How to Modernize Your Aging ERP Without Disruption
Companies today are engaged in technological innovations at an unprecedented pace. As B2B manufacturers move to the cloud and add new support systems such as e-commerce and global logistics applications, they face the challenge of integrating these new applications into their legacy ERP systems.
While they have always been important, ERPs have now become even more important to manufacturers due to the even broader range of applications they manage.
The problem is that many manufacturers are still running their businesses using outdated ERP technology that may be 10 or more years old. Traditional ERP developers didn’t design their systems with the digital world in mind. And they certainly didn’t develop them with the functionality to integrate them with new technologies like cloud applications.
Therefore, patching these new apps and feeding them back to the ERP via middleware has served as a temporary solution. But this practice cannot continue when organizations want functional, low-risk, high-performance systems.
Without implementing an entirely new system, it can be difficult for manufacturers to maintain the functionality of newer technologies such as cloud applications. Unfortunately, many manufacturers cannot afford a complete overhaul from a time or financial perspective.
ERP layering reduces disruption
The good news is that ERP layering allows manufacturers to minimize business disruption by quickly adding new or enhanced applications that offer better functionality without a complete system overhaul.
With new applications and innovations constantly being released, companies need to keep up with their ERP solutions. Using a layered approach, legacy ERP solutions can have the required modern capabilities and integrate with cloud applications while staying below an organization’s threshold of acceptable risk.
There are three approaches to ERP layering, each with their own advantages and disadvantages. Businesses should evaluate each of these and decide which makes the most sense for them.
1. Top down layering
The top-down layering approach focuses on functionality. Using this method, companies look for the best tools to achieve their goals, rather than identifying individual applications that integrate natively with their ERPs.
For example, if a company decides to add scheduling software to its ERP, it can choose the most feature-rich and best scheduling software on the market, even though it doesn’t easily integrate with the company’s ERP.
While this approach allows the company to use the specific point solution they want, this option opens the door to a higher level of risk as the add-on application now needs to be retrofitted into the legacy ERP. As a result, the company may need to use APIs and other connectors to make it work.
2. Center Out Layering
Center-out layering is a happy medium between adding functionality to an ERP and reducing risk. With this approach, companies are looking for applications that have native integrations with their existing ERP system.
While the built-in application may not offer all the features that the company desires, it will still improve its functionality with less customization. In addition, the company does not have to take as much risk as with a system that requires custom APIs.
3. Bottom-up layering
Bottom-up layering is the most conservative approach to ERP layering. It relies on the organization being able to leverage software that already exists in the ERP or the larger software ecosystem.
For example, a company using an Oracle ERP would only look at other Oracle applications to add new functionality. While this approach entails the least risk, it can limit access to needed functionality because it limits the number of applications to consider.
ERP layering versus a full overhaul
Getting more functionality out of a legacy ERP with layering is a means to an end. It allows companies to add the functionality they need without incurring the time and expense that would require a complete overhaul.
There are also fewer change management issues, which means fewer disruptions to employees and customers. ERP layering is the right move for a company when their ERP still works for the business but needs connections to cloud applications or new functionality.
However, if the ERP can no longer support the business the way you need it, layering probably won’t be able to add enough functionality to make up the difference. In this case, it’s probably better to start with a complete overhaul of the ERP system, but it requires clear advance notice of the change to employees and customers, and plenty of notice of the change so they can prepare for the likely disruptions.
Also, new ERPs tend to be very expensive and can take a long time to fully implement, meaning you need to create a detailed plan for the project.
Can you handle the ERP layering yourself?
The evaluation and setup for ERPs are complex. While some companies have in-house ERP specialists to help them maintain the system, most rely on outside support. When deciding how best to modernize a current ERP system or whether a new system is needed, decide whether to use internal resources or enlist external help.
Using an external implementation team can help reduce disruption and risk. Also, this approach is typically less expensive than recruiting and hiring internal resources.
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John Ruddy is Director ERP Global Solutions at Seneca Global. Ruddy drives NetSuite and other ERP projects and engagements for a variety of clients and industries that include modernization, application support, and consulting services.