The true cost of doing nothing with your outdated ERP and rental system
After twenty-seven years of implementing mid-market Enterprise Resource Planning (ERP) systems, the one consistency I have found is people just don’t like changing systems. For managers, this might be because of the financial cost or the disruption to the business. Perceived ROI is just not there, in some cases. For staff the reason is probably that they know how to do their job and they are fearful of change.
Regardless of the reasons, there are some high costs to keeping an outdated ERP or accounting system or rental equipment system. Here are ten things you should consider if you find yourself in this situation although the exact cost will depend a great deal upon the system, or multiple systems, you currently use.
1. Lack of support
The average support of an active ERP or accounting system is three to four years at the most for each version. Being on an unsupported version can can have serious consequences if technology changes enough that your system will no longer run, or is not supported for security updates. Either way, it can result in significant risk to your operations. If the system is no longer active eventually there won’t be anyone to support your outdated system. You may even be down to one resource and hoping that person doesn’t get run over by a bus or retire.
2. Technological obsolescence
Technology changes and no matter how well your system works you will have challenges if you are stuck on a DOS machine or using a database no longer being upgraded or moved forward. Being out of date is much more serious than not having the latest features. Assuming you need to expose your network to the internet as most organizations do, what happens when security updates are no longer available? What if your system is so old that it can’t even be available from remote locations or mobile devices? Technological obsolescence will seriously limit your ability to adapt to the ever changing demands of your customers and staff.
3. Higher training costs
Chances are your outdated system is no longer taught in tech schools or colleges. Unless you get lucky enough to find an older person with the right experience, you will have to train every person you hire. The newer systems available require much less training because many share their “look and feel” with Microsoft Office, which more than 1 billion people use worldwide. In an environment where younger employees enjoy significant mobility, offering to train them on an unfamiliar technology platform will make hiring new employees more difficult and affect employee retention.
4. Lower productivity
There are a number of factors in older systems that result in lower productivity. Often users have to enter duplicate data into multiple systems or track additional information in spreadsheets, which greatly enhances the risk of incomplete or inaccurate data. A modern relational database ensures data is only entered once and gives you timely access to the accurate information you need. Older user interfaces can be quite efficient at processing transactions, but they may be designed to access functionality by utilizing a large number of keystrokes. Younger users will be less proficient with older user interfaces.
5. Restricted access to information
Older systems often have very cryptic database designs and it is not easy to get information out of them. Often the only report designer available is a proprietary version built into the system, which can make it quite difficult to find anyone capable of writing new reports or modifying old ones. In comparison, a modern SQL Server database has a wide variety of reporting tools available and an almost unlimited pool of qualified report writers. Many of the older systems rely on batch processing to move data between modules, especially to the financial modules. The newer systems generally offer real-time posting meaning operational and financial information is as current as the last posted transaction.
6. Limited features
Accounting and Enterprise Resource Planning (ERP) systems have seen many advancements over the past few years including workflow control, integration to third party systems, advanced security, and real-time posting. There are many features and configuration capabilities available now that can provide your organization with competitive advantages or processing efficiencies. As an example, a proper financial consolidations module can save your organization several days of effort every month-end, quarter-end, and year-end. An online bank reconciliation module with automatic reconciliations based on download files from your financial institutions can save several days per year, or more if you have multiple bank accounts. Multi-currency is also now easily handled by most of the newer systems.
7. Data vulnerable due to weak security
Many of the older systems have older databases, which generally do not have good security models, either for internal users or to protect from external hackers. Most organizations today need to expose their systems to the internet to allow for external access by company employees in remote offices or at home. You need to be as up-to-date as possible to protect yourself.
8. Data integrity suffers
Many older systems have databases subject to periodic down times and problems with data integrity. Besides the loss in productive time, there is a very real danger of data corruption resulting in general ledgers that don’t balance, irreconcilable differences between the general ledger and supporting subledger’s, and an outright loss of data. Many years ago I received a t-shirt labeled “I survived the crash of ‘97”, after a combination of malfunctioning hard drives and a faulty backup drive caused the system having to be re-implemented from a backup copy that was eighteen months old. All data after that time had to be painstakingly re-entered and reconciled. Although the primary problem was due to hardware, a modern disaster recovery plan combined with a current database would have prevented this problem. A properly executed cloud solution would have allowed the company to continue to process, even if the primary server had gone done. When the city of Calgary experienced serious flooding a few years ago, one of our clients simply told his staff to go home and connect to the off site server with no loss of data or productivity.
9. Not appealing to new staff
Newer generations of employees are used to working with graphical systems, whether with computers or their mobile devices, and are very likely to be familiar with them from school or home. In any environment with a number of jobs to choose from, top candidates are likely to pick the one with the most up-to-date systems, which will be more enjoyable to use and offers a better career path for them.
10. Non-existent batch posting
Ending the need for batch posting has been one of the most transformational steps in the evolution of mid-market ERP and accounting systems. The better systems today offer real-time posting, which means your data is as up-to-date as your last post. Receivables and payables will be up-to-date. Financial and operational results are available immediately after a document or transaction is posted. Month-end is much quicker with virtually no close off processes other than to make sure your final receivable and payable transactions are posted. You will still have to make sure your bank balances, but with the advent of automatic reconciliation routines using bank download files, even this will take just a fraction of the time it used to. Inventory balances should always be accurate (although all user problems can’t be eliminated).
When trying to determine the return on investment from changing your business management system, you may run into difficulty assigning values to some of these items. A few, such as total loss of support or a catastrophic collapse of the legacy system, represent heart-stopping costs and even the question of survival for an organization. You can limp by with an inadequate and outdated system, but the question is, how much are your current inefficiencies costing you in the long run? We at Open Door Technology would be more than happy to help you sort through some of these risks and potential costs.