3 Hidden Costs of Keeping a Legacy ERP

Author: admin in: Business Solutions

3 Hidden Costs of Keeping a Legacy ERP

March 22, 2022

It can take years. From picking an ERP to seeing the benefits of its usage can take years. That was your personal experience when you implemented your current system so long ago. Along the way you added plug-ins and gadgets and widgets. Your top-of-the-line and cream of the crop ERP system has been the backbone of your processes for longer than many of your employees.

Lately, though, it’s begun to feel very sluggish and old-fashioned. Maintaining it has become a chore with things like operating systems that are no longer supported and security updates that you have to pay out of your own pocket to test and implement. There are even newer components to your regular software packages that the old ERP can no longer talk to, leading to hours of added data entry work (with all the errors that it creates). As a final nail in the coffin, new hires often complain about how your ERP is not as good as their former place of work.

The Hidden Costs of Old Software

Like with every other aspect of manufacturing, a regular audit of the process will help you find places where you can improve. This post has already mentioned the added time it takes to print reports, the time it takes to manually transfer data between systems, or the added errors. When it comes to your legacy ERP system, the biggest wastes may need refining. Things like:

  • Maintenance Costs
  • System Performance
  • Employee Morale

Maintenance Costs

Keeping your current ERP up and running requires 3 separate costs:

  • Workers – An IT department isn’t cheap and maintaining an IT team that actually understands and can maintain older software is even more expensive.
  • Service – Most enterprise-level software needs a dedicated support team that includes developers to update and patch the software. This is usually paid for by the customer via monthly maintenance fees for service. This becomes worse with legacy software, since you may need additional software packages (and associated service fees) that attach to the legacy ERP to keep it working and communicating with your newer system.
  • Hardware – Older software can have issues running on newer hardware and so keeping and maintaining that older hardware in good working order can run up your hardware costs, with replacement parts becoming harder and harder to source.

To summarize, you are paying workers to specialize in something you don’t need, paying for service that you can’t use, and paying more for hardware that does less, and is slower, than many off-the-shelf items you can readily find at any big box store. New ERP systems can solve most of these costs by moving to a cloud-based model, where you need less IT staff, less service fees, and less specialized hardware.

System Performance

While the previous section items are quite easy to view, as you can get the fiscal values to calculate how much it costs you to run your ERP, these items are part of the daily usage of your ERP, which run up the following added unaccounted-for costs:

  • Wasted Time – Regular or new users that are not familiar with the system may have a slower click-through rate to print a report, which also takes longer to send to the printer. While spending an extra 3 minutes for a report may not seem like a lot, when run the same process 10 times a day/ 5 days a week/ 52 weeks a year, it quickly adds up.
  • Wasted Data – Any time data is entered, you have a chance for an error. So, if that same data is entered more than once, you are increasing your chance of an error. And if an error makes it into the system once and the error copied manually to another… Bad data can become a secondary factory you are paying to run with no returns.
  • Poor Decisions – One of the biggest drivers for ERP adoption for executives is how better data helps them make better decisions. Poor decisions are decisions that are made based on poor data. Eventually, these decisions will be costly.

To summarize, running a legacy ERP can be costing you with inefficient business processes and bad decisions. New ERP systems can solve most of these costs with a more efficient user interface, a single database for all your transactions, and better reports and dashboards.

Employee Morale

The previous costs can seem pretty steep, but there’s more bad news your old ERP isn’t telling you. With manufacturing companies around the world seeing a hiring crunch that has lasted most of a decade (and gotten worse), you need to revisit what you do to keep your employees happy and engaged:

  • New Hires – Young prospective employees coming into the workplace will be accustomed to smart and easy-to-use tools. Providing them with a stressful and difficult to learn old fossil as their main tool can lead some to look for other employers.
  • Older Workers – Your older operators are still needed and helping them easily pass their skills to the next generation should be a top priority. This can be facilitated with better tools.
  • Technical Workers – It’s becoming increasingly difficult to compete with larger companies for highly skilled and technical workers that your firm may need to succeed. Cutting the costs associated with your older systems can help you source and keep technical staff.

To summarize, your legacy ERP can be costing you workers that don’t want to spend their time getting used to an ancient system that is no longer relevant. Adding a new ERP system that is modern and familiar can help decrease your onboarding time (and costs) and improve staff retention.

Conclusion

In manufacturing, complacency can mean the end of a company. Wasting time, money, and valuable resources on out-of-date systems in this global economy can quickly become a detriment to your competitiveness. On the other hand, investing in a future-ready product or system can help you ensure you stay competitive for years to come.  With your costs adding up and your benefits being harder to find, maybe it’s time to look for a new ERP.

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