Understanding the ROI of Replacing Legacy Software
Are you considering upgrading your critical business solutions, but don’t know where to begin? Utilize a proven Return on Investment (ROI) analysis to measure your short-term gains and long-term success. This blog will help you understand the ROI of replacing legacy software in favor of a modern cloud-based solution.
Businesses often struggle with the decision to upgrade their business systems. Let’s be honest, the idea of changing systems at the very core of our organization is a scary proposition. However, the decision to upgrade to a modern cloud-based ERP (Enterprise Resource Planning) system from a legacy system is imperative if your business wants to grow. Upgrading your systems will require a significant investment of time and money, and should be researched thoroughly.
The 411 on Legacy Systems
Before we go further, let’s first define what qualifies as a legacy ERP system, and discuss the challenges users face with outdated technology.
Legacy ERP systems are the business management systems you have been using for seven years of more. These systems were most likely state of the art when you purchased them and still tackle many of your company’s needs. However, the competitive landscape has changed drastically over the past decade and if you are not deploying the latest technology stack, you are putting your firm at an unfair disadvantage.
When you consider the overall ROI of maintaining legacy systems you must look at the overall cost of ownership. Things to consider include:
- The cost of maintaining hardware to support the system
- Limitations on user licensing and the burden of adding new users
- Restricted avenues for training new users or retraining existing users
- Difficulty integrating with other critical business systems
- The burden of accessing up-to-date custom reports and retrieving the data remotely
These drawbacks hinder your growth and your company risks getting left behind, instead of staying on top of paradigm shifts in the software industry. As your competitors replace their systems, you lose the competitive advantage.
Breaking Down the ROI of Replacing Legacy Software
Upgrading your ERP to a modern cloud solution can save on average more than 20% in IT spending as a percentage of revenue and have been found to deliver 2.1x times the relative return on investment (ROI) of on-premise ones.
Calculating the ROI of replacing outdated ERP systems can be complicated. When it comes time for your upgrade consider:
- Choosing the right method of ROI calculation
- Including people costs in your projections
- Identifying the direct and indirect benefits of your ERP project
- Accounting for both first-year and ongoing costs
- Predicting and measuring your future business success
Clarify the Process. Break Down the Your ERP Cost Savings.
To assist you in understanding the ROI of replacing outdated legacy systems, Acumatica has put together a Whitepaper, Return on Investment (ROI) Analysis for ERP Replacement. The paper discusses how to calculate ERP cost savings.