People, in general, are getting healthier each year as we have become much more conscious about diet, exercise and lifestyle changes that weren’t so prevalent in past generations. Regular checkups at the doctor are now widely accepted, and many insurance companies now encourage, if not require regular visits. It wasn’t long ago, however, that people (especially men) only went to the doctor when it was a dire necessity.
While our personal habits have changed over the years, for the most part our business habits have not. That is particularly true when it comes to ERP systems. You would think that companies would welcome ERP “checkups” from time to time but this is rarely the case. In fact most companies only replace their ERP systems when they are absolutely forced to change. After 35 years of replacing ERP systems, I have learned that almost always, one of the following events must occur before a company will consider replacing their ERP system.
- The Disappearing Vendor – Many companies are still running on very old ERP systems and they become dependent on the vendors who support them. When that vendor goes out of business, retires or vanishes for any other number of reasons, companies will finally consider a change.
- Techno Lock – This occurs when a piece of hardware or an operating system will no longer support an application. Sounds hard to believe but many systems still running are 20-25 years old and without regular upgrades these systems can (and do) become obsolete due to technical obsolescence.
- Industry Morph – Sometimes a company’s industry encounters a disruptive change in technology, or a company can change directions all together and require a new system. Examples are the HIPAA requirements in the Health industry or supply chain requirements in the manufacturing industry.
- Who are those Guys – Yes, like the boys in the movie, Butch Cassidy and the Sundance Kid, many companies are looking over their shoulders constantly for the competitors who are trailing them, or worse yet, passing them by. Many times, the competition has deployed new technology and this forces companies to consider a change.
There are a few other reasons why companies change an ERP system but they aren’t even worth mentioning here. The truth is that most company leaders are so busy with the urgent day to day issues that they don’t take the time to really analyze the health of their companies or the many cost saving benefits which could be added by the implementation of a new ERP system.
Most importantly, what is at stake is the diminished implicit value of their companies. When it comes time to consider a merger or possibly being acquired, there are only three things which will be perceived as value. They are cash flow, experienced staff and internal systems. The acquisition value alone, of a company with a poor ERP system can be decremented substantially because the buyer assumes they will need to replace the systems as well as suffer through the time and process of transition. A few improvements or even an overhaul could pay huge returns in the end.
