Your current ERP system might be causing you Cognitive Dissonance. That’s a fancy term for when you have conflicting thoughts inside your mind. Part of your brain keeps telling you to delay your ERP spend. It reassures you that by delaying this investment, you’re not incurring any additional cost. Then the other side of your brain just won’t leave you alone and it’s keeping you up at night. It keeps whispering “by maintaining the status quo, you’re not saving any money at all — there are real costs incurred every month that goes by whilst we make do with a system that’s just not cutting it.” In this blog, we get under the skin of this dilemma, so that you can finally find ERP peace.
Many business leaders have convinced themselves (often to their peril) that delaying or not making an investment represents a saving. What they often don’t factor in is the true opportunity cost of their decision. The costs of doing nothing (and making do) are often hidden deep within your operation. There are costs associated with updating and maintaining a legacy system, in addition to the inefficiencies that represent your business as usual; the workarounds, the manual calculations in spreadsheets, the extra administration, and the double keying. Worse than that, the true cost is often felt by the end customer — in terms of a lack of product availability, out-of-stocks, or the ability to get your product or service faster, cheaper, or even on-demand from somewhere else. In the last decade, new startups and market entrants have run rings around established brands and businesses, rendering many of them irrelevant and unable to compete in today’s fast-moving world. Why? Because these newer businesses often don’t have the weight of legacy systems and processes holding them back. They’ve moved fast — and whilst boards and management teams are still arguing and debating about what to do next, these agile upstarts are already busy making sales and disrupting the market.
When thinking about the right time to upgrade your ERP, think about the true opportunity cost of delaying your investment. If you could take back all that wasted time and administration — what amazing things could you do with it? The upshot? — be sure to compare the costs and benefits of doing nothing versus the costs and benefits of investing in the future of your business.
Along with the missed opportunity that comes from sticking with a system that’s ‘not cutting the mustard’ — you need to factor in the range of financial and non-financial risks that your present business systems are exposing your operation to. Ageing on-premises systems present more risk than ever before. There’s a good chance the people who originally wrote the software have moved on to pastures new. People are up-skilling to build a career around the next generation of business software, rather than preparing to go down with a sinking ship. When the people who support your bespoke software make a move, you could be left exposed. On-premises systems also bring you other risks and potential costs. Unless you have a sizeable IT team who is continually patching, upgrading, and protecting you from cyber-threats, you are leaving yourself open to a variety of problems that could bring your operations to a grinding halt.
The cloud has become the de-facto place to run software for a reason — and that goes for small, mid-size, and even huge enterprises. That’s because it gives businesses like yours access to powerful computing power, unrivalled security, and data backup that’s replicated across multiple data centres — all without you needing to pay for an on-site IT department of your own. Or endure costly downtime when your key decision-makers can’t access critical data that’s stuck on a desktop at the office or an inaccessible on-premises system. Whilst major incidents like earthquakes or pandemics don’t happen every day, they do happen unexpectedly from time to time. If the worst should happen, you’ll want the confidence to keep on trading, even if that means accessing your systems from home or a new location.
Implementing new technology can make business leaders and their boards nervous. After all, crucial systems like ERP are the glue that holds your entire operation together. Every dollar, product, and service will pass through it. The good news is that the cost of next-generation ERP is a pleasant surprise to many. It’s often only marginally different from the total cost of what’s currently in place. This is driven by many factors. First of all, these platforms consolidate several disparate systems into a neat single solution. Instead of a big monstrous CAPEX investment in software licenses and server hardware, modern cloud ERP is OPEX-based, without costly up-front licensing fees. You pay per user per month and get a fully managed service, with continuous automatic updates. There’s no need for an extensive on-site IT department — and existing internal IT staff are often re-deployed to strategic ‘all singing and all dancing’ projects that will create growth and new revenue streams that deliver real value. Hurrah!
It pays to do your homework. Under the hood of some of the world’s fastest-growing businesses is cloud-based ERP software. We’re not just talking about big multinationals. We’re talking about small brands and businesses and midsize firms that are making their mark. Businesses such as clean cosmetics trailblazer Trilogy, Natural Petfood disruptor Natural Pet Food Group, Global Agribusiness innovator Nuseed and Performance Yachting apparel company VMG.
Small business accounting software often got them off the starting blocks; but once the real growth and complexity kicked in, these systems became their limiting factor — effectively a straight-jacket. That’s why these businesses left behind basic accounting and business tools and made the switch to systems that would be their lifeblood and backbone for the next 10 years of their growth and evolution. For these entrepreneurs, leaders, and boards, the decision to implement these systems was seen as an investment — to unlock a share of the future. When you appraise the costs of adopting a new ERP, remember to factor in the true costs and benefits, including the savings that will be made across time, administration, lean processes, remote access, security, and faster, smarter decision-making. Research conducted by Forrester shows that within three years, the average business adopting cloud-based ERP will gain finance and management efficiency of more than NZ$595,000, 15% revenue growth, and IT costs tangibly reduced by NZ $1.09m. If you look at the true total cost of ownership, that’s an ROI of 380%.
In conclusion, there’s a good chance sticking with your current ERP is costing a lot more than you think. The costs to maintain an ageing system and the opportunity cost of delaying your investment are hiding like a monster in plain sight. The costs of adopting a new ERP can make you nervous — but with a little due diligence and research (and by talking to other businesses that have already made the switch to next-gen cloud ERP), you’ll quickly realise that there’s no time like the present to future proof your business.