- What is ERP optimization?
- ERP selection vs. ERP optimization: Key considerations
- 10 areas to improve your ERP ROI
- Why newer isn’t always better
- Key takeaways
There may have been a time when your enterprise resource planning (ERP) software aligned with and supported the needs of your organization. It matched the state and scale of your business processes and helped your organization keep pace with a changing industry.
Fast-forward to today: The risk environment has intensified, your staffing models have changed, and your business processes have evolved. The rate of industry change is accelerating, forcing organizations to make bigger investments faster. Gartner research predicts that more than 70% of recently implemented ERP initiatives will fail to fully meet their original business case goals by 2027.
That’s why now more than ever you need to adopt a continuous improvement mindset to realize the long-term benefits of upgrading your ERP system. Engage your team with the right questions. Is your system keeping up with your current state needs? Can it support new digital transformation initiatives? If the answer is no, you may risk becoming part of the statistic.
What is ERP optimization?
Many organizations are finding that their systems and procedures aren’t meeting their current needs and fail to adequately support their teams to operate more effectively. Organizations may attempt to remediate an inadequate ERP by filling multiple roles or onboarding new staff. Others might still be experiencing pain points or manual processes from a recent system implementation. But, whether due to budget constraints or staffing shortages, it may not be the right time to replace your current ERP.
How can you get greater value from your existing ERP without overextending your already limited resources? The answer lies in ERP optimization.
ERP optimization is the process of enhancing current ERP systems to improve efficiency, reduce costs, and maximize performance. Compared to a full-fledged system replacement, optimization is generally less time commitment from your staff and more cost-efficient, offering greater return on investment for your existing system.
ERP selection vs. optimization: Key considerations
ERP systems are complex and ever-changing. It’s important to have a current strategy for using them effectively and a plan for optimization that supports where you are now and where you want to be. To strengthen a deployed ERP system, you need to analyze how your team interacts with it. ERP optimization focuses on enhancing a current system to improve efficiency, strengthen controls, and maximize value without the disruption, cost, or staffing commitment of a full upgrade. Not to mention recalibrating your current system to better fulfill future state operational and business needs.
Optimization can be beneficial when:
- Facing staffing and resource limitations.
- Seeking to reduce operational risk or manual processes.
- Recent implementations left behind unaddressed pain points.
- A replacement isn’t the right investment at this stage.
In contrast, you may consider replacement when:
- Your ERP software is approaching end-of-life and can’t scale with future growth.
- Integration limitations with modern functionalities undercut digital transformation and security compliance.
- High-maintenance costs due to your outdated system cut into your IT budget.
Ultimately, when your ERP is no longer supported by the vendor, an upgrade may be the only option. However, if your existing system is fundamentally sound but underutilized or misaligned, choosing to optimize your ERP can extend system life by several years and give you the flexibility to plan future technology investments more strategically.
10 areas to improve your ERP ROI
Do your current ERP technology investments generate measurable business value? ERP optimization can help technology leaders navigate operational risk, improve reporting quality, and strengthen utilization of existing resources. These improvements can strengthen your financial health and support future growth by ensuring your ERP functions as a scalable, reliable backbone for the business. These 10 areas can help you optimize your current system and strengthen return on investment (ROI).
1. Consider the age of your system
If you have been using the same system for more than five years, it may be time to look at upgrading; and if over 10 years, it may be time to replace. Older systems may be limited in functionality, lack the latest technologies, have sunsetting support and upgrade limitations, and may not be able to support current or future needs.
2. Conduct a post-game analysis and define key success metrics
Evaluate why your organization didn’t fully realize the original goals of the software deployment. Were there hiccups with the project team, the vendor’s consultants, or internal sponsorship? Did you run out of time or funding or simply don’t use certain functions? Is the system lacking functionality, or is it a training or setup issue? Your findings can help you focus future efforts to target effective improvements.
Next, define what success looks like to your business. ERP metrics should comprehensively track performance and measure ROI across operations, finance, and business functions. Establishing key performance indicators (KPIs) can help you measure the success of your ERP optimization and the long-term value you hope to realize from it. Common ERP success metrics include:
- User adoption
- Improved data quality and visibility
- Process improvement
- Error or rework reduction
- Cycle time improvements
- Risk reduction through stronger controls
3. Review and automate your business processes
At the heart of the effort, you’ll need to evaluate your key business processes to determine if they’re consistent with best practices observed in peer organizations. Do these processes align with the ERP ecosystem? There may be untapped potential within best practice functionality built into the system but “deconfigured” during the implementation.
Ultimately, your technology should support best practices around processes, and you shouldn’t have to adjust your best practice processes to accommodate the constraints of your ERP system.
If your system doesn’t have functionality to improve all your processes, can you automate a few with robotic process automation (RPA)? Has your vendor released any new automations you could be using? RPA can be programmed to mimic the rote tasks that your staff perform to free up their time for other value-added activities.
4. Assess and train your team
You’ll want to consider your team’s perspective and willingness to reinvest in the system. Assessing this will identify the areas where you can immediately focus so that your teams are ready and capable of reenergizing your implementation and optimization efforts. For example, it could be that your system is just fine, but a data management review and cleanup is needed.
If your staff were originally trained by your software vendor, are they in need of a refresh? Your software vendor should always conduct the training, and only trained staff should conduct internal training. Have you budgeted for annual training? Are staff being trained on old processes, rather than new features? When was the last time your procedure materials were updated?
Once evaluation and updates are completed, you can customize plans for growth and development opportunities to fully support them to maximize the effectiveness of your technology investment.
5. Analyze vendor services
Your organization’s software solution is only as good as the service that you receive when you’re having an issue. You’ll want to evaluate the level of support and service that your technology vendor provides compared to industry-acceptable performance standards and best practices to ensure that you’re optimizing use of their solution.
6. Consider governance and decision-making
Are your decision-making processes and methodologies for people, processes, systems, and data aligned with the roles and responsibilities associated with your technology? Ongoing project governance with a strong sponsor, an individual or group at the executive-level steering the project, is important to the success of your ERP initiative.
7. Leverage peer successes
Sometimes you need to look outside of your organization and learn from the success of your peers. Collaborate with other entities using the same software to see if they can provide insights on alternative methods for configuring the system to your needs. Consider attending local user groups to meet others who are using the software successfully and sharing ideas.
8. Harness data analytics
Is your team effectively managing your data? Do you have the ability to understand and utilize data for better decision-making and real-time insights? It’s important to assess your analytics infrastructure and delivery, including the ability to manage, retrieve, and interpret the information you manage.
9. Optimize product licensing
Are you using all the software modules you paid for, and is the licensing tailored to the vendor licensing model? Evaluating this area will ensure that you’re only paying for what you need, both in the near term and long term.
10. Reconsider deployment models
Have you effectively evaluated whether your solution is best housed as an on-premise or vendor-hosted solution if both options are available? While some sectors were initially more cautious in considering cloud options, most organizations are now becoming more comfortable with a remote hosting model as these cost-effective alternatives continue to mature.
Why newer isn’t always better
Your prior software investment may still be viable, especially if your staff doesn’t have the capacity to go through a complex and time-consuming replacement process. You may still be able to achieve your original objectives by improving your current system. It’s time to reassess and refocus your efforts, realign your investment with your organization’s strategic goals, and recommit to optimizing your existing software solution.
Key takeaways
- ERP optimization offers a valuable alternative to a complete overhaul. Businesses can significantly improve their technology position, and drive long-term value, by harnessing existing capabilities.
- Ensuring ERP investments deliver measurable business value starts with alignment. You need to monitor performance indicators, such as cycle times, error rates, manual work reduction, reporting improvements, and user adoption to map ERP improvements against business outcomes.
- ERP optimization strengthens the foundation for digital transformation. With a strong ERP at your foundation, organizations are better equipped to pursue analytics, automation, and other transformation initiatives.
