A Decision Framework for ERP Implementation vis-a-vis ERP Upgrade
Organizations which have successfully implemented ERPs feel the constant need to revisit the implementation as business priorities change and system requirements are challenged. However, always there is a dilemma whether to go for a complete overhaul of the old system or to do a system upgrade. As usual the decision depends on variety of factors...
• The existing implementation has not captured all the processes, and there is a need to enhance the system capabilities to further automate/aggregate the processes
• Over the years there are additional business needs leading to rendering the existing ERP capabilities inadequate; examples can be, acquisition of new businesses, expanding business in new geographies, adding new lines of business, etc.
• There is need felt among the user community to have more simplified system processes to carry out business activities
• Product vendor comes out with new versions of the software and raises the concern on not supporting the old versions
• System performance goes down with increase in data volume over the years
• Data quality deteriorates over the years for lack of user training and policy manuals
The above needs give rise to various solution options to an organization. Depending on the budget and risk-return scenario, it can use the following framework:
• Perform a Business environment analysis
• Perform a System environment analysis
• Derive a decision
Business environment analysis
Economic considerations: Normally full-fledged implementation requires more budgetary allocation of fund; fund becoming scarce with economic down turns, a solid business case is required for justifying any IT initiative.
Business obligations: Business may need to do things differently to become more competitive in the market place and hence new systems and processes to get enabled. Also in many cases, business may not have such ambitious plans and it may need some short-cut ready-to implement solutions to address some immediate requirements.
System environment analysis
Bottleneck on System capabilities: Is the IT system able to deliver what it is expected out of it? How is it performing over the last few years in meeting the requirements? How does it compare to some of the IT systems from the modernization perspective? Has it at all evolved from a data-crunching tool to an operational and managerial decision support system?
These are some of the questions organizations keep on asking themselves. Responses to these questions decide an organization's way forward towards implementing new tools and processes vis-a-vis mere upgrade of the existing ones.
Maintenance investment: This is the will-known maintenance overhead issue of maintaining too many systems and old technology.
Disparate systems: While multiple systems inter-act each other, huge effort goes in to maintain the data sanctity and make information available in a timely manner, if at all possible within constraints.
Technology obsolescence: Product vendors withdraw support or technology becomes so obsolete that the knowledge of the technology becomes concentrated only to a few individuals thereby raising the IT risk.
Time to Decide
The decision matrix will comprise the need for urgency vis-a-vis the long term view on the IT alignment with the business strategies. Many organizations tend to err here to assign proper weightage to the multiple factors as discussed above. The market conditions, competition status, organization maturity and most importantly an all-inclusive strategic view is what should drive the decision in this regard.