We typically advise companies to avoid upgrading their ERP system unless absolutely necessary because it is a large undertaking. On our most recent episode of the ERP Advisor Conference Call Series, we discussed the 5 most common reasons why companies upgrade their ERP system, and when to know if your company needs to upgrade their financials or ERP system. We advise companies to only consider an upgrade if they are experiencing one of these issues. You can listen to the entire call above, or read a summary of the call below.
What is an upgrade?
When we discuss upgrading your ERP system, we are talking about one of two very specific types of upgrades, which are important to understand prior to considering one.
The first type of upgrade we discuss is the more literal kind. Say you're running version 10 of a software, and you want to upgrade to 11.2, the newest version. You’re still using the same application, the same vendor, just a different version. These updates, especially in cloud-based applications, tend to happen rather frequently and often without you even knowing it.
The second type of upgrade is when you want to move to a better system like you might upgrade from an apartment to a house or upgrade from a Toyota to a Lexus. So if you are responsible for software systems in your business, and you feel it is time to upgrade to a better system, not just a different version, that is the type of upgrade we are going to explore here.
As we mentioned, there are 5 major reasons that companies seek to upgrade their ERP system.
The first reason is growth and there are 4 growth indicators to look at in determining if your company might need to upgrade its ERP system.
- More Business Transactions: When a business is experiencing a significant change, there is more data that comes through that needs to be tracked. There are more sales, more fulfillment transactions, more employees, more projects, more of all the things that need to be tracked by people in management positions.
- New Products and Services: As a business continues to grow, their model may also expand or shift, which we have seen happen in many of our clients. They may start to add additional services to their portfolio to build a stronger value proposition.
- Selling to New Markets: Growth often leads to expansion. Where a business may be focused on a certain geographic region in the U.S. to begin with, growth may create opportunities to build business in additional regions, or even develop territories outside the U.S. Expansion often creates the need to incorporate new business requirements including new tax rates, new number formatting conventions, or multiple languages — all features that your current ERP system may not be designed to handle.
- New Business Line: This is more than just a new product or service. A new business line is a completely different product or service, with a different customer base, different manufacturers, different processes, and more. With a new business line, you would need an adequate ERP system to handle all the different aspects.
Anytime your company is experiencing rapid growth, it might be a good time to evaluate your ERP system and select a software application that can aid in the growth of your business. Next week, we will discuss how mergers and acquisitions, legacy technology and regulatory considerations may impact your ERP and necessitate an upgrade.