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The Top 7 Strategies for ERP Modernization

Reading Time: 5 Minutes 22.10.2020 Press Releases

How SMEs tackle the update of their IT systems

Companies have realized that ERP systems are the key to their innovative strength. This raises the need for action regarding modernization. The strategies for modernization could not be any more diverse, though.

SMEs in Germany, Austria, and Switzerland agree that they must brush up their ERP system to stand a chance against the national and international competition. This is the result of a survey by teknowlogy | PAC on behalf of proALPHA. The survey among 100 IT specialists also showed that the companies have completely different strategies for tackling modernization.

  • Add more functions
    Most of the interviewed companies intend to use previously unused functionalities of their current system. 42 % stated that they plan on adding individual components or functions to their ERP software. The survey by PAC showed that warehouse management and goods logistics are particularly popular. The entry and forwarding of transaction data on mobile devices provide for more consistent processes here. Why it makes sense to expand in this area is shown using the example of the production at the Bavarian State Mint. When lots are transferred from one container to another, the ERP system immediately receives the information about their whereabouts via scanning, without the need for job tickets. This provides for an improved process reliability and saves the oldest company in Munich a lot of time and effort. "We are now able to analyze our processes holistically and to keep on optimizing them," says Stefan Ziegler, Head of Procurement at the Bavarian State Mint.
  • Further adjust existing installations
    31 % of the interviewed companies intend to make small adjustments and configuration changes to their ERP installation. These replies already show that the adopted strategies do not exclude, but rather supplement each other. The majority of companies believe that they already achieve a great deal with a better use of their existing infrastructure.
  • Progress through release upgrade
    More than every third company is planning a major upgrade: 37 % of the participants want to upgrade the software they are using. PWM GmbH & Co. KG, provider of electronic price displays for gas stations, has already successfully completed this step. "We needed the update to pave the way for new functionalities and a further expansion of our ERP landscape," says Maximilian Specht, Head of IT and Business Development at PWM. In a first step, PWM and the ERP provider defined all requirements and expectations for the future ERP. Things then moved very quickly, with the update contract signed by the partners in the summer of 2018. The new software was installed in November and the update project was then completed in June 2019. The update itself was carried out on a long weekend.
  • Every fourth company still develops their own customizations
    20 years ago, an ERP system was quite a rigid construct. Companies had to commission expensive customizing if they wanted to map individual business processes. Standard software nowadays is a lot more flexible thanks to modularization and configuration options. According to the PAC survey, every fourth SME believes this is not enough, though. 24 % have indicated that they develop additional components themselves with the help of external service providers. These are most likely companies that believe their specific processes cannot be mapped in the standard version of a system. The survey does not examine whether they are right and whether this justifies the high expenses for development and maintenance.
  • Liberating change of provider
    Almost the same number of companies does not shy away from a more radical step. 34 % of the participants have stated that they intend to replace their old ERP system altogether. A big step which is usually worth it, since modern providers do not only include a lot of industry-specific functionalities in their standard version. They also offer extensive possibilities to integrate systems and machines, and hence provide the basis for the Industrial Internet of Things.
  • Improve the system integration
    The PAC survey also shows the growing importance of integration options. Every third company intends to better integrate their ERP software with another business software. Modern systems offer a variety of options for this purpose, from classic interfaces to service-oriented architecture with an enterprise service bus.
  • Additional software to the rescue
    30 % of the companies have decided to add software to their IT environment. This includes mainly special programs for specific industry processes or new technologies, for example, in the field of machine learning. However, these companies must comprehend that this does not spare them from a functioning integration. Metal processing specialist KWM WEISSHAAR was well aware of this fact. At KWM, the ERP system now transfers all master files and orders to the production control software TruTopsFab. After programming, they are transmitted to the machines. These continuously report status information to the ERP system, after every step and every completed order. "It's working smoothly," confirms Frank Jung, Deputy ERP Project Manager at KWM WEISSHAAR. "With proALPHA, we always know which order is currently in which status and at what processing station."
  • Conclusion
    The survey results indicate two main trends. First, there is no golden path to IT modernization. The companies choose very different paths as is shown by the narrow spectrum of the answers. All of these range from 30 to 37 percent, except for one outlier in either direction. The second trend which can be derived from the survey is that most companies do not solely rely on one strategy. They compile their perfect mix from all options. However, they often don't do this by themselves. Every third company relies on external help, whether in consulting or programming. ERP expert hence seems like a safe career choice for the future.
The entire survey "Mehrwerte schaffen für den Mittelstand durch ERP-Software" (available in German only, roughly: How to create added value for SMEs using ERP software) can be downloaded for free on the proALPHA homepage

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