ERP or Enterprise Resource Planning systems work as a central hub and manage and contain all the necessary core data of various departments within an organization. However, legacy ERP systems struggle with rapidly changing regulations and modern-day users’ evolving needs. These are designed for stable and on-premises environments, lacking the flexibility and the required level of responsiveness. This has made ERP modernization a strategic necessity rather than just an upgrade.
But how to modernize ERP systems so that there are minimal disruptions involved and no downtime period? This blog explores a brief overview of what ERP modernization really means, why it is essential for modern businesses. We will also provide you with the top 3 ERP modernization approaches you need to invest in for long-term business growth.
Understanding ERP Modernization & Why It is Needed
Older ERP systems are built for storing data on-premises systems, but with today’s changing needs, you need to rely on the cloud more to access and manage data efficiently. This is where ERP modernization comes in and helps you re-host, re-architect, or replace legacy ERP systems to align them with modern needs, technologies, and integrations.
By modernizing your ERP systems, your organization can align the current core systems with future growth goals and evolving business demands. Now, let’s look at the reasons for investing in ERP modernization:
1. Improved Business Scalability
Modern ERPs have responsive interfaces that adapt to different devices and many platforms, and in contrast, legacy ERP systems are difficult to modify or are basically rigid in nature.
This is where investing in the ERP modernization process comes in and helps you add modern mobile app features or scale the existing operations whenever needed, without any major downtime period or disruptions.
2. Streamlined Processes
A strategic and well-defined utilization of the ERP modernization process identifies and reduces manual errors. It can also automate repetitive tasks such as inventory updates, basic data entry, and invoicing.
To do so, you need to require AI integration that can provide you with intelligent machine learning algorithms and workflows. This will ultimately result in reduced operational costs and also enable you to focus on much higher-priority tasks.
3. Increased Security and Compliance
Legacy ERP systems often lack security measures and struggle to safeguard the private data of their loyal audiences. This makes the organization’s ERP system vulnerable to significant data breaches and compliance risks related to legal regulatory bodies such as HIPAA.
While leveraging an ERP modernization process, you can implement advanced and built-in security mechanisms such as encryption using the AES-256 algorithm, extensive multi-factor authentication, role-based access controls, and more.
4. Reduced Technical Debt
Legacy ERP systems come with major maintenance and support costs, which can significantly drain your financial resources. You need to pay for costly upgrades or even invest in premium support through a leading outsourced company.
Whereas modernized ERP systems leverage cloud-based infrastructure and automating capabilities, reducing the total cost of ownership and optimizing the overall IT spending.
5. Better Decision-Making
Implementing an ERP modernization process helps you modernize ERP systems by centralizing data from various departments into a single and unified platform. Rather than relying on outdated or separate reports, you can eliminate data silos and also access data quickly and efficiently.
This provides you with access to accurate information and also provides improved decision-making capabilities and data-driven decisions.
Key ERP Modernization Approaches
1. Re-hosting Approach
Using the lift-and-shift strategy or the rehosting ERP modernization approach helps you transfer your existing ERP software from on-prem infrastructure or on-premises to the cloud. This transformation is done without making any significant changes to the actual ERP system, architecture, or its capabilities that were included in itself.
The rehosting approach is a faster and lower-risk adoption, and it allows you to reduce the overall maintenance costs as cloud adoption enables you to implement a pay-for-usage principle. However, rehosting delivers you more benefits, like enhanced scalability, and allows you to modernize the system without changing the actual codebase and architecture behind the ERP system.
Final business goal of utilizing this approach: Overall reduction of operational costs and faster cloud adoption
2. Re-architecting Approach
The rearchitecting approach is often referred to as the refactoring ERP modernization approach. It involves the process of almost upgrading or redesigning the entire existing ERP system to align it with modern business needs or trends, such as serverless architectures, cloud-native deployment, etc.
Instead of simply moving the system to the cloud, this approach retains certain core functionalities and restructures or upgrades the critical components to improve their performance and operational scalability. Although it requires a higher team effort and investment when compared to the rehosting approach, it offers you continuous adaptability and enables innovation.
Final business goal of utilizing this approach: Long-term business value and enhanced ERP systems’ flexibility
3. Replacing Approach
The replacing or replacement approach involves the process of retiring the whole legacy ERP system and implementing a new and modern ERP platform that leverages cloud-based architecture. This ERP modernization approach allows you to adopt the latest ERP capabilities, which include AI-driven insights, real-time reporting, intelligent automation, and advanced security measures.
Although replacing an ERP system requires significant management, data migration, and extensive user training, it offers the most comprehensive modernization benefits. It can eliminate legacy-related constraints, streamline processes, and align ERP capabilities with future business growth. Replacing ERP systems is ideal for organizations aiming for full-scale digital transformation.
Final business goal of utilizing this approach: Future readiness and enhanced innovation capabilities
Final Thoughts
The ERP modernization approach serves as the backbone that promotes long-term business agility, scalability, and efficiency. Modernizing legacy ERP systems should be a high priority as it helps you reduce the management costs, improve visibility, and also streamline basic reporting and invoicing.
However, this modernization process requires a strategic business approach to plan, implement, and start the continuous optimization process. It requires a well-defined proactive approach that helps you stay aligned with market demands or tech-related advancements. At AppDevGuide, we provide the right guidance and modernization execution strategy that can support your sustainable business growth, thus achieving long-term success.
