Modernization has been a perennial line item on every CIO’s budget for decades. What’s new soon becomes old, and to keep up with rapidly changing business needs, the organization must keep its technology up to date.
Given so much of the IT budget goes to basic maintenance – aka ‘keeping the lights on’ – and every CIO would prefer to allocate the remainder to areas of innovation, modernization tasks often get short shrift.
In times of crisis like today, however, modernization is suddenly on the top of everybody’s to-do list – in particular, for core systems of record like ERP systems.
Such existing systems of record may continue to meet the challenges they were built for, but are rarely up to the task of keeping up with the rapidly changing demands of a work from home (WFH) workforce, upended supply chains, and customers who are themselves struggling under the burdens of transformed day-to-day life.
Typically, following vendors’ instructions to -upgrade systems of record to the next version, perhaps while migrating them to the cloud, does not deliver a solid ROI. Instead, such actions suck away available resources that would be better spent on innovation. As a result, the enterprise’s ability to innovate is in jeopardy.
The good news: CIOs have a one-in-a-lifetime opportunity to rethink how they prioritize modernization of core assets like ERP systems. Decisions they make today will both address some long-standing modernization challenges while simultaneously positioning their organizations for success once the pandemic has passed.
The First Principle of Modernization
It is essential that modernization efforts target the right problems. Be sure to follow the first principle of modernization: if it ain’t broke, don’t fix it.
In any enterprise – especially the largest ones – there are vast numbers of existing systems and applications, some of which might potentially improve via an investment in modernization. You can’t tackle them all. Instead, identify the ones with the most serious and urgent problems and focus on those.
This principle appears simple, but in practice, there are many forces working against it.
There’s the ‘shiny things’ fallacy, where some new tech or other catches people’s fancy, and now everyone has to have it because it’s the new thing.
Another popular fallacy: ‘baby with the bathwater’ – where some part of an older application is obsolete, so people jump to the conclusion that the whole thing should be replaced.
In reality, ‘monoliths’ aren’t typically monolithic. Even older ERP systems may benefit from the modernization of some features, for example, user-facing systems of engagement, while other features continue to meet the business need as-is.
Mind the Vendors
The third, and perhaps most pernicious force fighting the ‘ain’t broke so don’t fix it’ rule: vendor pressure.
As today’s vendors shift from a perpetual license-based business model to a cloud-based subscription model, they can make far more money over time if they can move a customer off of the perpetual license.
That licensed software you’ve owned for years, however, is fully paid for. Chances are your organization has already invested plenty of dollars in customizing and configuring it to meet your needs. Today it fits your organization like a well-worn glove.
The vendor who sold it to you might want you to move to the cloud. Certainly, some capabilities might be more cost-effective there. But think twice before you take their advice to move the whole shebang via a poorly thought out ERP cloud strategy.
Remember, all clouds are not equal. Vendor-specific clouds do not have the same benefits as vendor-agnostic ones when you are considering a ‘lift and shift’ strategy. In fact, moving your ERP system to the same vendor’s cloud infrastructure is simply a recipe for extending vendor lock-in.
Thinking Strategically about Modernization
The best approach to modernization is to understand the specific needs of the business moving forward and where to best invest scant modernization resources to achieve those business goals.
On rare occasions, retiring an entire system or application and replacing it with something entirely new is the best move, but that approach is much rarer than people think.
In truth, taking a modular approach that leverages the full range of modern modernization techniques to apply surgical updates is far more likely to achieve the goals of the organization without overspending or incurring too much risk overall.
From the strategic perspective, it’s important for CIOs and other IT leaders to think about total cost of ownership (TCO). What are the respective TCO outcomes at a particular point in time for each of the modernization alternatives under consideration?
A consideration of return on investment (ROI) is also important. Cloud-based ERP systems don’t offer the complete breadth of functionality that existing core systems offer. Furthermore, migrating ERP to the cloud would require forgoing any existing customizations that are in place.
The Intellyx Take
Application maintenance has been a massive cash cow for enterprise application vendors for decades now. Maintenance dollars shift the responsibility for keeping software up to date to the vendors, but maintenance may be overpriced for the value it provides.
Such maintenance is also a cudgel that vendors can use to strongarm their customers into making decisions that would otherwise not be to their best interest. For example, a vendor might force a customer to upgrade a stable, customized system by ending full support for their specific release.
Enterprise application vendors who are pushing their customers to the cloud are notorious for wielding this cudgel. With ongoing subscription revenue in their sights – undoubtedly more over time than the maintenance fees customers were paying – such vendors are only too happy to squeeze customers by making maintenance increasingly unaffordable.
IT leaders must take this anti-customer perspective into account when calculating the various TCOs of each modernization alternative – a tall order when vendors become increasingly desperate to move their customers to the cloud.
Fortunately, there are alternatives to vendor maintenance, like the services from Rimini Street. Rimini Street’s third-party support is an important enabler CIOs have at their disposal to help them selectively invest in innovation even through a challenging economy.
By providing long-term, premium software support and maintenance of core, stable enterprise applications, Rimini Street empowers its customers to keep core systems running smoothly in compliance while optimizing the TCO of their modernization initiatives – regardless of the level of desperation the ERP vendors exhibit.
Copyright © Intellyx LLC. Rimini Street is an Intellyx customer. Intellyx retains final editorial control of this article. Image credit: Fred Rockwood.
