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employer is going to look favourably on an applicant with updated skills, and far less favourably on a skilled-but-outdated applicant.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.
By: Margaret Hunnicutt
About the Author:
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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