ERP Strategy: Drivers for version upgrade and solution re-implementation

If you have an ERP solution, sooner or later you will need to upgrade it to a newer version to take advantages of the latest functionalities and to continuously improve your process efficiencies. The thumb rule suggests that always go for a technical version upgrade as the solution is already in place but this post aims to challenge the thumb rule and recommends evaluation of the version upgrade option with the whole solution re-implementation option so that a correct strategy can be deployed for maximum benefits. Believe me, every case is different than the other and in current times, no thumb rule can be proved a panacea for all our pains in this area.

So, what are the criteria of evaluation? And what are the factors that need to be considered before taking a decision in this context? Let me give my thoughts here from my experience and then we can enhance them with your comments later.
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The major drivers for version upgrade are:

• Cost and Time: Upgrade is more of a technical solution and it does not involve many changes in solution except for retrofitting the existing custom components and removing few of them with new functionalities, the requirement for business involvement is less. This means that an upgrade can be finished much faster and hence the cost of the project will also be much less
• Consulting Effort: Since upgrade largely means no re-visiting the broad solution so lesser engagement of consultants for tweaking the solution
• Change Management: No major change management issues as the system as well as the processes remain similar and users do not see new screens after the project goes live
• Trainings: Less number of changes in the new system means lesser hours of trainings required for business to be accustomed with the new system
• No additional license fee: Almost all ERP product vendors provide the latest version of the product free of cost to the customers and no additional license fee needs to be paid to them while upgrading

Above are the points which drive you towards going for a version upgrade straightaway but let us also check the drivers of re-implementation of the solution before taking a decision:

• No impact of customized instance: Since the solution will be a new one and the configuration of the system will be done a fresh, there will not be any impact or limitations of new solution due to existing customizations
• Opportunity for process re-engineering: Chances are, that the solution implemented by the organization some time back is not the optimal solution in today’s scenario and re-implementation of whole solution will provide an opportunity to fine tune the processes, standardize them and look at centralizing/decentralizing some of them to take new shared services features of the ERP product
• Acquisitions/Mergers: Two merging organizations will have 2 different solutions that are best for them but these might fit the newly created entity. This is a fit case of solution re-implementation
• Address design Issues: If your current solution has multiple design issues that will remain in the system even if you go for an upgrade, then you might go for a solution re-implementation
• Opportunity to change ERP: When you are going for a re-implementation, since you need to do things from scratch, it might make good sense to look at alternate ERP products and go a broad fit-gap exercise before zeroing-in on the re-implementation solution ERP

These above drivers paint a few points in favor of re-implementing an ERP solution and I am sure, though I have covered the major drivers but there must be some hidden points that need to be considered and both the options need to be evaluated before taking a final decision in this regard.