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3rd Party Support Study Documents Extending ERP System Life

Posted by Dave Kravitt

A new study published by Aberdeen Group in September details significant benefits for those that move to Third Party ERP Support services such as those provided by Precision Solutions Group. The article corroborates the benefits PSGi customers have achieved for years:

  • Higher quality and more responsive service
  • Less disruption in business continuity caused by ERP replacement
  • Desired functionality often already exists in current ERP system
  • On average third-party support costs are less than the vendors
  • Third-party support can extend the life of your current ERP software

In his opening remarks the author summarizes his findings, Extending ERP's Lifecyle with Third-party Maintenance"Aberdeen's research finds that out of all the ways third-party services can provide enhanced return on investment (ROI), third-party maintenance can provide tangible cost savings when compared to purchasing maintenance support from the ERP vendor. For organizations that are not satisfied with their current level of support, third-party services may also be able to deliver higher quality of services and quicker response times than the solution provider."

The article goes on to discuss the substantial commitment a new ERP implementation requires and points out that "the resulting disruption to an organization's business could cause it to fall behind competitors." Implementing ERP software is difficult work.  Unexpected events often delay and sometimes derail promising projects.  Beyond the typical project challenges, external events including turnover in key executive positions, mergers and acquisitions, or layoffs can dramatically impact project timing. According to Management Consulting Now, 50 percent of ERP implementations take longer than expected.  Providing statistics for cost overruns (8%) and project delays (14%), the Aberdeen study suggests that it may be better to extend the life of your current software and continue to reap the return of your continuing investment in your systems rather than replace them.

The author says that in some cases "the desired functionality ... an organization needs to effectively run the business ... already exists within the [current] software solution." Several factors may be impacting this "invisible functionality." Often the original multi-phased ERP implementation never made it past the first couple phases leaving desirable functionality on the shelf. The original project team as long since been disbanded and along with it the planned subsequent, value-laden project phases.  "Application erosion" occurs as whisper-down-the-lane training and employee turnover results in users and IT forgetting the comprehensive functionality that the ERP system actually possesses.  Often newer software releases full of requested functionality are left on the shelf and deemed too difficult or disruptive to install.  Time and again it is just assumed that older software cannot possibly keep up with contemporary demands.  Truth be told, core ERP functionality hasn’t changed in decades.  An audit of a company’s business processes and use of their ERP software along with the current business' requirements will often reveal substantial unused functionality that is "low hanging fruit" relative to implementing a new ERP system. Third-party providers such as PSGi are application, business and industry experts that can perform this essential audit.  This can provide the evidence that either your current ERP can or cannot address your business requirements and minimize the subjective factors being weighed.

The majority of respondents to this study cited "lack of internal resources as one of the reasons keeping them from getting the greatest benefits out of their ERP solutions." This is where third-party providers may act as an extension of their IT team. Not only do they work to resolve daily issues but they also can look at the bigger picture.  These providers can ensure the software is being used properly and appropriately with audits and optimization studies.  They also know what unused modules or functionality would benefit the organization and help them address changing and challenging business requirements. In this way third-party providers like PSGi truly become partners assisting organizations achieve their strategic and tactical goals and objectives.

The most often discussed rationale for third-party maintenance and support is the cost savings.  The Aberdeen study clearly states "the average cost difference makes third-party maintenance an attractive option." The reason is clearly different business models of third-party providers versus software vendors.  Vendors are saddled with significant overhead costs to continually develop new software products for profitable license revenue and view the support and services area as a profit center to cover the overhead.  Third-party support and service organizations don’t usually develop products so they aren't burdened with this overhead.  As a result as the study shows, third-party providers can charge less for their higher quality and more responsive service.

The final takeaway speaks volumes, "As our current research shows, organizations that secure effective third-party support are able to cut costs and extend the lifecycles of their ERP solutions.  And those results go right to the bottom line."  I couldn't have said it better myself or agreed more.

A copy of the Aberdeen Group article may be downloaded at Aberdeen Group's Extending ERP Lifecycle with 3rd Party Maintenance.  Thanks Aberdeen Group.

 

Tags: Extending ERP System Life, Maximize ERP Investment, PRISM Support, PRMS Support, JDE World Support, Enterprise Application Support, Enterprise Application Services