Why you need to modernize your ERP system
ERP is often one of the last parts of an organization’s IT estate to be modernized - despite the importance of a modern ERP system in facilitating digital transformation. There’s a simple reason for this: we don’t tend to think of ERP as a transformation critical system. At this point (if you aren’t a regular reader) you might well be thinking, “why should we?” ERP isn’t about transforming and preparing plans for the future: it’s about creating efficiencies and making the best use of the resources you have in the present.
But as many organizations are now realizing, modern ERP systems are about more than simply ensuring your resources are well-managed. They represent a key element in guaranteeing competitive advantage in every arena, from attracting and retaining talent to ensuring operational efficiency and nimbleness, to providing the strategic flexibility for your organization to grow, innovate, and satisfy your customers and stakeholders.
In this article, we’ll be exploring some of the reasons why modernizing your ERP system is essential if you’re to successfully pursue your digital transformation strategy - and why failing to modernize can put your organization’s operations at risk.
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Legacy ERP is a major source of technical debt and operational risk
“Technical debt” is the implied cost incurred when an IT decision-maker chooses an easy or quick solution at the expense of a more thorough or appropriate approach that would take longer. Since such a solution will almost always require reworking or refactoring somewhere down the line, what seems like a cheap option can often be significantly more expensive and cumbersome as time passes.
Legacy ERP systems are generally not fit for purpose in a world in which change is occurring faster than ever, thanks to regulatory environments becoming increasingly tight, evolving technology and customer preferences, and widespread geopolitical uncertainty.
Currently, technology is undergoing a raft of generational changes, the most significant of which is undoubtedly the move to the cloud. Cloud delivery models - particularly Software-as-a-Service - have wide-ranging impacts on every aspect of a business’s operations, from the way you manage accounting to the way you handle project management, talent management, procurement, and overall strategic planning and forecasting.
The proliferation and disbursement of data in the cloud also creates real changes and challenges to the way businesses handle compliance - especially since many organizations are subject to hundreds or thousands of different regulations and laws.
Legacy ERP systems are simply not equipped to deal with either the volume of data or types of data that all of these new burdens and changes require. When it comes to service-based firms, this inadequacy is compounded by basic design incompatibilities - typically, traditional ERP was built to accommodate the needs of manufacturing concerns managing tangible resources and fixed processes, not to manage knowledge-based activities that rely on people’s time and skills beyond specialized equipment and parts.
Failing to modernize will mean your organization is left behind
Although many see ERP modernization as a complex and costly task that can get in the way of business-as-usual thanks to the vagaries of large-scale implementation projects, this mindset robs Peter of paying Paul. The inherent limitations of your legacy systems are so fundamentally opposed to the kind of rapid decision making required in periods of extended uncertainty.
In fact, it may be the case that without modern ERP, your organization will not actually be able to understand its own limitations, as your view of your operating environment will be inherently limited in their scope by your legacy systems’ blind spots.
Modern ERP systems are designed for the flexibility and agility that modern volatility demands
Successful organizations run on the skills and knowledge of the people who work for them. Intellectual property has risen from being just 17% of a typical company’s value in 1975 to around 90% by 2020. And this is particularly if those organizations are what we call “service based” businesses; those who sell the time, skill, and expertise of their workers to provide services either to individuals or other organizations.
ERP modernization is an essential step in fully leveraging the knowledge contained within your organization. Modern ERP software - particularly cloud-based solutions - create a single source of truth for data and using automation (such as virtual assistants) to make information instantly accessible to those who need it. Making strategic planning, your month-end financial close, and even the granular management of time spent on particular projects and workflows simple and efficient.
As well as supporting a better working environment, it also allows for a more dynamic ongoing approach to both planning and decision making. A company supported by modern ERP can move from rigid annual or monthly strategic planning to a more adaptable continuous forecasting approach that encompasses all aspects of finances, operations, customer management, and HR processes and data, underpinned by information that’s trustworthy and always up to date.
Modern ERP systems make possible an advanced level of operational agility. They allow many routine processes to be automated, provide industry-specific frameworks around which your workflows can be planned and designed, and use built-in change management support to make strategic pivots easier for the whole organization to manage. They also provide the foundation for a talent strategy that can help your organization attract, retain, and grow talent in an environment where skilled workers are thin on the ground, acting as the basis of a more hospitable working environment that supports the wellbeing of your people and empowers them to do the work they want to do.
Modern ERP helps you fully embrace the advantages of the cloud
The smaller number of organizations that fail to make the jump will find themselves incapable of competing with those powered by more modern systems.
Modern ERP solutions are cloud-based by definition, and architectured to take advantage of the benefits that the on-demand delivery of compute power, storage, and functionality can bring. These include everything from embedded, real-time analytics and reporting via personalized dashboards on all aspects of your organization’s financial, HR, and project data, built-in security that protects your organization from cyber risk, and the capacity to instantly scale your operations as needed and deploy all the advanced tools and technologies your organization needs, as soon as that need arises.
How can Unit4 help you?
Unit4 has over 40 years of experience designing ERP software for service and people-centric organizations. As such, our solutions are tailored to your specific needs, and integrate with our FP&A, HCM, and PSA solutions to create an end-to-end system for managing your back office in a way that reduces the burden of administration on your teams and allows them to invest more time in processes and activities that add value for you and your customers. To learn more about what our solutions can provide for you and your people, check out our dedicated product pages here or click here to book a demo.
