Re- implementation – an alternative to change ERP system
20 May 21
Organizations today are using their ERP systems longer and longer before changing to something new. Our statistics show that an organization today changes ERP system at approximately 15-year intervals (however, it varies between different industry segments). This differs a lot when comparing with the statistics from the 1990s when organizations changed ERP systems in the interval of 5-7 years. The reason for this is that the industry of ERP systems was still relatively young during the 1990s. Although several ERP systems emerged during the 1970s, many new systems were born during the years 1985-1995. And those who were customers of these new systems often grew out of them and were forced to switch to a new system with broader and deeper functionality. During the 1990s, there was also a transition from minicomputer to PC / Windows, which also contributed to a generational shift of vendors and systems.
Although we can state that the lifespan of an ERP system at the customer has increased compared to “the early days”, we are convinced that many of today’s companies could extend their use for a further number of years. What speaks for this is our experience from +400 selection cases over the past 15 years. This experience shows that many of today’s companies have got “stuck” in an old setup that reflects the company’s organization and operations on the day the system was installed (10-20 years ago) but where the customer has not changed their configuration along with a changing business. And where the customer rightly after about 15 years claims that the system no longer supports the business in a good way and therefore wants to change system.
There may of course be other motives for changing ERP system, but we often see that the existing ERP system has support for what the customer wants, but that it requires a re-implementation for the customer to be able to utilize the system’s total capabilities. What we put in the concept of re-implementation includes review and change the model for steering and measurement of the business, which has effect on the accounting string in the books as well as changes in product cost calculations and the information model needed to meet the business’s current needs for KPI´s. In addition, there will follow optimization of the business’s processes. All this normally takes place during a system change but is still required if a re-implementation of a system is to be carried out where the configuration no longer supports current needs.
It is natural that the customer hesitates for a re-implementation as it creates concern that the project will be as complex and messy as a system change. However, this does not have to be the case if the installation is planned and prepared correctly. The advantage of a re-implementation is that both customer and vendor have good knowledge of the system and the customer’s operations, which reduces the risk of extensive consulting efforts. This is the case if the customer and vendor have been reasonably active in their relationship.
At the same time, a re-implementation must be compared with a system change that always requires a great effort from both customer and vendor to build knowledge about each other. And on this a comprehensive installation with testing and training. And where the effect of the system change may not occur until after a relatively long period of use.
The basic problem is that the discussion about re-implementation versus a system change usually arises when the customer has passed a certain level of pain. And in a situation where dissatisfaction with the existing system is so great that the customer chooses to change supplier largely to “get in something new” that does not carry a negative history. It then becomes more of a political decision instead of a decision based on facts.
Although it may be difficult to convince the company management and board, it should be included in the plan for active system management to carry out an analysis / evaluation of a re-implementation of the existing ERP system at intervals of about 8-10 years. This is to avoid getting stuck in an old configuration and as a way to extend the value of the investment previously made.
Even if the customer follows the system upgrades and always uses the latest version, it does not mean that the customer has the possibility to fully utilize the development and the new functions that are added to the system – without changing parts of the basic configuration. The risk is that you pay for continuous upgrades but where you cannot utilize the new opportunities. In the long run, this means that the benefits of annual fees and upgrades decrease over time.
The recommendation is to see re-implementation as an opportunity to increase the benefit of the investment previously made and also as a way to reduce the need for a future complex system change.