How long should an enterprise computer system last? ERP is a significant investment for a company, not just in the up-front costs but also in the training and implementation, making it an integral part of day-to-day operations. Changing systems is expensive and disruptive and a company needs a very good reason for doing so.
Many companies today are using a system that they installed 5, 10 or even 15 or more years ago. The average age for a system today is about seven years. But computer systems don’t age the same way that, say, a car ages. The story is really about needs and technology.
When you buy a new car, it will likely embody the state-of-the-art in safety, performance and convenience. As the car ages, moving parts will wear out and some of the parts might fail or get damaged, but these can usually be repaired or replaced to bring the car back to an acceptable level of performance. Ten or 20 years later, the car is likely to still be viable as a means of transportation. We still drive on streets and highways at essentially the same speeds and under the same conditions as when the car was new.
When you buy a new system, it will likely represent the state-of-the-art in technology and functionality. If you maintain the system by regularly installing the various upgrades and enhancements provided by the vendor, it will continue to function reasonably well for years.
There are several factors that might make a computer system obsolete, however, that do not apply to automobiles. Foremost among those is functionality.
While our streets and highways have not changed that much in the past half century, and cars designed 50 years ago are fully capable of operating well on those roadways, manufacturing and distribution are radically different today from the way business was conducted a decade or two ago. Functionality that was adequate in 1990 or even 2000 will likely not be able to help a company be competitive in today’s environment unless it has been significantly upgraded since its initial deployment.
The need for new advanced functionality is one of the primary reasons that companies replace their ERP systems. Often, however, the existing software’s current release has the needed functionality, but the company has not kept up with releases and upgrades. In these cases, company management decides that a change in software offers an opportunity for a fresh start.
Another reason for a system change is that the old system may employ obsolete technology. An older system may not have the processing power, connectivity and communications abilities, or data management capability, needed to support today’s business requirements. In other cases, the old hardware may be increasingly expensive to maintain or might be less reliable than newer models. Often, new equipment is a lot more energy-efficient and therefore more economical to operate.
Whatever the reasons, a change of enterprise systems is an expensive and disruptive undertaking, so companies are justified in their reluctance to take this step unless absolutely required. As a result, many companies wait too long to make the change, and operations, competitiveness and efficiency may suffer.
Most companies will study the potential return on investment of a system investment before committing to such a large expenditure. The return from ERP, properly selected and implemented, can be significant, and is primarily driven by increased efficiency (lower costs), higher sales (due primarily to better customer service), increased flexibility and the ability to grow the company by taking advantage of market opportunities.
Reprinted from Portsmouth Herald / Seacoastonline.com – July 23, 2012
