Is Upgrading Your ERP Necessary?Thu Nguyen
Many companies have been wondering if it is necessary to invest in upgrading their enterprise resource planning -ERP – software. Our recommendation is usually, this should only happen for the upgrade is in the best interests of the users.
For companies opting to upgrade their ERP software system, there are some things the contract needs to include. Prime among these is a specific detailing of the functionality and performance of the newer model.
Furthermore, if either the vendor or integrator is reluctant or unwilling to include these warranties in the contract, it’s best to walk away from the deal. They’re signaling they know something you don’t. However, if there is a problem down the line, these written assertions will become your best argument.
Here is the crux of the issue.
Despite their largely successful track records with more mature systems, there is a legitimate question of whether the newest generation of ERP software systems is up to the task. SAP’s S4/HANA, Oracle’s ERP cloud and Microsoft’s D365 lack the track record of their predecessor systems of supporting the complex needs of many businesses and other organizations in the private and public sectors.
Until they have demonstrated their ability to seamlessly take over from a more mature ERP software system, a user is urged to upgrade needs to proceed cautiously. If a careful, internal analysis makes a business case for upgrading, then do so. Just remember to include in the contract all of the specificity in the agreement for your legacy system.
Furthermore, apart from the improvements that a necessary ERP upgrade will bring, some other points to cover include:
1 – Including all sales material as an appendix to the new contract.
2 – Detailing the specific responsibilities of the vendor, integrator and the user
3 – Drafting provisions that prevent “scope creep” without a senior person’s authorization.
4 – Removing or limiting binding arbitration clauses that may reduce your ability to recover damages from the vendor or integrator if there is a problem.
If there is an unfortunate history of ERP “train wrecks,” take steps upfront to reduce the likelihood of another one.
In nearly every aspect of running their organization, executives and senior managers are incredibly disciplined. Yet when it comes to their ERP software system, we’ve seen too many decisions made for the wrong reason. The most common seems to be viewing ERP software systems not a management solution. This is likely to result in the transformation heading straight for the rocks. It is similar to where the Sirens lured Circes and his entire crew to their demise.
Source: Taft Stettinius & Hollister LLP – Marcus Harris