Love Your ERP or List It?
February 23, 2022 Alex Woodie
When it comes to business applications, companies are strangely attached to them. According to a recent Forrester study, more than two-thirds of organizations are happy with a range of existing core business applications and don’t plan to leave them. But the upside of digital transformation beckons, leading the analyst group to wonder whether application owners are better off loving their ERP systems or leaving them.
Forrester tackled the challenge of digital transformation in a creative way with a recent report, titled “On Premise ERP: Love It or List It,” which compares a company’s business application stay-or-go decision to the popular TV series “Love It Or List It.” Anyone who has watched the Home and Garden Channel (HGTV) series, which is now in its 18th season, knows that there are a lot of factors that go into a person’s decision to keep a house and renovate it (i.e., “love it”) or sell it and move into something else (i.e., “list it”).
As it turns out, most couples in the HGTV series choose to keep their homes. That is likely the same path that most companies will take, considering the fact that 69 percent of organizations report being satisfied with their business applications and have no plans to leave. Only about one fourth of the nearly 2,100 decision-makers say they are currently evaluating or planning to leave their current vendor, and about 5 percent say they’re thinking about moving to a different product from the same vendor.
Clearly, the decision to stay with a legacy business application, like ERP, or to ditch it for something new is not an easy one to make. A businesses’ reputation and its existence is on the line when it begins to tinker with the software that automates its myriad business functions. Companies often have invested tens of millions of dollars, or more, over a period of many years to get the software to where they need it to be. Why would they rip it out for something new?
As it turns out, there are often good reasons for companies to undergo the digital equivalent of a major architectural renovation. With better software powering their businesses, companies can offer better products and better service, and better compete in the open market.
Specifically, the siloed, hard-coded nature of legacy ERP systems could prevent companies from giving their customers “operational must-haves, such as buy online, return to store, pay-per-use subscription contracts, and add-on app marketplaces,” Forrester analyst Duncan Jones and his colleagues Stephanie Balaouras, Liz Herbert, Alessia Stewart, and Madison Bakalar write in the February 2 report.
Other upsides of digital transformation cited by Forrester include “application usability” by employees, which is something every IBM i shops that has struggled to train new users on a 5250 screen is familiar with. The homogenization of expectations regarding customer experiences is another factor in favor of an upgraded user interface.
Overall business agility can grow as a result of digital transformation. Forrester cites Moderna’s successful roll-out of its COVID-19 vaccine as due in part from its SAP S/4 HANA deployment. Similarly, it cites an unnamed distributor’s success in adapting its delivery network during COVID-19 in part to its adoption of Oracle SCM Cloud.
But these experiences may be the exceptions rather than the rule. CIOs still do not seem to have the appetite for major long-term projects at the moment, Forrester says, noting that they prefer short-term goals at the moment. Pandemic-related office closures also make it more difficult to plan for big, hairy projects (there’s only so much planning you can do over Zoom).
And then there is the thorny matter that vendors’ “modern” ERP applications just aren’t there yet. “For many industries, the new products aren’t yet move-in ready,” Forrester says, noting that the software portfolios lack depth in certain industries. Infor CloudSuite, for example, only supports 60 percent of the functionality that its on-premise portfolio supports, Forrester says. Moving off the highly customized ERP systems will take many years, especially for complex, heterogenous companies, the analyst group notes.
So what is a forward-looking company to do? One of Forrester’s recommendations for companies that aren’t ditching their old ERP homes is to instead start the renovation process by adopting a “digital operations platform,” or DOP, to start preparing to shrink their ERP footprint and begin the shift to specialist SaaS products.
“DOP has a smaller functional footprint than ERP because many functional areas that were modules in ERP are now discrete categories, including supplier value management, human capital management, and customer service management,” Forrester writes. “Separating these from ERP enables you to implement one global solution in each area, which brings greater visibility and consistency where business units previously operated independently within their ERP silos.”
Other ways that Forrester recommends to help companies get more mileage out of their ERP systems includes retrofitting them with some of the features desired in digital transformation, such as adopting digital process automation (DPA), creating mobile interfaces that offer modern experiences and engagement methods, integrating disparate data silos, and adopting third-party supports services, such as those offered by Rimini Street and Spinnaker Support.
In the end analysis, there are a lot of factors that must be considered before ditching an old but functional ERP system. ERP migrations are notoriously risky and expensive endeavors, and should not be embarked upon just to be hip to the latest tech fashion. IBM i shops that have customized their applications to fit them like a glove probably know this better than most.