Upgrade your ERP or Switch to SaaS?


Swapping out an ERP is probably the scariest thought on earth to an IT director. But at the recent Workday Rising, there were a large number of ERP users seriously thinking about such a switch. I talked to several: and let’s look at the pros and cons as they reviewed the challenges and risks.

I recall the wisdom of a comment from Tracy Jones, at the time the IT manager at the Department of Energy's Sandia National Laboratory in Albuquerque, N.M.: “Don't be the first one on the block to install the latest release.”

He was referring to his organization’s installation of a major ERP provider’s software that was taking about a year longer than expected to complete because of problems IT staffers found with earlier versions of the software. I suspect his warning still remains pertinent to today’s potential upgraders.

To date, the ERPs have been on-premise client-server architectures.  The draw for many at this event:  the move to SaaS with predictable cost of ownership over the long term – and no more fork-lift upgrades. These companies have invested millions in their current ERPs, and now face product upgrades within the next 12 months.

One large customer estimated that an entire ERP upgrade for his firm could well be a $4.5 Million project.  While many at the Workday event are solely looking at their human capital management and financials solutions, the cost, effort, and time to upgrade is still very significant, making the allure of "never upgrading again" pretty compelling. Oft-heard here was the compelling phrase “on time and on (or under!) budget” from existing users for their new deployments.

Workday customers who had made the move from prior ERPs were for the most, satisfied customers, stating that the migration from, for example PeopleSoft, had to be carefully planned for, but worth it in the outcomes and savings they achieved.  Medtronic (the medical device company) users, as one example, maintain part of their multinational installation running in parallel on PeopleSoft until a total conversion to Workday occurs.  The issues for many involve testing a tremendous number of customizations they have made before they can switch.

Upgrading an ERP

So what goes into the upgrade decision and why is there such a very long time between an upgrade release and the date customers go into production?

Here are the steps required: 

  1. Review the content of the new upgrade to see what features one may want to deploy
  2. Assess the hardware and networking infrastructure to ensure that the required prerequisites are available and running in the data center
  3. Run the release in a test bed to ascertain its readiness for “prime time”
  4. Test all integrations and customizations in that test bed environment to ensure all still work – then reintegrate or recustomize those that don’t.
  5. Ascertain if the new functionalities provided replace any customizations and evaluate how that “swap-over” would work.
  6. Retest in a model of the production environment to ensure that nothing breaks in this facsimile of “real world”
  7. Evaluate issues that may affect performance degradation
  8. Plan for change management and training for any new or different functionality to be introduced (for both users and IT)
  9. Plan for release deployment: generally a staggered division by division rollover from the existing production environment to the new one.
  10. Measure the cost/benefit of all of the above to determine if the upgrade merits potential business disruption against leaving the prior release in place.

You will notice that the preponderance of these plans are virtually identical to the planning that goes into effect when considering a totally new business application. (Upgrade time is when companies switch vendors.)

And of course, no one makes a software decision solely on the delivery method—that would be silly. The central question is always: does this meet my business requirements? Yet consideration of the pros and cons of upgrade with “the devil we know” and a new business environment both require very much the same thought processes.  And now may be just the time to begin that evaluation. Oracle, SAP, ADP, NorthgateArinso, NetSuite, Ultimate and many other vendors now offer end-to-end HCM and ERP solutions in the cloud.

For our assessment of Workday’s newly announced features, please see Josh’s blog of Tuesday, November 06, entitled Workday drops the Other Shoe(s): BigData Analytics, Recruiting, and Extensible Objects.

Christa Degnan Manning

Christa Degnan Manning leads Bersin by Deloitte’s Technology & Tools research. In this role, she collaborates with Bersin and Deloitte colleagues across practices to identify and analyze software and service providers that support and sustain success in human resources, workforce enablement, and organizational effectiveness. Christa’s research and advisory work helps businesses align their workforce support strategies with the right third-party software and service partners and governance models to deliver functional capabilities and employee experiences that support productivity, engagement, and workforce efficiency. She also helps solution providers map their capabilities and go-to-market activities with solution buyers’ and users’ critical needs. Christa draws on more than two decades of business-to-business market research, operational leadership, and global workforce experience. She holds a Master's degree in English from the University of Massachusetts, and a Bachelor of Arts degree from Barnard College, Columbia University, including studies at University College, University of London. Christa also has completed on-going executive education coursework in business metrics at Wharton, University of Pennsylvania.

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