Back in the early 1990s, change happened less rapidly. Product cycles were slower, communication occurred mostly by telephone and fax, and email was still a novelty. If you wanted to boost sales, you hired more sales personnel. Let’s just say you could afford to move “a little slower.”
But over the last few years, the pace of business and innovation has accelerated dramatically. Today’s speed of change places stresses on business processes. Worker expectations have changed on how they want to engage with your business systems. And your customers have changed the way they want to engage with you. Businesses can now go global in an instant, eCommerce has opened up new sales and customer service channels and the last decade has seen the birth of several hyper-growth companies.
Owning an ERP system that can only be upgraded every four or five years (at best) is simply not enough to maintain competitiveness with your peers. Business and technology are now moving so quickly that even if you do invest six months and $1 million in an ERP upgrade, the end result will be out of date by the time it’s completed. Worse still, old ERP is fundamentally incompatible with the way companies need to be structured for success.
It’s time to explore the eight ways that your aging ERP system is holding back your business.
The key to knowing how aligned your ERP systems are with your business imperatives is measuring how much of the IT budget is devoted to innovation rather than maintenance.
How much of IT’s time can you devote to addressing new business requirements, rather than day-to-day operations such as patches, fixes, support calls and otherwise managing your infrastructure? Take a hard look at the aging, version-locked ERP system you are running right now, and do the math. Analysts from Forrester to Gartner measure this allocation closely and find that maintenance spend can range from 50 percent to more than 90 percent of a typical IT budget. Only a fraction is left over for meeting business needs. It’s no wonder, considering the average cost of SAP deployment can be between $12 million and $17 million, according to CIO magazine.1 Subsequent recurring maintenance fees, infrastructure upgrades, integrations and ongoing IT maintenance can quickly consume the IT budget.
Simply changing the equation and reallocating the IT budget from maintenance to innovation is almost impossible with old
ERP, because every costly old on-premise ERP upgrade, patch and fix is “opportunity cost” —money and time that isn’t spent on tailoring ERP to meet the needs of the business. Worse still, businesses have little left over for managing core areas such as security and reliability. For example, does your business have a budget left over to manage a second data center?
But your competitors are already changing their budget allocation—and cloud computing is the tool that enables them to do it, by cutting IT costs by 50 percent or more.2 They’re able to reduce spend on maintenance, and increase spend on such value-added activities as creating new cross-functional workflows and reporting processes, adding sales channels, entering new markets and improving connectedness between internal and external systems. That adds up to a decided competitive advantage, while the company gains enterprise security, redundancy, and data recovery that would be cost-prohibitive as internal company initiatives.
Does your IT budget allocation look like this? Blame your outdated on-premise ERP.
1 Why ERP Is Still So Hard, CIO Magazine, Thomas Wailgum
2 How TCO Benefits Make Cloud Computing a No-Brainer for Many SMBs and Mid-Market Enterprises SMB Group, Inc. February 2013
The accounting and regulatory environment is in constant flux as governments tighten fiscal policy through sales and corporate tax changes, or accounting bodies implement more stringent requirements. These kinds of changes place enormous pressure on finance organisations. An out-of-date ERP is simply not designed with change in mind. How could your ERP install circa 2012 ever have known about revenue recognition changes that would be hitting in 2021?
The gulf between your ERP and your current business operating environment is filled with spreadsheets and headcount. This is the “putty” that fills the gap that your ERP was meant to automate. Revenue recognition schedules suddenly migrate to spreadsheets, local geo tax reports get massaged through CSV exports and manual entry, and sales tax calculations suddenly start becoming error-prone affairs.
The fact is that your on-premise ERP will never track with change—because on the rare occasion you upgrade it, the operating environment will already have changed, and spreadsheets and personnel once again rush to fill the gap.
In contrast, cloud-based ERP aligns continuously with your operating environment. It applies the same philosophy to corporate ERP that’s behind web-based applications—you’re always up to date to adhere to the latest accounting rules, tax regulations and compliance standards. These upgrades are rolled out regularly by the cloud ERP vendor as necessary and while you sleep, your ERP is updated with the latest regulations and requirements. The result is less risk, less headcount and more time spent on strategic rather than operational tasks.
Has your operating environment changed but your ERP stayed the same? Welcome to spreadsheet hell.
The web enables businesses to go global instantly—reaching many millions of customers in a year or two, whereas it used to take a decade or more to make that type of progress.
Some of today’s fast-growing publicly traded companies are growing because they are not shackled to their on-premise ERP systems. Had these companies relied on an upgrade to the installation of their on-premise ERP system to take advantage of innovation, who knows where they’d be today?
Your ability to compete is diminished if you’re running an aging install of Microsoft Dynamics NAV or Epicor that was designed for when businesses grew incrementally—country by country, market by market, over years and decades.
The old way of doing business meant deploying multiple ERP instances and databases for each market. It meant hiring IT in each location, setting up offices, procuring software and hardware, and enduring onerous setup processes. IT budget, resources and time were the constraining factors for business growth.
Cloud applications like NetSuite provide the engine to drive growth, enabling businesses to lay down an application's footprint for each country and subsidiary in weeks—not months or years.
Cloud ERP spares businesses from having to worry about scaling up expensive IT resources and large capital expenditures on IT infrastructure. The result is velocity that creates true competitive advantage.
It’s not just workers that are becoming mobile. Businesses as a whole are becoming more distributed.
To compete, businesses are looking to achieve agility and fluidity in their business structure. In a globalised world, businesses need to be able to choose where work takes place based on cost, timeliness and the ability to maintain and adapt an elastic workforce.
Today’s businesses are running operations in multiple locations and maximizing efficiency with offshoring and remote workers. But last generation’s ERP was never designed with this in mind, requiring hefty Windows clients and heavyweight software in each location. Old ERP forces you into an expensive centralised structure, unless you can afford to dispatch IT teams to every corner of the globe. It means maintaining desktops at multiple locations, upgrading clients and dealing with information fragmentation across local desktops. Businesses want to decentralise while maintaining visibility and control, but old ERP holds them back from achieving those goals.
Cloud computing enables the distributed “elastic” business—enabling the extended workforce to access applications from anywhere across the globe, offshore as it makes sense, and scale up and down easily whenever needed. They can easily operate on a true “follow-the-sun” model and not be limited by the constraints of centralised ERP or be dependent on local IT resources.
If you’re running legacy ERPs like Sage, Epicor, Quanta, or Exonet, you know the drill. Your business is running on spreadsheets, and management reporting is an onerous and error-prone exercise. You’ve got employees dedicated to the job of simply reporting, or reporting consumes the lion’s share of their day.
More often than not, it takes days to assemble bookings, billings and backlogs reports, or complete the periodic budgeting and forecasting process. You’re constantly struggling to unlock data that’s buried in the ERP (or other disconnected systems and spreadsheets). Amazingly, while businesses can today measure ad performance, marketing campaign responses, and the number of unique visitors to their website in real-time, core financial management reporting remains measured in weeks and business days.
And for good reason—there’s a gulf between what financial managers need and what their ERP is delivering. Static Crystal Reports or out-of-date spreadsheets emailed among managers just aren’t enough. Your ERP is starving your business of information, forcing you to make strategic and tactical decisions based on out-of-date, incomplete or simply erroneous data.
To compete, businesses need modern ERP designed for today’s needs, not the needs of yesteryear. BI and analytics should be part and parcel of the ERP experience. BI has to empower every employee with personalised key performance indicators (KPIs) in real-time, enable them to get down to the invoice behind that days sales outstanding (DSO) threshold metric, gain visibility across the complete business and create and share their own reports with self-service tools.
Combining the mobility and distributed access enabled by the cloud with real-time analytics puts your company firmly on the path to true competitive advantage—enabling workers across the extended business to collaborate and achieve alignment, no matter where their location and without days of delay. Modern cloud ERP like NetSuite eliminates the gap between the demand for analytics, your business processes and the decisions you need to make based on both of those items.
3 Five Prevailing Trends In ERP, Forrester Research
Everything has become connected through the cloud. Your customers are no longer content to wait on the phone to check an order; they want to browse your website to get their order status right now. Your suppliers stand ready to drop-ship your orders in real-time rather than forcing you to tie up capital in inventory.
Channels like Amazon are ripe to drive additional sales. Your website is increasingly your principal storefront, and customers judge your business by the level of service
it provides. Your operations have to be interconnected with customers, suppliers and partners, enabling real-time information exchange on demand.
But your out-of-date Legacy ERP deployment was never designed for such an interconnected world—forcing you to deploy expensive adapters, third-party applications and CSV exports. In short, Stone Age ERP was never designed to be connected across so many touchpoints and with so many external stakeholders—they’re simply not service-oriented systems.
As the Web increasingly becomes the medium for information exchange, your on-premise ERP is increasingly an anathema, a silo—disconnected and out of sync. The impact is multi-faceted. Your customers are frustrated if they can’t easily view pricing and inventory information on your website, or check the status of orders or returns. You’re frustrated if you can’t switch suppliers on demand, because the effort requires yet more expensive integrations.
In contrast, cloud ERP applications were designed to connect with other platforms and web applications within your enterprise and beyond. Designed from the ground up to be service-oriented and always-on, cloud ERP makes it easy to synchronise your back- and front-office with your website in real-time and connect to the extended enterprise. Your customers see their orders and returns in real-time. Your suppliers are able to fulfill your customers’ orders as they process in your ERP. Your stock levels are always up to date, providing visibility for your sales and service reps as well as customers.
Are you part of a self-service business? Can your employees enter time and expenses themselves into the ERP, or does someone need to rekey it for them? Can an accounting manager quickly implement a new purchase order process, or do you need to wait weeks for IT to do it? Can your finance team easily change the invoice template, or add another field to a customer record themselves? If none of this rings true, don’t blame your co-workers—blame your ERP.
Stone Age ERP was designed when businesses were top-heavy in general administration—when it was standard practice to have someone assigned to rekeying purchase orders or time and expense entries. Back then, a manager could offload his reporting to the finance staff, and you could hire another IT guy to make an ERP process change.
Cloud ERP is designed for lean businesses and uses the power of the web to drive employee self-service, just as the Web has securely transformed online banking and customer self-service systems.
Cloud ERP frees businesses from the brittle, inflexible and change-resistant ERP of the past. With the cloud, businesses can run on ERP that is “version-less.” It means that businesses get the latest innovations automatically, from new features to support for the latest regulations. No more waiting, no more costly upgrades, no more upgrade risk. No more outdated ERP.
“Version-less” cloud ERP enables enterprises to experience ERP innovation as fast as consumers experience innovation in the enhanced web applications they use every day. It continuously aligns your ERP with your business operating environment.
Better still, enterprises no longer have to live in fear of customisations acting like “silicon concrete,” hardening their ERP to change and slowing their business to a crawl. They can finally customise their ERP with confidence, because with cloud ERP, customisations migrate automatically with every new release. Customisation no longer becomes a barrier to innovation.
A Forrester Research Forrsights survey found that the top four reasons that businesses move to the cloud are improved business agility, speed of implementation and deployment, faster delivery of new features and functions and to support business innovation with new capabilities.
At Verde, we couldn’t agree more—we’ve seen companies and subsidiaries that run on the NetSuite cloud, experience the same benefits.
In today’s business environment, businesses can’t afford to ignore
these competitive factors and advantages:
Consider the alternative.
Remaining on Stone Age “version-locked” systems means high ongoing cost, distraction from focusing on what matters and a continuing drag on business agility. And ultimately that means falling behind your competition.
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