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Companies today use their ERP systems for increasingly longer periods before switching to something new. Our statistics show that a company today changes ERP systems approximately every 15 years (though this varies between different industries). The difference is significant compared with statistics from the 1990s when companies changed ERP systems at intervals of 5-7 years. The reason for this is that the ERP system industry was still relatively young in the 1990s.
Although several ERP systems emerged during the 1970s, many new systems were developed between 1985-1995. Those who were customers of these new systems often outgrew them and were forced to upgrade to a system with broader and deeper functionality. During the 1990s, there was also a transition from minicomputers to PC/Windows, which contributed to a generational shift in vendors and systems. Although we can confirm that the lifespan of an ERP system at the customer has increased compared to "earlier", we are convinced that many of today's companies could extend their usage for several more years. What supports this is our experience from over 400 procurements over the past 15 years. This experience shows that many of today's companies have "stuck" in a setup/configuration reflecting the company's organisation and operations on the day the system was installed (10-20 years ago) but where the customer has not revised their configuration as the operations have changed. And where the customer, with good reason after around 15 years, claims that the system no longer supports the business well and therefore wants to change systems.
Of course, there may be other motives for changing ERP systems, but we often see that the existing ERP system supports what the customer desires but requires a re-implementation for the customer to fully benefit from the system's total capabilities. What we mean by re-implementation includes review and modification/completion of the model for governing and measuring the business, which affects the accounting string in the ledger, as well as changes to product costing and the information model needed to meet the current needs for management data. In addition, there is naturally optimisation of the company's processes. All this normally occurs during a system change but is equally required if conducting a re-implementation of a system where the configuration no longer supports current needs.
It is natural for the customer to hesitate about a re-implementation since it creates concern that the project will be as complex and messy as a system change. However, this does not need to be the case if the installation is planned and prepared correctly. The advantage of a re-implementation is that both customer and vendor have good knowledge of the system and the customer's business, which reduces the risk of extensive consultancy efforts. This is on condition that the customer and vendor have been reasonably active in their relationship.
At the same time, a re-implementation should be compared to a system change, which always requires a large effort from both customer and vendor to build knowledge about each other. And on top of that, an extensive installation with tests and training. And where the effect of the system change may not occur until after a relatively long period of use.
The fundamental problem is that the discussion about re-implementation versus a system change often arises when the customer has passed a certain level of pain. And at a time when dissatisfaction with the existing system is so great that the customer chooses to switch vendor largely to "get something new" that does not carry a negative history. This then becomes more a so-called political decision rather than a decision based on facts and reason.
Even though it can be difficult to convince management and the board, it should be included in the plan for active system management to conduct an analysis/evaluation of a re-implementation of the existing ERP system approximately every 8-10 years. This is to avoid getting stuck in an old configuration and as a way to extend the value of the investment previously made.
Even if the customer keeps up with system upgrades and always uses the latest version, it does not mean that the customer has the opportunity to fully take advantage of the development and new features added to the system – without parts of the basic configuration being changed. The risk is that you pay for continuous upgrades but cannot utilise the new possibilities. In the long run, this means that the benefits of annual fees and upgrades decrease over time.
The recommendation is to see re-implementation as an opportunity to increase the benefit of the investment previously made and as a way to reduce the need for a future complex system change.
