After years of not investing in their ERP systems, OEMs spent much of 2020 and 2021 embarking on major upgrades, or replacement projects to modernize their core systems with over 26% of prospects and customers telling us that they are in the midst of a multi-year upgrade cycle.
After years of not ERP underinvestment, 2020-2022 have seen a large increase in ERP modernization projects – 30% of the OEMs we have engaged with are currently engaged in such an effort.
We are also seeing a similar occurrence with CRM systems, with implementations ranging from purely new (“first time”) CRM implementations, to upgrades to existing/old systems. And data from industry sources backs up this anecdotal evidence: Gartner found that ERP spending went up by 10%, CRM by 12.6% and are forecasting further growth in both these categories through 2025.
Regardless of the type of system being upgraded or implemented, the undeniable truth is that IT organizations are overwhelmed. Their day-to-day jobs are more complicated by transitions to the cloud, worrying about security breaches and hacks, and managing these extraordinarily large and complex projects. So the appetite for taking on something new, be it a BI project, analytics warehouse, new Service management system, etc simply gets moved to the backburner. No new initiative will be taken on without letting go of something else that is in flight.
The issue is one of timing; specifically, most of these implementations take a long time, and there are (almost predictable) delays in the go-live dates. Implementation timelines of over 2 years for ERP and CRM are not unheard of (more the norm), and this puts huge pressure on IT teams to complete their work on time.
So business leaders are caught between a rock and a hard place: they have other initiatives which they need to execute, often with help from IT, but they are also very aware of the difficult trade-offs their IT brethren face as they juggle demands on their resources. What should they do? Wait for large project completion, or push other smaller projects through at the same time?
We’ve heard this so often in the past year that we asked some experts to weigh in on the “to wait or not to wait” strategy. Here are their top 3 suggestions on how to handle this decision:
- If the new investment has a quick turnaround and payback, then find a way to invest in it as the benefits will pay for the investment, and more importantly, create a “cushion” for the inevitably delayed ERP/CRM implementation.
- If the investment has a much longer payback period, then it is better to defer it as there will be too many costs without offsetting benefits in the near term. This will make the finance community happy as it doesn’t jeopardize the financial performance of the company.
- If the investment has a middling payback period, then the decision-making process skews towards strategic reasons; e.g. will this investment give us a competitive advantage vis a vis cost, or capability that is valued by the customer base? Will it help us leapfrog competition? Etc.
The last category is clearly the hardest one, but is the difference between leadership and managing an organization. Those who take bold, but balanced decisions will set up their companies for success. And one way to make this more palatable is to find a way to break up the initiative into smaller projects, each bounded and with clear success metrics and milestones. Additionally, investment risk and cost can be reduced by using purpose-built technologies, rather than massive customization of generic platforms.
Finally – some tactical observations which will make the above decisions easier to stomach: we’ve seen OEMs migrate only a few years of data to the new/upgraded ERP. In our opinion, this is a mistake – sure it saves you time and cost in the near term, but is an expensive, time-consuming, and unproductive decision over the long term. Bite the bullet, and migrate every bit of historical data you can to build the foundation for a data-driven enterprise. And along with this migration, invest in the necessary data quality investments so users get high-quality, unified, trusted data to make decisions and power workflows in the future. This investment is NOT a waste of time as data will be reused in multiple workflows and applications across the organization. Better yet, build that unified, trusted single source of truth you’ve been waiting for all these years!