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TechTarget Enterprise Applications Media

Seems like youve just finished a multi-year ERP implementation, and already its time to consider an upgrade. Do the new features justify the hassle and expense? Or should you waitand risk paying more to maintain an obsolete system? This eBook provides expert advice on making the case for an upgrade, then executing a plan to ensure a positive return on investment. Plus: Learn how to define the business benefits of an ERP upgrade Find out how to tell when its time for an ERP upgrade Get answers to FAQs about ERP upgrade best practices Know the most common pitfalls and take steps to avoid them

How to Justify, Plan, and Execute a Successful ERP Upgrade

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How to Justify, Plan, and Execute a Successful ERP Upgrade

Table of Contents

How to Justify, Plan, and Execute a Successful ERP Upgrade


Table of Contents:
Five signs it's time for an ERP system upgrade How to make the case for an ERP upgrade FAQ: ERP upgrade best practices Resources from IQMS Tips for avoiding common pitfalls of ERP upgrades

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How to Justify, Plan, and Execute a Successful ERP Upgrade Five signs its time for an ERP system upgrade

Five signs it's time for an ERP system upgrade


By Beth Stackpole, Contributor Heading into 2006, spice giant McCormick & Co. Inc. saw some pretty clear signs that an SAP ERP system upgrade coverage, which meant McCormick was facing significant consulting charges whenever there was a problem going chain management (SCM) functions and vendor-managed inventory capabilities that were lacking in their existing platform. Rather than wait for the system to become a burden, McCormick opted in 2006 to proactively orchestrate an definitely play a role in McCormick's future. forward. Newer releases also boasted software functionality the company needed -- specifically, advanced supply was in its future. SAP 4.6c, which the company had deployed in 2002, was just about to lose maintenance

changes that would facilitate ERP integration and new capabilities that -- though not needed immediately -- would

upgrade to SAP ERP Version 6.0. It didn't hurt that Version 6.0 sported new Web functionality and architecture

take," said Terry DellaVecchia, McCormick's director, Enterprise System Technologies.

"We run our business on SAP, and not having the proper service and maintenance was a risk we weren't willing to Many companies feel the same way about enterprise resource planning (ERP) software, today the lifeblood of

narrower focus around manufacturing, HR and financial components, subsequent releases have expanded to capabilities.

turing to human resources (HR) and dealing with suppliers and customers. While early versions of ERP had a

financials, inventory planning and order management, along with the operational side -- everything from manufacincorporate SCM, logistics and warehouse planning, and customer relationship management (CRM), among other

business. ERP is designed to be an integrated system that handles the transactional side of a business, including

Ideally, ERP systems should serve as the primary source for all critical data while delivering analytics and reporting functions that help companies make better decisions. If they don't, or if one of these scenarios sounds familiar, it may be time for an ERP upgrade.

No. 1: Upgrade an ERP system that's more than five years old
While there is no so-called expiration date for ERP software, experts suggest the five-year mark as an inflection point to re-examine a system and evaluate whether it still has the muscle to efficiently run the business. There are some telltale signs that an ERP system has run its course. In addition to lack of maintenance and upgrade, as would the lack of new user interface enhancements and Web, business intelligence (BI) and business process management (BPM) improvements that categorize many of the newer ERP offerings.

support, ongoing problems caused by complex integrations and customizations can indicate the need for an

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How to Justify, Plan, and Execute a Successful ERP Upgrade Five signs its time for an ERP system upgrade

No. 2: Upgrade when ERP system integration is difficult.


Ease of integration is a particularly thorny problem driving many companies to consider an ERP upgrade. As companies spend time and dollars building custom software integrations to address their specific business processes or to accommodate third-party systems, they often end up with a complicated mess of custom code that becomes difficult to scale and support as more functionality and end users are added to the system.

upgrade to a single ERP system and get rid of the integration and maintenance work," said Joshua Greenbaum, almost all of which are based on a service-oriented architecture (SOA) foundation, go a long way in reducing integration and maintenance costs, Greenbaum noted.

was bolted on from third-party applications or internally developed software, you need to ask whether it's time to

"When you're spending more time integrating or managing a kludge of older systems and new functionality that

principal of Enterprise Applications Consulting, a consultancy specializing in enterprise software. New ERP platforms,

No. 3: Upgrade when an ERP system is missing the "modern" features and functions required to efficiently run the business.
evolving business requirements to allow customers to send orders electronically, for example, or to access accounts 24/7 online. "It could be a functionality issue -- maybe a manufacturer needs advanced logistics tracking or support for vendormanaged inventory," Greenbaum said. "If a system isn't able to perform those tasks that partners or large customers require, then it's time for a reassessment." Many new ERP offerings are packed with new business intelligence and Web functionality that help companies meet

No. 4: Upgrade when employees, partners and consultants aren't using the system -- or aren't available to fix it.
Beyond feature-envy, outdated ERP systems can be a huge disincentive to keeping internal customers using the with older ERP platforms that don't support the latest technologies. system -- not to mention a turnoff for attracting and retaining new talent. Specifically, finding experts to support aging ERP systems can be a problem, as is hiring top-quality consultants, who often aren't interested in working

their skill set on an open market," said Jon Reed, an SAP mentor and president of jonERP.com, an independent clear the ERP platform has run its course.

"Anyone who takes ERP consulting seriously is very wary about getting stuck on an old release because it will hurt outdated-looking or because it doesn't work well with Microsoft Office and other important productivity tools, it's consultant specializing in SAP. Similarly, he said, if companies find users backing away from the system because it's

No. 5: Upgrade when it's obviously time, whether the hard upgrade ROI is clear or not.
Experts disagree about whether making a hard ROI case is necessary for justifying an ERP upgrade. Some, like

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How to Justify, Plan, and Execute a Successful ERP Upgrade Five signs its time for an ERP system upgrade

justify an ERP upgrade; now it's more like 10% to 15%.

other systems. According to AMR Research Inc., formal ROI analysis used to be required 70% to 80% of the time to "People think all capital purchases require an ROI analysis, but in the case of ERP, it's not as common as you an absolute requirement for business."

McCormick's DellaVecchia, say a level of business case justification is needed, but not nearly as necessary as with

think," said Jim Shepherd, AMR senior vice president. "It's sort of like infrastructure -- you don't do an ROI analysis on whether you need electricity or water. There's an understanding now that an ERP system is not an option -- it's

extensively.

About the author: Beth Stackpole is a freelance writer who has covered manufacturing techniques and technology

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Knowledge is power. Period. That is why everyone on your team needs immediate access to information critical for making smart, informed decisions. And thats exactly what you get with EnterpriseIQ. Its the one ERP solution that works seamlessly across your entire organization from Finance and Sales to Manufacturing and Distribution. The result is increased visibility that keeps you lean, agile, and competitive. Its collaboration from top to bottom thats built on over 20 years of rock-solid ERP experience. Want the complete story? Call today for a demonstration: 1.866.FOR.ERP2 (1.866.367.3772) or www.iqms.com.

Smarter design. Happier customers.


2009 IQMS. IQMS and EnterpriseIQ are trademarks of IQMS. All rights reserved.

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How to Justify, Plan, and Execute a Successful ERP Upgrade How to make the case for an ERP upgrade

How to make the case for an ERP upgrade


By Alan Joch, Contributor If you want Mitch Pisik to spring for an ERP upgrade, dont talk to him about bits and bytes. The president and CEO of Breckwell Products, a manufacturer of home heating products, wants to hear about only one thing: cash flow. Whats the incremental cash outflow for hardware, software and training, then the incremental cash inflow for

increased efficiencies, higher sales, improved margins, lower costs? Pisik said. If you sell it as a revenue and cash-flow enhancement opportunity, it will be viewed as such [by senior managers].

Pisik isnt the only one who thinks this way. ERP consultants and systems integrators agree that selling the business benefits of an ERP upgrade is essential when IT budgets remain tight and top managers resist any new spending, of dollars. particularly for expanding large-scale ERP systems that have already cost hundreds of thousands -- if not millions -We hear a lot of people say, Id rather quarantine my ERP base and invest in new product development or a better supply-chain platform, said Bob Parker, group vice president of research at IDC Manufacturing Insights. Given the constraints, they are making the choices around business value rather than IT efficiency. Nevertheless, ERP remains the heart of business-process and financial-management systems, and delaying neces-

efforts. Heres how ERP veterans make the ERP upgrade business case, using arguments that resonate with CEOs

sary upgrades or not taking advantage of innovations can impede productivity, security and regulatory compliance and CFOs.

ERP best practices for upgrades


conversation toward the larger idea of how an ERP upgrade can improve operational efficiency or customer service. Start by assessing current performance, including any glaring gaps, then talk about potential improvements. Tell said Paul Sita, principal of Innovative IT Consulting, which specializes in ERP systems for midsized companies. them: Heres how we could be doing business, and heres how ERP can be a tool thats going to help us get there, First, while its natural for senior execs to focus on the cost of the investment, IT managers should steer the

forming ERP applications. They can demonstrate where it takes a superhuman effort to keep things running or of those inefficiencies are.

IT managers cant talk the talk alone. Elicit help from the business-unit managers who suffer the pain of underper-

where there are a lot of wasted steps, Sita explained. Top management probably doesnt even realize where some Now its time for the money talk. Describe how the new ERP features will address specific shortfalls and work with

The ROI of ERP upgrade innovations

business managers to estimate potential savings in costs and staff time.

CEOs and CFOs may not be impressed with the latest and greatest ERP technologies, but sometimes these innova-

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How to Justify, Plan, and Execute a Successful ERP Upgrade How to make the case for an ERP upgrade

tions offer important reasons for upgrades. Just make sure to translate techno talk into the language of business tions.

benefits. One prime example is the trend to embed business-intelligence (BI) and analytics tools within ERP applicaWhile initial ERP implementations focused on re-engineering business processes, todays BI-infused upgrades accelerate an internal product-development effort because of changing market conditions. For procurement

revamp decision-making processes, according to IDCs Parker. This allows business managers to use concrete data to identify poorly performing products and decide when to eliminate them. Conversely, analytics can flag when to managers, analytics can quantify the tradeoffs of sole vs. dual sourcing a particular product, including factors such as tooling costs and the risk of shortfalls. Explain to management that an upgrade allows you to better use all the good information youre generating with your current ERP system, thanks to tightly integrated analytics, portals and collaboration technologies, Parker added.

The importance of some ERP innovations extends far beyond internal operations. Many tier 1 OEMs and distributors have spent the downturn squeezing out inefficiencies by automating key components of their supply chains. This about customer demand, inventory levels, production schedules, and forecasts. requires their partners to upgrade internal systems for sophisticated electronic transactions and for exchanging data

Reducing risk in ERP upgrades


Another compelling argument for expanding ERP systems is the risks that arise when companies delay upgrades for too long. At the top of the risk list is running ERP versions that are unsupported or minimally supported by the

vendors, said John Hoebler, director of enterprise systems at MorganFranklin, a systems integrator. Companies can requested by user groups, Hoebler said.

become cut off from the constant stream of patches and fixes that close security vulnerabilities or address features Finally, an upgrade is also an opportunity to reduce the costly, customized code that might have seeped into the easing the development efforts needed to maintain and revise the application, Parker said.

ERP implementation. Over time, this housekeeping step can cut cost-of-ownership expenses by 20% to 30% by

highly customized, 10-year-old version of an ERP application that needs $1.1 million in new spending.

Sita is currently helping one of his clients to document the benefits of an ERP upgrade. The customer now runs a

Upper executives always start off by thinking, Why should I spend a million dollars for new ERP features? Sita doing nothing because of the inefficiencies that exist in how they currently operate.

said. But of course the choice isnt $1 million vs. zero. From a pure dollars and cents perspective, theres a cost of

computing, and the web.

About the author: Alan Joch is a freelance writer whose expertise includes enterprise applications, cloud

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How to Justify, Plan, and Execute a Successful ERP Upgrade Tips for avoiding common pitfalls of ERP upgrades

Tips for avoiding common pitfalls of ERP upgrades


By Eric Kimberling, Contributor Given the competitive landscape of the ERP industry, enterprise software solutions are changing by the minute. their products, often releasing new versions at least once a year. Leading software vendors pour millions of R&D dollars into their solutions to keep up with or surpass the competition. In addition to the Big 3 ERP vendors, tier II and III vendors are constantly improving the functionality of

This is mostly good news for ERP customers and a key reason why companies often choose commercial off-theand disruptive to an organization as replacing an entire ERP system. upgrade project. Here are four tips for avoiding them:

shelf enterprise software: so they can directly benefit from the R&D investments and improvements made by the vendors. The bad news is that the same innovation cycle makes upgrades more common, which can be as costly With all this in mind, organizations should watch out for several common pitfalls when embarking on an ERP

enterprise software initiatives. Just as with full implementations, it will not be enough to upgrade the other resources, and your project plan should be developed accordingly.

1. Set realistic expectations. IT departments and software vendors are notorious for oversimplifying software, flip the switch, and expect changes to take effect overnight. ERP upgrades take time, money and

2. Use the upgrade as an opportunity to reassess the functionality of your ERP software. Most companies grow and evolve from the time they implement an enterprise software solution until they embark on a major upgrade, which can cause misalignment between the software and the companys business requirements. Just as your business evolves, most enterprise software also evolves and improves that you are leveraging. Look for advanced functionality and new software that your vendor may have

over time, so it is important to use ERP upgrades as an opportunity to reassess the modules and functions

deliver a clear return on investment. For example, several of our clients have found during the economic enjoy immediate improvements to top-line revenue that more than cover the cost.

developed or acquired since your last upgrade, and identify the best opportunities for purchases that will

downturn that adding customer relationship management (CRM) to their core ERP software allows them to

fail to realize at least half of the expected business benefits. More often than not, the failure has little or more extended modules or functionality, retrain people on how to use the software more effectively, or redesign business processes to better fit the upgraded software.

software. In fact, according to a survey in Panoramas 2010 ERP report, more than 41% of organizations tial of the software. Upgrades can be a good opportunity to reassess opportunities to take full advantage of nothing to do with the software itself; instead, it happens because companies dont leverage the full poten-

amazing how many organizations never fully realize the business benefit potential of their enterprise

3. Identify ways that the ERP upgrade can help you realize measurable business benefits. Its

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How to Justify, Plan, and Execute a Successful ERP Upgrade Tips for avoiding common pitfalls of ERP upgrades

4. Dont forget all that soft people stuff. Even more than new ERP implementations or replacements, ERP upgrade projects are often driven by IT departments and treated as pure technology initiatives. But major upgrades can be just as disruptive and involve as much change to an organizations people and this reason, it is important to develop a comprehensive organizational change management and training processes. Such change is even more pronounced if your organization hasnt upgraded in several years. For

plan to ensure that employees understand the changes to their business processes and job responsibilities. The key is to bear in mind always that an upgrade is similar to a full implementation in requiring changes not just

to software but to a manufacturers business processes and the roles and responsibilities of its people.

that helps companies with ERP software selection, ERP implementation, organizational change management, and benefits realization.

About the author: Eric Kimberling is president and founder of Panorama Consulting Group, a Denver-based firm

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How to Justify, Plan, and Execute a Successful ERP Upgrade FAQ: ERP upgrade best practices

FAQ: ERP upgrade best practices


Upgrading an ERP system can be a complex, business-changing project that deserves much of the same careful questions about best practices that can make any ERP upgrade go off smoothly. planning and execution as a brand-new implementation. SearchManufacturingERP.coms panel of experts answered

I've heard that communication among departments during an ERP upgrade project is critical. For a manufacturer, which departments should be directly involved in the upgrade process?
consulting resources. One approach is to build the ERP upgrade project team using role-based scenarios. This way, Communication of critical information and decisions must be coordinated among business units, IT and any

a business process flow touches upon all key users -- from the machine operator to the line manager to the order clerk to the shipping manager to the distribution team.

The key is to make sure you create business flows around an object like an order. Then take that order and walk it can determine who should be included in the ERP upgrade team.

through the process across all the functional fiefdoms and all the roles that touch that order. Once you do that, you

every role understand the upstream and downstream implications. --R Ray Wang, Altimeter Group

You will quickly find that there are more people needed than expected. However, with a process map, people in

How should a manufacturer evaluate whether the newest features in an ERP system are worth the trouble and cost of upgrading?
Every company has unique business needs and competitive advantages that it is trying to address with its ERP software, so the answer depends on how well the new software addresses those needs. It is therefore important perform a basic comparison of features, it shouldnt be the only evaluation tool, as it typically provides generic how well the software meets their unique business needs. --Panorama Consulting Group

to understand exactly what the ERP upgrade will provide and what it will cost. While there is software available to assessments based on the vendors yes/no responses. Instead, companies should seek a day in the life view of

An ERP upgrade is a major project that takes substantial time, money and human resources. Which project management methodologies and practices are the most effective in avoiding problems and ensuring that an ERP upgrade is finished on time and within budget?
An ERP upgrade project is usually less intense and costly than a new install, but the business risk and potential for

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How to Justify, Plan, and Execute a Successful ERP Upgrade FAQ: ERP upgrade best practices

processes similar to those of new installs, but right-sized to an upgrades more limited scope. Anything less, and the upgrade can go astray in three main areas. First, to avoid problems, dont be an early adopter of the new release. Wait at least until the first major software

schedule and cost overruns are significant. Well-managed ERP projects employ planning and implementation

time on endless cycles of bug fixes and rework involving the vendor, project team and consultants.

patch is released, then check the pulse of other companies that installed the upgrade. Otherwise, you risk wasting

database and related software.

will replace the old softwares customizations, and beware the impact of changes the vendor made to the ERP

Underestimating the effort needed to retrofit modifications is a major pitfall. Dont assume that the new functions

results, and retesting as needed. Users must be heavily involved even when the ERP softwares main functions and user interface have not changed. Finally, allow time for stress testing if new technologies have been added to the system. --Steve Phillips, director of information technology/ERP project manager, Candle-lite

Plan to have the same testing phase as you would in a new install, including formulating test cases, checking

What kind of technical support and other assistance should I expect to receive from the ERP vendor and consultant during the ERP upgrade project?
itself, while the implementation consultant addresses business adoption and integration issues. It is important to end users so the company retains the know-how to address future issues on its own. --Panorama Consulting Group The tech support that comes with the maintenance agreement will help with purely technical issues in the software

plan the project in a way that transfers some of the vendor and consultant knowledge to internal stakeholders and

Whats the best way to test the upgraded ERP system before going live?
Five key things should be tested: software configuration, customization, data, integrated business processes, and user security profiles. Most organizations and vendors address the first two, but the other three are often

access and security to execute required business processes when the upgrade goes live. --Panorama Consulting Group

non-ERP processes are operational. Finally, test security profiles to ensure that employees have the appropriate

organization. In addition, integrated, end-to-end business processes should be tested to ensure that all ERP and

configured and customized, it is equally important to test it with the actual data and transaction volumes of your

overlooked until too late in the ERP upgrade project. While it is important to confirm that the software works as

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How to Justify, Plan, and Execute a Successful ERP Upgrade FAQ: ERP upgrade best practices

How can a manufacturer take steps to avoid disrupting business during the cutover to the new ERP system? What are the must-have safeguards?
operations when they switch to a new ERP system. Companies can take a number of steps to avoid such disrupAccording to Panoramas research, more than half of organizations experience material disruption to their

tions. First, fully test the software and business processes as described above. Second, carry out a comprehensive change management and communications plan to help employees get comfortable with the new software. A good ment is critical to ensure that the organization and its operations are ready for the go-live day. --Panorama Consulting Group plan involves more than just training on how to use the software. It also entails clearly communicating the business process and organizational changes that will come with the ERP upgrade. Finally, a comprehensive go/no-go assess-

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How to Justify, Plan, and Execute a Successful ERP Upgrade Resources from IQMS

Resources from IQMS

Real-time Shop Floor Integration, Simplified: The Right ERP System Can Make It Happen How the Small Get Mighty: Manufacturing ERP Is Essential but Not Just Any ERP Will Do How Successful Manufacturing ERP Selections Are Made: The Top Things to Look for, Look at, and Look beyond When Evaluating an ERP Purchase About IQMS: IQMS offers the innovative EnterpriseIQ ERP software for the manufacturing industry. Designed as a scalable, single source solution with multiple location, language and currency capabilities, EnterpriseIQ is the best industry specific solution available.

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