Organizations that use modern ERP systems typically spend millions of dollars per year just to maintain their enterprise software packages. One of the benefits of implementing a modern ERP system is that vendors spend an equal amount (or more) a year on R&D, functionality improvements and other enhancements that enable customers to benefit from lessons learned and the technology development from other companies. ERP vendors such as SAP, Oracle, and Microsoft Dynamics invest heavily in constant improvements to their solutions. In theory, these ERP upgrades should enable the customers of ERP vendors to get more out of their enterprise software solutions.
The downside of upgrades, on the other hand, is that ERP vendors are constantly changing and improving the software, often making it more difficult for customers and end users to keep up with the various iterations of the solution. For this reason, organizations can grow tired of the changes, stop upgrading and eventually opt out of annual maintenance and support. However, this type of band-aid approach can be more detrimental than the change fatigue organizations experience during the never-ending upgrade cycle.
In other words, upgrading your ERP system is a double-edged sword: on one hand, organizations want to keep up with technology improvements while, on the other, they don’t want to constantly change their operations to adapt to functionality. To add insult to injury, most organizations’ reasons for upgrading isn’t tangible ROI. Instead, they upgrade because they have no other choice if they want to continue to have annual maintenance and support. Upgrades aren’t necessarily a good or bad idea in general, but an organization should upgrade only if it can point to three key reasons for doing so:
1. The business operations are going to benefit from the ERP system upgrade. Just as organizations shouldn’t upgrade because they feel as though they have to implement new technology, software upgrades should never happen simply for the sake of technology. Instead, there should be a clear benefit for doing so, and one that outweighs the costs. In other words, there should be a strong return on investment for the upgrade, along with a clear benefits realization plan for attaining those benefits. Unless you are using a SaaS ERP system, you should ensure that you make your upgrade decision based on the potential impact to your business operations.
2. The organization can effectively digest the upgrade. When most organizations complete an ERP implementation, going through the pain and heartburn of an upgrade is typically the last thing on the minds of CIOs, CFOs and other executives. The project team and overall organization is often times burned out from changes involved with the initial implementation, and most organizations don’t have the skills, capacity or stomach to upgrade every several months when new versions of the software are available. For this reason, upgrades should only be completed if there are appropriate resources and capacity to do so. Even with SaaS ERP systems – where physical installations of new software are not required – organizations need time to adjust and adapt to new software features and functionality.
3. There is a clear upgrade project strategy and plan in place. In order for upgrades to be successful, they need to be properly planned similar to an implementation. In other words, the upgrade needs to have a project plan, organizational change management and training plan, and other resources and focus required to make the initiative successful. Only by having this clear plan in place will organizations be able to succeed in their upgrade projects.
Although Panorama analysts have yet to study the failure rates of new implementations versus upgrades, we have had plenty of clients hire us to clean up their failed upgrade attempts. It’s important to note that upgrades of major new releases of an ERP system already in use can be nearly as taxing on an organization as a more greenfield implementation. Finally, SaaS systems, with all of their incremental and more frequent enhancements behind the scenes, can be confusing and overwhelming for end users. For these reasons, companies should proceed with upgrades cautiously and only do so if it makes sense to their organizations.
Your ERP vendor may threaten to cut off support or sell you on all the great features of an upgraded solution, but just as is the case with implementing new enterprise software, business and organizational needs should determine if and when you upgrade your ERP system.