Most people know the saying "Never change a running system". You don't want to touch a system that is running. But if you wait until the ERP system is no longer running before modernizing it, you run the risk of significant problems in your business operations
In many SMEs, the ERP system has been in use for over a decade - the average ERP system is around 12 years old (own analyses as of 2024)
Since then, the business environment has changed drastically: Remote work, digital customer channels, new compliance requirements and rapid technological advances are shaping everyday life. Outdated ERP systems are reaching their limits. They are often slow, cumbersome to use and no longer compatible with modern requirements.
Typical weaknesses of older ERP solutions include a lack of integration (data islands without real-time exchange), a lack of mobile access options for field staff or home offices, limited reporting and analysis functions and rising maintenance costs. In addition, many legacy ERPs run on technologies for which there is hardly any expertise or manufacturer support - security updates are becoming rarer and the risk of outages or security gaps is increasing. The result: employees improvise with Excel & Co, processes become inefficient and opportunities for digitalization remain untapped. In short, an outdated ERP system can become a brake on growth and competitiveness.
The aim of modernizing the ERP system is to eliminate these risks and make the company fit for the future. It is important to note that this is not about technology for technology's sake. Rather, the ERP should once again optimally support business processes as the digital centerpiece - today and in the future. Without immediately insisting on a new system, every company should regularly and critically check whether the existing ERP is still keeping pace or needs a refresh. In the next step, we take a look at what modernization options are available and how other companies are proceeding.
There are various ways to modernize an outdated ERP system. These range from a cautious upgrade of the existing system to a radical new implementation. According to a study by PAC, companies have very different opinions here: 42% plan to expand their existing ERP with additional functions, 34% are considering switching to a different ERP system and 31% would like to fundamentally adapt their current system
The appropriate variant depends on many factors (more on this later). Essentially, three approaches can be distinguished:
Technical upgrade of the existing ERP: The simplest way is to upgrade to the latest version of the existing ERP software, ideally with a 1:1 transfer of all functions. This brownfield variant (one-to-one migration) continues to use familiar systems, minimizes changes for users and is often the quickest way to at least reach a current supported status. However, there is a risk of dragging legacy systems with you. Functions or adaptations that are superfluous today would simply be adopted
The opportunity to improve processes would remain unused.
Conclusion: A pure version upgrade only makes sense if your ERP still fits well with your current processes and the modernization is mainly driven by technical reasons (e.g. expiring support).
Partial modernization and modular expansion: An intermediate approach is to use the modernization project to clean out and optimize. The ERP is updated, but in a filtered way - i.e. all existing adaptations and processes are checked to see whether they are still needed in the new system
At the same time, missing functions can be supplemented with new modules or third-party solutions without having to replace the entire ERP. Example: A retail company retains its proven ERP system, but also implements a modern CRM module or a BI solution that is seamlessly integrated. This modular modernization gradually improves the system's capabilities. Advantage: Less risk and gradual gain in benefits. A clean integration plan is important here to ensure that the old and new system components harmonize.
Complete new implementation (greenfield): The most comprehensive option is to switch to a new ERP system or a completely new installation of the next software generation from the previous provider. This is tantamount to a greenfield: processes are rethought and you are not restricted by legacy issues. This option is particularly recommended if the existing system is fundamentally no longer adequate - e.g. is technologically outdated or the company has undergone major strategic changes. A new implementation offers the opportunity to use the latest technologies (cloud, AI, etc.) right from the start and to implement best practice processes. However, this is where the effort, costs and change management are greatest. Without experienced project management, the risk of time and budget overruns increases. Conclusion: A new ERP start makes sense if the benefits of modern solutions justify the effort and a genuine new start is desired.
There are many nuances between these three basic options. Some companies combine approaches - such as a basic technical upgrade plus subsequent modular extensions. The key is to choose the approach that best suits your company's starting position and objectives. The next section explains how to approach such a modernization project in concrete terms.
ERP modernization is a comprehensive project. With a structured approach, risks can be minimized and ongoing operations can be protected. The following step-by-step guide has proven itself in practice:
Analyze the current situation and define objectives: The first step is to precisely analyze the status quo of your ERP system and business processes. Where are the pain points (e.g. slow processes, media disruptions, legacy system interfaces)? Define clear goals for the modernization - do you want to save costs, introduce new functions, increase user-friendliness or simplify the IT landscape? An early assessment of the current situation with specialist departments and IT provides the basis for all further steps.
Involve stakeholders and set up a project organization: An ERP project affects almost all areas of the company. You should therefore put together an interdisciplinary team to support the modernization project - with representatives from key departments (finance, sales, operations, etc.) and, of course, IT. Define a project manager (internal or external) and committees for steering and decision-making. It is important to implement change management at an early stage: Communicate transparently why modernization is necessary and allay fears of change. If employees understand the purpose, acceptance increases and with it the success of the project.
Choose the right modernization strategy: Based on the analysis, decide on one of the variants - upgrade, partial/modular modernization or new implementation - or a mix of these. Have the cost-benefit and risks of the options weighed up against each other. For example, a supposedly inexpensive upgrade can be expensive if many workarounds remain necessary afterwards. On the other hand, a new implementation does not always have to be the most expensive option if it eliminates old inefficiencies. If necessary, bring in external ERP consultants who can assess from experience which approach will benefit your company the most. Once you have defined the strategy, draw up a rough roadmap: What milestones are to be achieved (e.g. selection of new software, implementation, testing, go-live) and in what time horizon?
Detailed planning: prepare data, processes and resources: In the planning phase, your modernization project becomes concrete. Develop a concept of what target processes should look like in the future - identify optimization potential that you want to use in the new ERP (e.g. automation of manual work steps, better evaluation options). At the same time, take care of your data management: clean up master data and consider which data should be migrated to the new system and how. This improves data quality and prevents you from transferring "data garbage" to a modernized ERP. Also plan for all the necessary resources : project team members must have sufficient time for the project, external partners should be commissioned (for consulting, implementation or training) and the necessary technical infrastructure (e.g. test environments, cloud accounts if necessary) must be provided. Finally, draw up a communication and training plan - when and how will end users be informed and trained about changes?
Implementation and test phase: Take a step-by-step approach to modernization so as not to jeopardize ongoing operations. It has proven to be a good idea to start in a test environment or as a pilot project. For example, you could use a less critical division or a subsidiary as a pilot for the new ERP. In this phase, the new solution is installed/developed, interfaces to the old system are built and initial data transfers are tested. Comprehensive tests (functional tests, integration tests, possibly a test run with a real database) are mandatory before anything goes live. This ensures that processes run smoothly and errors are detected without disrupting real business operations.
Go-live planning and transition: The transition to the modern ERP system should be carefully planned. It is best to set the go-live date at a time with a low business load (e.g. a weekend or the beginning of a quarter, if suitable). Decide on a rollout strategy: big bang (the entire company switches over at the same time) or a phased rollout (one location/department at a time). In many cases, parallel operation for a short period of time makes sense - i.e. the old system continues to run while the new one is already live until there is certainty that everything is working. Important: Have a contingency plan ready (e.g. extended support for the old system, manual workarounds) in case there are unexpected problems. And don't forget that users now have to work with the new system: provide intensive support during this phase (key users, hotline, regular updates) to resolve issues quickly. This will help you avoid productivity losses immediately after the changeover.
Secure and continuously optimize operations: After the successful go-live, the work is not quite over yet. In the first few weeks, monitor closely whether the business processes are running smoothly and whether there are any bottlenecks. Collect feedback from users - in practice, there is often room for optimization or a need for training. If necessary, plan readjustments (such as minor process changes, additional reports or interface optimizations). You should also consider how the ERP will remain up-to-date in the future: Establish a process for regular updates and improvements so that your system does not become "outdated" again. This continuous improvement process ensures that the investment in modernization bears fruit in the long term.
Not only how you modernize, but also where and in which architecture is crucial. This is where various modernization strategies come into play, which are often considered in parallel to the variants mentioned above. Three important strategies are cloud migration, modular transformation and hybrid approaches:
With a cloud strategy, you move your ERP system to the cloud - either as Software-as-a-Service (SaaS) with a provider or to a private cloud/infrastructure. More and more SMEs are taking this route, as the trend is clearly moving towards cloud ERP
The reasons are obvious: a cloud-based ERP is accessible from anywhere (important for mobile teams and distributed locations, for example) and the provider takes care of updates, operation and security. This frees up internal IT resources and the system always remains technically up to date. Scalability is another advantage - new users, locations or higher transaction volumes can be flexibly mapped without having to invest in your own hardware. However, before migrating to the cloud, companies should check whether all data protection and compliance requirements can be met (data protection and certifications are particularly critical in the medical technology or finance sectors, for example). Customizing and integration also need to be rethought: Not every legacy customization can be mapped 1:1 in a standard cloud ERP. All in all, however, cloud migration offers many companies a way to future-proof their ERP with predictable costs and a high degree of agility.
Modular transformation means that you don't replace your ERP in one go, but modernize it step by step. This approach is particularly interesting if the core ERP has some parts that still work well, but other areas urgently need to be replaced. This is also referred to as a best-of-breed approach: specialized modern solutions are introduced for certain functional areas, which are coupled with the existing ERP.
Examples: A production company retains its established ERP for master data and financial accounting, but adds a modern MES (Manufacturing Execution System) for production control.
Or a retailer connects a new e-commerce platform including an ERP module to its old central system in order to process online sales. The modular strategy has the advantage that investments are spread out and functions are modernized function by function, depending on the priority. However, it requires a good integration architecture: the individual modules must communicate reliably with each other (interfaces, middleware). In addition, there should be an overall concept to avoid a "patchwork" of too many individual solutions in the long term. When implemented correctly, modular transformation allows for very flexible modernization with hardly any disruption to ongoing operations - components are replaced one after the other while the rest of the system continues to run.
Hybrid scenarios refer to combinations of old and new ERP worlds. This can mean two things: On the one hand, technical hybrid architecture, in which part of the ERP functionality remains on-premise (in your own data center) and other parts migrate to the cloud. On the other hand, there are organizational hybrids in which a new ERP system is used in parallel with the old one - e.g. for different business areas - and both are closely integrated.
Technical hybrid example: a medical technology company keeps sensitive modules (e.g. for regulated production data) in its own data center, but uses cloud modules for less critical areas such as HR or CRM in order to benefit from their speed of innovation. Both parts are synchronized via interfaces.
Organizational hybrid example: A group decides to roll out the new ERP in a subsidiary while the parent company remains on the legacy system. However, integrations (e.g. consolidated reporting database) enable joint working. Hybrid approaches can be a smooth transition if an immediate complete changeover is too risky or impractical. Ongoing operations are safeguarded by ensuring that critical processes continue to run unchanged in the old system for the time being until the new system has proven itself. The management of the dual structure is important for hybrid ERP landscapes: uniform data storage, clear process delimitations and an exit strategy for how and when the old world will finally be replaced. If this is taken into account, hybrid scenarios can combine the best of both worlds and make transitions much easier.
Every company is unique - there is no one-size-fits-all solution for ERP modernization. To choose the right approach, you should proceed systematically and consider the following aspects:
Initial situation of the system: honestly check how outdated your ERP is technically and functionally. Is it stable and only missing a few features, or are you reaching its limits on a daily basis? The age of the solution and the manufacturer's support horizon also play a role - if support ends in two years, a fundamental renewal is almost inevitable.
Business strategy and requirements: Derive the IT strategy from the business strategy. What do the market and your customers want? If, for example, you want to move into new business models (such as e-commerce, international expansion, data-driven services), you will need ERP support. A modernization should cover the future requirements of your business for at least the next 5-10 years. If major changes are imminent, plan more generously (new implementation or cloud) rather than just making minimal updates.
Budget and resources: Calculate the financial and personnel costs of the various options. Introducing a completely new ERP usually requires more investment upfront than an upgrade - but the running costs (operation, maintenance) could be lower afterwards, especially for cloud solutions with an OPEX model. Make sure that enough qualified employees or partners are available to implement the chosen strategy. Nothing slows down a project more than understaffing or large parallel projects competing for resources.
Time and risk: Consider how urgent the modernization is and how much risk you can bear. If the new system has to be live by a fixed date (e.g. due to regulatory deadlines or expiring support), this limits the choice - you may prefer a closer-to-standard upgrade with a faster go-live than a lengthy new implementation. If your business is very sensitive to downtime (e.g. 24/7 production or online store), prioritize approaches with minimal disruption, such as modular or hybrid migration. Companies with a high level of change readiness and pressure to innovate, on the other hand, can take a bolder approach to a comprehensive transformation.
Processes and customizing: question how unique your processes really are. If you have a lot of special solutions and workarounds in your current ERP, this is an indication that the standard software is not (or no longer) a good fit - a switch to another system with a better fit or a completely new implementation could make sense. If, on the other hand, your processes are relatively close to the industry standard, you can take advantage of this and benefit quickly by upgrading and adopting modern best practices. In any case, modernization should be used to eliminate superfluous legacy adaptations and reduce system complexity.
External support: Don't be afraid to bring in expertise . Choosing the right strategy and the right new ERP solution (if necessary) is critical to success. Independent ERP consultants can help to develop an objective basis for decision-making - for example by means of maturity level analyses, profitability calculations and experience from comparable projects. Such a preliminary study may be time-consuming, but it saves time and money later on because the modernization path is more clearly mapped out.
Once you have weighed up all these factors, a preferred strategy will usually emerge. It is important that you communicate this decision well internally and get all stakeholders on board. It must be clear: Why was this path chosen and what expectations are associated with it? Then you have a reliable roadmap to tackle modernization in a targeted manner.
Finally, a practical example from a Dreher Consulting project that shows how ERP modernization can work in practice - in this case at a medium-sized service company (anonymized). This company, with around 250 employees throughout Germany, had been using a self-customized ERP system for its project and order processing for over 15 years. Over time, however, problems began to accumulate: The system was technologically outdated, reports had to be laboriously consolidated manually in Excel and there was no mobile access for the consultants in the field. The company was also faced with the challenge of adding new services to its portfolio, which could only be supported by the old ERP with workaround-heavy isolated solutions. The management realized that growth and service quality were increasingly suffering under the old system - time for a modernization.
Analysis and strategy: Together with Dreher Consulting, the company began a comprehensive analysis. It quickly became clear that a simple upgrade of the existing solution would not solve the core problems. A combination strategy was therefore decided upon: a modern, cloud-based ERP was to be introduced, modularly and with minimal disruption to ongoing operations. The choice fell on a step-by-step migration of individual functional areas. Initially, the critical finance and project management modules were to be transferred to the new system, as this was where the pressure of suffering was greatest. Other areas - such as HR management - would follow in phase 2. This resulted in a clear two-stage plan.
Implementation: In phase 1, Dreher Consulting worked with the internal project team to implement the new cloud ERP for financial accounting and project management. A particular challenge was the data migration of the many ongoing projects: The decision was made to keep the master data and open projects in both systems synchronized and to initially use the new ERP in parallel with the old one for new orders. Existing ongoing projects remained in the old system for the time being so as not to cause confusion among employees. At the same time, all interfaces were prepared so that, for example, invoice data could be transferred from the new system to the old one while the parallel operation was running. After intensive testing and employee training, the new ERP module for Project Management & Finance went live - just in time for the start of the new financial year.
Thanks to parallel operation and good preparation, the changeover went smoothly: the consultants were able to create new projects directly in the new system from January, while a clear shutdown concept was defined for old projects (completion of old projects in the old system until Q2, then complete migration). In phase 2 (Q3 of the year), the remaining areas such as HR and purchasing were then migrated to the cloud solution, having already gained experience from phase 1.
The result: once the modernization was complete, the service company was able to handle its projects and services digitally end-to-end. Reports that used to take days were now available in real time at the touch of a button. The consultants in the field use tablets with access to the new ERP, which has greatly accelerated data collection on site. Overall, the management estimates that process throughput times (from order entry to invoicing) have been reduced by around 20%. IT costs have also benefited: by eliminating the old servers and switching to a cloud solution, the IT landscape has become leaner and more cost-transparent.
Important from the customer's point of view: Ongoing operations were not seriously affected at any time. Thanks to the careful, gradual transition and dual operation in critical phases, the service level for customers remained stable. The result was a successful ERP modernization project that was implemented within 12 months and brought tangible benefits to both the company itself and its customers. This case shows that with the right planning and expertise, even complex modernizations in medium-sized companies can succeed smoothly.
As a note, it is important for our customers to know that in many of our customer projects we do not require parallel operation during the transition from an old to a new ERP system. Our planning for the transition (cut-over phase) and the establishment of an efficient help desk with experienced Dreher Consulting consultants and experienced implementation partners of the software provider reduce the effort and the risk of failure enormously.
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Modernizing an outdated ERP system may seem like a major undertaking - but it is often necessary for growing service, medical technology and retail companies in order to remain competitive. Those who act proactively can minimize risks and take advantage of opportunities: Modern ERP solutions enable more efficient processes, a better basis for decision-making and more flexibility for future changes.
It is important to find the right modernization path for you and to approach the project professionally. A well-planned ERP modernization can reduce operating costs by up to 20% in the first year and speed updecision-making by up to 30%- clear benefits that justify the investment.
Solution-oriented action is paramount: focus on business processes, involvement of employees, selection of modern technologies with a sense of proportion. With a clear roadmap (as described in our guidelines and successfully used in our projects), even extensive ERP projects can be implemented without paralyzing ongoing operations.
Would you like to find out which modernization approach is the right one for your company? The Dreher Consulting team will be happy to help you. Contact us for a free initial consultation in which we will analyze your current ERP situation and show you ways to future-proof your ERP system without obligation. Take this opportunity to take the first step towards a modern, high-performance ERP - your company and your employees will thank you for it.
Do you recognize yourself in this article? Arrange a non-binding appointment for a free initial consultation via web conference. Together we will analyze your current ERP situation and show you specific solutions.
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