefully, we will see Dynamics AX becoming increasingly loosely coupled so we will be able to upgrade individual modules and run different versions of modules.
So, at the end of the day, I would argue that instead of talking about ERP projects and upgrades, we should instead talk about investment cycles where the business has to continuosly invest in the application backbone running the business, namely the ERP solution. That would also mean that the business should maintain a sustainable investment in skills, capabilities and vendor relationships to ensure that the ERP solution is maintained to a high standard and kept up-to-date. This way, the business, I would argue, is able to save money in the long run and the outcome would be a more robust solution with more predictable costs associated with it. It is time to acknowledge that without ERP a business would struggle to process key business transactions and an ERP solution cannot be maintained on the cheap.
These were my summer musings on the theme of upgrades – please enjoy the summer…