Many ERP systems were upgraded or replaced in the late 1990s to prepare for Y2K. Now, with most having a lifespan of 12 to 15 years, many companies are ready for an upgrade.
“Since then, obviously there have been significant improvements in the technologies and functionalities available,” says Doug Schrock of Crowe Horwath LLP, a public accounting and consulting firm.
Today’s cloud-based ERP systems are much more adaptable than the ERPs sold in the late 1990s and early 2000s. The cloud simply provides the kind of flexibility that companies didn’t have before and that’s why so many are moving that way.
Of course, an ERP implementation requires companies to consider several critical factors, an article on the Crowe Horwath website explains.
The article takes the approach of a private equity firm. They’re typically all about getting an organization lean, mean and performing at a high rate of return so they resell or go public with the company. In other words, return on investments and the expected benefits are important.
With an ERP implementation, however, one of the hardest things to do is to truly capture some of the benefits and unmet business needs. Business needs change as businesses evolve.
With that said, here are three primary considerations the Crowe Horwath article recommends that private equity firms focus on when evaluating ERP options.
- Investment thesis: What would the private equity group gain from investing in an ERP upgrade? Would a potential buyer see the state of the current system as a major risk?
- Unmet business needs: Does the current ERP system support the company’s future goals or hold it back from expansion? Are there significant unresolved software integration issues?
- Organizational capability: Is the company able to take on a new system or a major upgrade? Are the right people available to handle such a project or will outside resources be needed?
Source: Crowe Horwath, November 2012