August 8, 2024 - Your ERP system may be due for an upgrade. In a survey of 1,000 business leaders at mid-sized and larger private companies, many admitted they had not updated their ERP systems for a very long time.

• 31% hadn’t updated their ERP in 5 years
• 10% hadn’t updated their ERP in 10 years

This is a problem for those companies because while their ERPs have remained the same, the world around them has changed — in some ways, markedly. In this article, we explore the ways those ERPs can grow out-of-date, the implications (like cybersecurity and analytics), and what your business might consider doing about it.

It’s not just the ERP — it’s the whole financial tech stack

Older ERP systems are less likely to easily integrate with your company’s entire tech stack, which is growing both broader and deeper. Companies are storing more information of greater value across an increasing number of systems, and it’s that entire cloud and all those interconnections that you must worry about. There are accounting systems, e-commerce systems, CRMs, bill pay systems, payroll systems, and dozens of others.

If an ERP system was implemented before many of those cloud software systems, it’s probably becoming a drag on productivity across all of them. The integrations may not be bidirectional or complete, and employees may be manually transforming the data by downloading and then uploading Excel spreadsheets, which introduces human error and delays.

In addition, aging financial tech stacks can become a cybersecurity risk. Intuit no longer supports QuickBooks Desktop, for example, and like Windows XP, it will likely become a major security risk.

The more that an ERP implementation and surrounding constellation of software ages, the harder it also becomes to attract talent interested and willing to work on it.

Old ERP systems are less able to support analytics

An ERP implementation from 5-10 years ago can’t have accounted for newer data types or data models, which means you either push all that data into a data lake where you can transform it or accept that it’s structurally frozen in time.

Perhaps this is why less than one in three private companies use analytics, and far too few forecast with enough frequency to be meaningful. A precious 7% say they are able to forecast continuously.

This is a major risk for companies that need to scenario plan and have more complex supply chains operating over more locations and more countries than ever before.

Old ERPs are less able to support today’s level of e-commerce

In 2017, e-commerce accounted for just 9% of sales and was projected to grow respectably. But worldwide predictions rarely factor in black swan events like the 2020 pandemic and now e-commerce is doubled — 16%. For private companies, it is far more: 53% say they sell more than half their products online.

ERPs that don’t account for this volume of e-commerce probably aren’t gathering the data and enabling the forecasts for things like demand planning and inventory availability needed to compete and have high customer satisfaction.

Old ERPs keep companies AI-unready

In 2017, just 6% of companies were using AI. Today, 73% are. That use ranges from the algorithms embedded in all the cloud software they now use to training their own large language models. All uses, however, suffer one common bottleneck: AI requires clean and available data.

In a Bain & Company survey of business leaders, the number one thing preventing them from realizing the benefits of AI is their internal systems are not ready for it.

ERPs are about staying competitive

What all this comes down to is whether your ERP and other systems help you adapt to the market and compete. There’s no question that accurate and timely information of the kind that a modern ERP can provide are crucial, according to leaders in our survey:

• 48% say the ability to gather and analyze data from suppliers’ ERP systems to better predict supply chain delays and cost changes is most important to stay competitive.
• 50% say the ability to gather and analyze customer data to better predict their behaviors is most important to stay competitive.

To know whether your ERP implementation is an impediment, consider a third-party audit. Just like getting a second opinion in medicine, it doesn’t hurt to have an outside specialist who views dozens or hundreds of implementations per year conduct a gap analysis. This can tell you what more you could be doing with your present ERP, and what you might achieve with an upgraded one, so you can weigh the costs.

In an economy where supply chains are in a state of continuous disruption, high inflation, and uncertain interest rates, old ERPs are a blocker most businesses can’t afford. To learn more about how Citrin Cooperman can help your business ensure its ERP system is up-to-date and effective, please contact Mike Zyborowicz or Eric Casazza.

Want to learn more?

Access our Private Company Performance Report