A Guide to ERP Modernization in Eight Essential Steps

Technical debt is a growing problem for organizations. CIOs report that 10% to 20% of their IT budgets are being spent resolving technical issues—an obstacle that’s particularly common in enterprise resource planning (ERP) deployments.1 Organizations recognize the value in upgrading to agile, cloud-based, and customizable ERP tools that can help address common issues and provide more consistent data outputs. As a result, ERP modernization is becoming more popular in digital transformation.

While the typical life span of an ERP deployment is five to 10 years, pre-pandemic data pegged the true age of ERP systems as twice that long on both the high and low end of the spectrum. Consequently, ERP modernization is growing in popularity across a wide variety of organizations.

Ready to Take on ERP Modernization?

Here are eight steps that can help lead to desired outcomes.

Step 1: Identify Existing Challenges

The first step in ERP modernization is identifying challenges with current systems. For example, data and application security often are assumed rather than prioritized in legacy ERP systems. Because these systems are both long-lived and familiar, they may go untested for months or years. By addressing these issues upfront, companies are better prepared to prioritize critical requirements, lessen security vulnerabilities, and foster a smoother transition.

Neglecting ERP system security can lead to situations where data is unintentionally exposed or has accumulated significant errors over time. In both cases, critical company information may be at risk.

By identifying the existing system’s challenges before starting the search for a new ERP system, companies are better prepared to prioritize critical requirements.

Step 2: Assess New Versus Ongoing Costs

Both existing and new ERP systems come with costs.

Legacy solutions may include costs for server maintenance, upgrading, and replacement, along with costs to develop and implement integrations to allow pre-existing technologies to work with new, cloud-based applications.

Meanwhile, the new wave of ERP solutions has shifted most costs from a capital expense model to an operating expense model, meaning that companies continue to pay overtime for services and features used. Business leaders should consider the costs of onboarding staff and driving integration across operations—as new ERP deployments average an integration time of around or after 18 months.

Step 3: Don’t Let Business Size Stop You

ERP systems are no longer enterprise-exclusive. Not only are cloud-based ERP solutions more accessible, but many midsize business (Tier 2) offerings are also starting to offer features comparable to large business (Tier 1) solutions, making it possible for small businesses and organizations of all sizes to benefit from ERP modernization.

To help determine a suitable ERP deployment, organizations should ask themselves three key questions:

Are we comfortable moving to the cloud?
Do we prefer a monolithic ERP or an “industry-leading” model?
What level of resource commitment can we allocate to the deployment?

Answers to these foundational questions can help narrow the decision between Tier 1 or Tier 2 solutions and help prioritize what ERP features are important to your organization.

Step 4: Pinpoint Key ERP System Characteristics

Speaking of features, it’s worth taking the time for organizations to identify key ERP characteristics that will support desired business goals. For example, many ERPs offer models that can help automate specific practices, such as supplier invoice management or customer transaction history aggregation.

By choosing an ERP system with features that align with business objectives, teams can standardize processes without breaking IT budgets.

Step 5: Be Aware of Potential Implementation Pitfalls

No matter the product purchased or the vendor’s promises, ERP implementations are difficult and can come with potential hurdles.

Some of the most common challenges for the organization to resolve that accompany ERP modernization include the following:

Skimming over staff training before systems go live
Ignoring the change impact a new system and processes will cause
Delaying the data conversion to the updated system
Waiting too long to focus on integrating the new system with legacy applications

Time to implement is also a common pitfall. While vendors may indicate that ERP software is ready for complete implementation “out of the box,” often this fails to account for the unique nature of every business environment—as no two system configurations are identical. As a result, implementing an ERP system invariably takes longer than expected. Leaders should familiarize themselves with these recurrent setbacks to properly prepare and try to prevent them.

Step 6: Recognize the Role Experience Plays

While it’s possible to take on ERP modernization in-house, the time and effort required often are distracting to the business and can potentially create roadblocks to achieving an organization’s business objectives. Experienced consulting and implementation partners can help organizations navigate the challenges described above and allow the organization to dive into the most valuable data and metrics.

In practice, consultants can help client organizations streamline implementation using the three-legged stool approach. The first leg is company leadership—they know their business needs, budgets, and goals the best. The second leg is the software vendors, or system creators, who provide the underlying ERP tool sets.

Consultants form the third leg through their ongoing oversight and a focus on helping companies navigate the changes that accompany ERP modernization. In turn, this can help projects stay on time and on budget. The result of an effective three-legged stool implementation is a stable, balanced approach to ERP modernization.

Step 7: Know Your Audience

Employees form the core of your ERP audience. From frontline staff to managers and C-suite executives, employees are the ones interacting with the ERP system day in, day out.

Therefore, it’s critical for companies to engage their audience as early as possible in the process. Asking employees what they like—and don’t like—about current ERP systems, noting what features they want in new ERP systems, and predefining the benefits of the change to your employees can help strengthen user acceptance.

Step 8: Prioritize Digital Transformation Best Practices

While every organization and ERP deployment is unique, there are recommended best practices to help drive digital transformation:

Define the requirements (functional and technical) that matter most to the organization by identifying what’s needed now and what will be required in the future.
Build (and stick to) a plan for leading through change. Leaders should be prepared to own the cultural shift that accompanies an ERP deployment.
Document everything to create a complete record of all operational changes.
Test, test, test—and then test some more. Understand how defects within the system are being found and corrected.
Train team members continually. Recognize that change is challenging, and that ongoing training is critical to help reduce employee resistance.
Track metrics, monitor outcomes, and revisit training every six to eight months after going live to support user adoption and workflow efficiency.

Making the Move to Modern ERP Systems

ERP modernization is not a “one-and-done” effort. Benefits may not be immediately evident, and the true value of ERP systems can take a year or more to manifest across business operations. In contrast to legacy systems, modern ERP tools allow companies to better control costs, address current pain points, and help streamline and consolidate many systems and processes.

Modernization With Forvis Mazars

For companies making the move, Forvis Mazars can help you execute your digital transformation journey. With an experienced implementation consultant on your side, Forvis Mazars can help reduce technical debt and create sustainable operational change through ERP modernization.