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Exposing The 7 Hidden Costs Of Putting-off Your ERP Upgrade

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One you are up on an ERP system, for how long to you continue to pay maintenance? The answer is indefinitely if you want to keep current on the software. Hopefully, you have not modified the core software, such that you have broken your upgrade path. If you haven’t then you can move along with the software as it develops and matures.

This article shows the key things you need to keep in mind as to why you should continue on maintenance and continue to upgrade your software. Keeping current will provide you with added benefits that you may not be aware of.

Exposing The 7 Hidden Costs Of Putting-off Your ERP Upgrade
Margaret Hunnicutt

It’s very easy for business managers to put off an enterprise application
upgrade. The tendency is to only look at the immediate and obvious impact on
cash flow. There are other factors so often overlooked that also impact cash
flow. While they may seem less tangible, these seven factors directly effect the
medium term and more importantly the long term, profitability of your
organisation.

First, let’s explode the two most common myths to delay
taking up an ERP software upgrade.

Excuse #1: �Upgrades are by the vendor
and for the vendor.�

It’s true, and it’s not true.

Having worked
as a developer in a software house and in the customer support team, I can say
from first-hand experience that customers demand enhancements. This means
existing customers and prospective customers ultimately drive
upgrades.

The true part is yes, vendors want new customers and so they
will adapt the software to be more attractive to new customers.

The false
part is that many software houses earn more money per year from their existing
customer base than from new customers. To stay in business, the vendors must
listen to and respond to their existing customer base. Over the last 10-15
years, we’ve all seen the impact on even the large software manufacturers that
didn’t get this right.

To suggest the only benefactors of upgrades are
the software vendors is not correct. To suggest that your business will
necessarily benefit from every upgrade is also not correct.

The rate at
which upgrades are offered is not going to suit all customers all of the time.
So the rate at which your business adopts the upgrades is certainly in your
complete control. You have the challenge of finding the right balance between
the benefits of the upgrade and when you adopt them, relative to your
environment and industry.

Excuse #2: �If it ain’t broke � don’t fix
it.�

If we’re going to throw adages around, this one could equally be
discredited with �if you’re standing still, you’re falling
behind�.

Exposing the 7 costs

1) Skilled resources � it’s
perfectly natural and normal for people to want to be skilled up on the �new
thing�. I don’t mean the leading-edge of technology, I mean current.

a.
From an employee’s perspective, any future employer is going to look favourably
on an applicant with updated skills, and far less favourably on a
skilled-but-outdated applicant.

b. From a contractor’s perspective, you
can usually find more work in the �new� area and its usually more
interesting.

c. From a business perspective � quality skilled resources
of older skills become harder and harder to find and more costly over time.
Current staff become stagnant and stale, and prospective employees you would
want to attract will be more attracted to your competitors.

2)
Competitiveness � the fast paced world we all live in demands your business
adapts as well. Software vendors rely on a combination of customer requests and
best-business practice of the day to form their enhancements strategy and
direction. If your business is still using the best practice of 10 years ago,
your business is struggling. Software upgrades give the enhanced functionality
and efficient business processes to help keep your business
competitive.

3) Return on investment � if you prefer the DIY approach to
updating your software, you will be weakening the investment the business made
in selecting the enterprise application.

It costs more to develop the
software in-house than to adopt the enhancements produced by the software
vendor. And even if you don’t see staff costs as direct costs to the business,
or you get developers at rock-bottom prices, you will be missing out on the
strategic integration of those enhancements to the product core. The end result
is you will be spending more and benefiting less from IT than your
competitors.

4) Compliance � software manufacturers stay on well informed
on legislative changes that may impact the design or flow of information in
their systems. Why re-invent the wheel?

5) Innovation � when businesses
develop in-house systems, they become reliant on internal knowledge. Another way
of looking at it is they become insular or stale. If your business systems are
in large part �stock standard� then you can easily infuse new ideas from outside
consultants, experts from other industries, and even from new staff, to help
foster growth and excellence across the enterprise.

6) Productivity –
Software upgrades provide the perfect catalyst for a business to adopt and
effect process change and gain productivity.

7) Staying on the same page
– This is one of the most common �opportunity cost� mistakes made, even by
companies that keep their software versions current.

Upgrades serve as a
reminder that business technology needs to stay in touch with the business it
serves, and visa versa. This is a perfect opportunity to review the business
strategy and the IT strategy, and re-align both to the same long-term
goals

Proper analysis of the risks and costs should be done as part of
the normal planning process of an upgrade. Pro-active engagement by the business
and planning by the business overall (not just seeing it as a technical
exercise) will help your organisation achieve and realise value out of your
software investment.

If you are looking to draw out the best functionality and efficiency from your
existing investment in IT, call us now. Our specialty is JD Edwards applications
post-installation professional services. � Qsolve Pty Ltd, all rights reserved
www.Qsolve.com.au

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