Enterprise software is purchased to support business needs. Over time, the business and markets change and eventually that existing software is no longer a good fit for the needs. When the needs gap gets too large, that software should be replaced.

There is the story of a frog dropped into a pot of cold water on a stove. Over time the stove heats up the water but the frog doesn’t notice the change. By the time he realizes what is happening the water is too hot. His strength is sapped and he can’t jump out.

The frog story describes what often happens to enterprise software. Companies are so busy doing what they do they don’t notice the widening gap between what they need and what their software delivers. When the company has good employees, those employees find ways around software limitations, often with spreadsheets and manual processes. The better those employees are, the less senior management will notice the widening gap. But that gap is there, and when it gets too big it siphons significant money away from the bottom line. So, how do you know if you have outgrown your existing software?

The litmus test

The primary litmus test for identifying the functional gap problem with existing software is the number of spreadsheets that are used in all business cycles. Those cycles can be daily, weekly, monthly, quarterly, or annually. Some other litmus tests are:

• The company’s period end close takes too long.

• Inadequate reporting. Executives can’t get the information they need fast enough, or can’t get it at all.

• Having multiple ERPs and other enterprise systems from M&A events.

What is happening is that these spreadsheets “paper over” functional gaps in the current system where employees manually process information. In extreme cases the current system comprises of islands of automation surrounded by a sea of manual processes.

Why this is a problem

The problem with these spreadsheets is that they are manual, relying on employees to keep data up to date. Manual processes get developed to execute processes that the software doesn’t handle. Usually these are handled with spreadsheets, but they may be done with Access databases or even point solutions in the cloud billed to a corporate card. However, for the purposes of identifying the problem with a litmus test, you only need look at spreadsheets.

We were helping a contract manufacturing pharmaceutical company select a new ERP system. One problem with their existing system was it could not process credits when goods were returned to suppliers, e.g. raw materials delivered that failed QA testing. These returns were manually tracked on a spreadsheet in the goods receiving department. This information didn’t always make it to accounting, so they were often not getting credits due to them.

Manual processes take time to execute. That time costs money in the form of labor for those doing the work. It also costs money where information takes too long to reach decision makers, e.g. if, instead of finding out about production problems immediately, it takes several hours to process data through spreadsheets. This means money wasted when extra scrap is produced on the production line.

Manual processes introduce errors, e.g. transposed digits, values in the wrong fields, missing data etc. These errors can result in the wrong decisions being made.

Manual processes require intimate knowledge to execute. If one employee is responsible for a critical manual process and they leave or are suddenly unavailable, there can be a mad scramble to handle that process, and errors can be introduced.

Business processes can live on long after the need for them has vanished. For example, an old software product required a business process that was executed on a spreadsheet. That software was replaced years ago, but the business process was never updated. This happens because people who create the process fail to document the reasons why it exists. And when new software arrives people are reluctant to change existing business processes because they don't know what they will break.

What can be done

If you suspect your software might not be adequately meeting requirements, audit your recurring processes to discover all the spreadsheets used. Where that number is too high, that is a strong signal that your existing software is not doing its job. You can estimate the labor cost of this manual processing, and the cost of slow decision making. These costs tend to be much higher than expected. Also see this blog article: The high cost of using legacy software

If you do find a large functional gap between your needs and your existing software, it may be time to consider replacing it. If you would like to explore the ROI that modern software can bring, click the [Contact Wayferry] button below. We have done this analysis many times, and can do it quickly and at no cost to you. Our analysis is impartial because Wayferry does not sell, implement or support software.