Why You Should NOT Implement a New ERP System Now

Written By: Eric Kimberling
Date: October 18, 2019

Growing up in the ‘80s, I was used to hearing the phrase “just say no.” It was a term coined and used often by the US President Reagan’s wife Nancy as part of her anti-drug campaign, so the saying became ubiquitous and associated with the ‘80s.

CIOs can’t seem to say “no” to drinking the Kool-Aid

Fast forward to today, and it’s interesting to see how easily some CIOs and their executive peers become enamored by new enterprise technologies. SAP, Oracle, and other leading ERP vendors have done a masterful job of convincing many that they “need” new technology – and that they need it now. For example, the video below illustrates how SAP has built its sphere of influence in a way that can be misleading to customers:

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Though the video focuses on SAP, many of the big ERP vendors are also cogs in the misinformation machine, and customers are falling for these and other ERP vendor hoaxes. In other words, vendors and their systems integrators are selling lots of Kool-Aid, and executives are drinking lots of it.

Why say “no” to a new ERP system?

Executives are disciplined in so many other ways, so why don’t they say no to ERP more often? Or why don’t they at least consider it as an option more often?

Vendors, consultants, and analysts that will tell you that companies “must” be at the forefront of technology, or they will be left behind. These industry participants certainly don’t want to bite the hands that feed, so it’s understandable how so many will perpetuate this message in the name of self-preservation.

But because our company is not tied to software vendors, we have the luxury of asking the sometimes-difficult question: why in the world would we want to implement a new ERP system now? Here are a few reasons to at least consider this option:

Many current flagship products not mature or ready for prime time. SAP S/4HANA, Oracle ERP Cloud, Microsoft D365, and other top ERP systems are too new to effectively support the broad and complex needs of many organizations. This may change in a year or two, but there are plenty of gaps among many of the systems in the market.

Many ERP vendors and systems integrators are too focused on technology. It’s fun to think about things like machine learning and artificial intelligence in ERP systems, but how realistic is this for our organizations today? Shouldn’t our business needs drive our adoption of technology rather than the inverse? While vendors are on one hand promoting sexy new technologies like blockchain and AI, they are struggling to get core manufacturing and supply chain functionality in place.

There is an ERP skills shortage. With so many vendors and systems integrators nudging and/or forcing so many customers on to new ERP systems in the same window, ERP consultants are becoming strained. As I outlined in my top 10 ERP predictions for 2020, I expect the resource shortage to become just as strained in 2020 as we saw in Y2K.

Cloud ERP systems can actually increase your long-term costs. ERP vendors and cloud proponents hate what I say this, but cloud systems often cost more than on premise in the long-term. Say what you will about the potential benefits, cloud systems are like leasing a car: your monthly payment never goes away. I don’t see too many companies that can compensate for this cost increase by reducing internal infrastructure costs – at least not yet.

The ROI of current ERP systems is largely unproven. With the first wave or two of companies just now going live on SAP S/4HANA, Oracle ERP Cloud, and other systems, the jury is still out on how well these solutions enable an attractive ROI. Chances are that they will deliver in the long-run, but not all companies have the risk appetite to take the leap on blind faith.

To be sure, not all organizations have a choice but to replace their aging enterprise infrastructures. Many we work with are severely constrained by their current systems, but others don’t necessarily “need” to make a change now. For those that fit into the latter bucket, below are some alternatives to consider.

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Alternatives to implementing a new ERP system

So, what are the options to consider? Here are a few to keep in mind:

Improve current business processes. Often times, business processes are broken – not the technology. Your organization could probably realize meaningful benefits by simply improving your current operational model. And this can be done without necessarily needing an entire ERP replacement.

Retrain your employees to better utilize the current ERP system. When we are asked to recover ERP failures, the culprit is often related to lack of organizational change management. Simple training, role definition, communications, and other organizational change management tools can deliver huge benefits with a relatively low price tag.

Utilize functionality you already have. Shelfware is an epidemic that plagues ERP customers. Too many customers buy more than they need and never consume the full potential of their ERP systems. It may be worth examining what modules, licenses, or functionality you aren’t using – but could be – in order to drive more benefits out of your current system.

Good news: it’s not an either / or option!

The good news is that none of this is an either/or option. It could be that you delay a new ERP system for now but deploy some of the tactics above to better prepare for a digital transformation in the future. Improving business processes and change management, for example, will help you implement new technology more smoothly and less expensively later on.

And, if you know you are going to embark on a digital transformation in the near future, it still makes sense to consider the above options. They can provide a strong foundation and blueprint for your eventual digital transformation later on.

Regardless of where you are in your journey, it is important to take a step back to objectively consider the “focus on incremental improvements” option. I am happy to be an independent sounding board for you as you navigate these and other decisions, so please feel free to contact me to have an informal discussion…my team and I are happy to help!

Kimberling Eric Blue Backgroundv2
Eric Kimberling

Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.

Eric Kimberling
Eric is known globally as a thought leader in the ERP consulting space. He has helped hundreds of high-profile enterprises worldwide with their technology initiatives, including Nucor Steel, Fisher and Paykel Healthcare, Kodak, Coors, Boeing, and Duke Energy. He has helped manage ERP implementations and reengineer global supply chains across the world.
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