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How often do corporations exchange/update their ERP systems?
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- Sarah Gogin
I think a succinct answer is that organizations consider updating/replacing their ERP systems "when there is a compelling reason to".
Some examples may include:
1) Changes in technology
2) Support being "sunset'd" for their particular version
3) Mergers/Acquisitions that stimulate consolidated reporting requirements
4) Changes in the business such as divergent business models (services vs. product, etc)
5) Specific opportunities identified with quantifiable value to the organization i.e. faster closing cycle, reduction of inventory, more accurate Promise To Deliver forecasting, etc.
Much of the $500B version backlog that Steve Christensen refers to above comes from companies who have chosen to eliminate product support/maintenance agreements and do not have access to newer versions. Often software publishers will bend over backwards to keep that company as a customer, but many times, the cost associated with "coming current" on the maintenance agreements makes the premise of considering a completely new solution more viable, especially if the company's needs have changed or the system was poorly implemented to begin with.
With all of this said, there are plenty of instances of organizations who selected the best solution to begin with, have maintained a great relationship with the implementation partners and have kept their technology resources and skills updated to support the system efficiently. We often see these companies having long-term solutions in place beyond 15 years.
Although "Set it and Forget it" worked for Ron Popeil, that approach is deadly to Enterprise software platforms.
It completely depends on the organization and situation.
There are old VAX systems, running mission critical systems, that have not been updated in 20 years or more. On the other hand, cloud providers update their system several times throughout the year, even though the upgrades may be transparent to customers.
In general, however, I agree with Fred Blauer that a typical update cycle might be every ev every 5-10 years. Most companies do not undertake these projects lightly, which explains the long cycle.
Research shows that the amount of "backlog" related to version upgrades is currently at $500B (cio.com/gartner). There are versions of off the shelf applications still running that were installed in 1992 and before. Fred's estimate is probably 1/2 what it should be based upon real results. 12 - 15 years.
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I am afraid that the above estimates are correct, which underscores one of the great failures of the ERP industry.
Traditional ERPs are monolithic and hugely complex pieces of software, with very tight interconnections among functional areas. Once companies have gone through the pain of an implementation and have got their ERP to work, they do not want to touch it anymore.
This approach was never ideal but it was perhaps acceptable in the '90s. Today organizations need to respond to an unprecedented rate of change and need to be able to adapt, respond and anticipate if they want to maintain and improve their competitive advantage.
The new generation of ERPs need to support this demand for agility and allow its users to confidently and inexpensively move from one version to the next. Every new release dramatically improves the capability of the software and an ERP package that does not allow to move from one version to the next is a proof that software vendors are failing the trust of their customers.