8 ways legacy ERP harms business

Discover how outdated on-prem ERP systems could be holding your business back. This article post explores eight ways legacy ERP can harm productivity, growth, compliance, and security—and how cloud-based ERP solutions can help your organisation thrive in a competitive, digital-first world.

Change is necessary. This is not just about how much business technology has changed and how important it is to embrace what it can offer. It’s also about shifting perceptions, and how advancements in technology influence how workers expect to interact with systems and tools in the business world as much as in their daily lives.

For businesses that feel well established in their industry niche, it can be hard to gauge what change should mean and to what degree and over what timespan change should occur. Then, there’s this question: how much should a company shake up the way it operates – and how it doesn’t – if things aren’t actually broken?

Hey! That’s a good point! Why fix what isn’t broken?

Well, yes. That is a good point and a great question. Here’s something to consider in response. If your business continues to rely on an on-prem enterprise resource planning (ERP) solution, it may serve you well enough today. But it’s more than likely your ERP will soon not help you adjust to allow your business keep pace with emerging trends. So, here’s another question to consider. What are the signs (and the costs) that you aren’t aware of that could become bigger problems? How is your on-prem solution actually hurting your business’ chances to solve them?

It’s a scary question, but an important one. It’s also one that you have the power to address once you’ve got a handle on the 'why should I?' factor. To help you get there, here's a list of eight ways that your legacy ERP could be harming your business. But don’t worry, it’s not all bad news. This list also includes how you can avoid future roadblocks by considering investment in cloud-based technology. An investment that can help you to succeed now while also providing the flexibility to scale with future growth, too.

1. Legacy ERP on-prem systems impede innovation and cost more

Here’s a foundational truth in both nature and in business. To survive, you must evolve, adapting to your changing environment better than your competition can. With that in mind, what resources do you have allocated to support business growth? How much time can you devote to addressing new business requirements to stay competitive? How much time are you and your technology teams spending on troubleshooting, fixes, and infrastructure issues instead? What are the numbers telling you?

Recurring maintenance costs, infrastructure upgrades, and self-managed integrations and related tasks can consume an IT budget. This is true especially as on-prem solutions age. With heavy maintenance burdens, only a fraction of budget and time is left over for meeting business needs and developing strategies that support future goals. Worse still, businesses have little left over for managing core areas such as security protocols and data governance.

Fortunately, cloud-computing technology and SaaS models for ERP solutions enable a lower cost of ownership and require fewer day-to-day maintenance costs.

With budget and time freed up to spend on growth areas, organisations like yours can:

• Improve connections and flow between internal and external systems
• Create new cross-functional and more integrated ways to work together
• Set integrated and automated reports to inform more timely strategy
• Add sales channels faster
• Expand to serve new markets with greater ease.

2. On-prem ERP solutions can’t deliver real-time information

The best paths to travel on are smooth ones. Bumps and seams on that path can distract you from where you’re headed. If you’re running a legacy system, your business might currently depend on a set of disconnected and yet operationally essential spreadsheets. Reporting is onerous. Errors are common. Assembling bookings, billings and backlog reports, or completing periodic budgeting and forecasting from various data silos consumes your team’s time – and that just isn’t the way they want to spend it.

This is even before it’s time to make sense of the data to help inform a viable strategy. Due to manual processes, the data you’re acting on by that stage is outdated. By the time you’re ready to action anything, the whole picture has changed. This drastically affects your ability to make strategic decisions. The good news is that you can smooth out that road and make the journey a lot less bumpy in the cloud.

A cloud-based ERP can integrate BI and analytics to enable your teams to create and share their own reports with self-service tools. This means faster and more relevant actions and strategies that support business objectives. When you can see what’s really happening in your business in real-time, you can eliminate the gaps between collected data, reporting, and strategy to make more informed decisions. That helps put your company on a smoother path to a true competitive advantage.

3. Legacy ERP systems make it hard to stay compliant

Compliance isn’t a one-and-done exercise. The regulatory requirements and rules that govern compliance around finances, data management, and reporting are in constant flux. That means that your business must keep up with the changes with precision. This can place enormous pressure on your finance teams, and other teams, too. To make things more complicated, your outdated ERP is simply not designed to be easily adaptable for frequent adjustments to regulatory and compliance requirements.

Your legacy solution puts more pressure on your people to make up for process shortfalls and necessary updates. And people can make mistakes. This is especially true if they don’t have the right tools. In a business environment filled with spreadsheets and other workarounds that are difficult to formalise, integrate, and adjust when needed, errors are not only likely, they’re inevitable. They can be costly, too.

In the cloud, though, the pressure to keep up with the latest compliance regulations is on the technology providers and not your people. With frequent updates via SaaS providers, cloud-based ERP solutions align with the most recent regulatory and taxation information. That means you’re always up to date with the latest accounting rules, tax regulations, and compliance standards. The result is less risk, less time spent on manual tasks and managing workarounds, and more time spent on strategic rather than strictly operational tasks. The pressure that was once on your people is off.

4. Ageing on prem ERP solutions slow down expansion

When you have big plans to expand your reach as a business, flexibility and simplicity beat rigidity and complexity every time. Today’s fastest growing and innovative companies are thriving in part because they have the flexibility they need to quickly expand into new markets and territories. One of the serious limitations of legacy on-prem ERP solutions is that they are tied to the burden of managing hardware and the rigid, manual work it takes to increase regional scope, add new users, and establish new domains and locations.

If you’re running multiple instances and databases for each market, that creates unnecessary complexity that can slow your business down and make it more difficult to scale up at the right time. The time and cost of hiring IT in each respective location becomes onerous. This is not to mention setting up offices, procuring software licenses and hardware, and managing setup processes that can add to the expense of expansion and cut into profitability. All this also increases the stress factor – and who needs more of that? No one.

Thankfully, there’s another way to go about planning and implementing an expansion project. Cloud infrastructure is designed for incremental adjustments and big changes alike without businesses having to worry about scaling up expensive IT resources and laying out large capital expenditures. The result is greater fluidity and much less friction, so that your business can spend less time on setting up expansion plans, and more time on making connections, cutting deals, and making sales.

5. Outdated ERP systems do not serve evolving employee expectations

Embracing change isn’t just about specific tools and platforms. It’s about meeting people’s expectations and better enabling them to produce great results. New generations of people are entering the workforce who have grown up using interactive technology since they were children. Older generations in the workforce have embraced new approaches to web-based technology and streamlined processes as well. Serving expectations of all your people and empowering them with the right tools is good for your business across the board. Continuing to do that is an ongoing process that demands – and we'll say it again - scalability.

So, what does the modern professional expect when it comes to how they do their job? Consider:

• Easy and secure access to work-related information from anywhere
• Mobile-friendly user interfaces
• Real-time information they can trust
• Accessible ways to collaborate with their peers.

An outdated ERP makes it difficult for your business to support this. They weren’t built for our current era of 'always on' technology and mobile-first processes. Clunky remote access, slow connections, and unintuitive virtual private network (VPN) experiences can work against productivity. Outside of VPN, professionals in your organisation are tied to specific locations versus having the freedom to solve problems and address needs wherever they are. The result is that your employees can become dissatisfied, frustrated, and alienated.

Cloud ERP applications help you to meet employee expectations so they can do their best work. They enable your employees to monitor and manage the business from anywhere on any device from any web browser. Cloud platforms help to better support employee self-service, including submitting reports, receipts, and purchase orders and do so more securely. Cloud-based platforms enable flexibility just as your employees are used to in their daily lives of easy access via the web.

6. Legacy or on premises ERPs don’t adequately support decentralised teams and ops

It’s not just workers who are becoming more mobile and remote-first. Businesses are becoming less location-based, and virtual in terms of where their teams do their work. Businesses looking to achieve agility and fluidity in an increasingly globalised world need to have the flexibility (that word again!) to enable teams wherever the work takes place with greater elasticity.

Today’s businesses like yours are running operations with teams in multiple locations. They’re maximising efficiency with offshoring and remote workers. Last generation’s ERP was never designed with this in mind, requiring hefty Windows clients and licensing software in each location. An old ERP can force you into a rigidly centralised structure, designed for another era where remote workers and locations were not the norm. But things have changed.

Cloud computing enables the distributed 'elastic' and virtual model for your business instead. This offers an extended workforce access to applications from anywhere and for your business to scale up and down easily whenever needed. This structure is not limited by the constraints of centralised ERP, nor is it dependent on local IT resources. That means that you can organise your workforce as you see fit without the limits that geography places on you.

7. Legacy ERPs don’t align your business to supplier and customer expectations

Your customers want greater flexibility from you, too. They want to check their order status right now in real time. Your suppliers expect real-time replenishment status data and forecasts. As our era has evolved. businesses, suppliers, and customers are not the separate islands they once were. Instead, they have become a part of a fluid and interconnected ecosystem.

By now, it sounds like listening to a broken record when we say that your legacy system wasn’t designed for that. You might be compensating for that by deploying expensive adapters, third-party applications, and managing siloed CSV exports. But with so many external stakeholders, manually intensive and unscalable systems cease to be service-oriented over time. Instead, they can negatively affect your most crucial relationships, and your ability to form new ones. Your customers can become easily frustrated if they can’t interact with your offering the way they expect. On your side, switching suppliers on demand when needed requires still more expensive integrations and drawn-out onboarding processes.

Cloud ERP applications connect with other platforms and web applications within your enterprise and beyond. They make it easier to synchronise your back and front-office in real-time and connect with fewer complications. Your customers see their orders and returns in real-time. Your suppliers can fulfil your customers’ orders as they process through the system. Your stock levels are always up to date, providing visibility for your sales and service reps as well as customers browsing online. The cloud opens these possibilities up to you and helps you create an environment where everyone can win.

8. Old on-prem ERPs are less secure

Cybercrime across all industries and regions is expanding to worryingly exponential degrees. According to the Australian Signals Directorate (ASD), during the 2022-23 financial year, there were nearly 94,000 reports of cybercrime submitted to ReportCyber. That represents an increase of 23 per cent compared to the previous financial year. Right now, technology firms and specialists dedicated to keeping personal and business data safe are in an arms race with criminals. Our data-driven world means that data is a highly sought-after currency. It’s a lucrative and re-sellable resource for those with bad intentions. When the wrong people get their hands on it, that can lead to untold damage to your business and brand.

While it’s true that on-prem solutions are closed systems, this just means that criminals know to adjust their tactics. On-site exploitations behind a locally managed firewall have a long tradition. Protections for data centralised inside of a single network represents a single point of failure for your business. To keep that data safe, your teams must enact physical measures to secure servers and the locations where those servers are housed. This means extra expenses and less focus on activities that further your business objectives.

Cloud-based solutions make it easier to protect your business data in a scalable way, including automatic updates to security protocols, remotely deployed patches, and greater compliance consistency. They also help to re-distribute the security burden onto those who have a vested interest in the overall hygiene of business systems. Amazon, Oracle, Google, and Microsoft are some of the biggest examples. In the cloud, your business can rely on the technology experts who hold data security as a core competency. You can then concentrate on what you’re best at in your business and industry – making connections, serving customers, making sales – with greater peace of mind.

So, that question again: why change?

The world has changed since your legacy ERP became available. The challenges that businesses like yours face today aren’t the same as those they faced even a decade ago. And of the ones that are, there are far better ways to meet them than there once were. So, it makes sense to consider what today’s challenges are and how well you’re able to anticipate what’s to come.

Some of your challenges may be common in your region, industry, and sector. But your business is unique. So that means that the sources of friction that keep you from where you want to go are unique, too. 

We invite you to contact us

We at PKF Digital would like to understand your story. Contact us to explore the value of cloud technology and ERP solutions for your business. Let’s start that conversation.