ERP transformation is vital for firms to cut costs and stay competitive. Let's explore how application consolidation is the key to unlock cost savings and a smooth transition.
Enterprise resource planning (ERP) transformation is an important concern for IT leaders. To thrive in a turbulent economy, your processes and tools must be efficient, and boards are looking to IT to drive streamlining initiatives.
The most obvious way to cut costs is to stop spending money on things you don't need and the most obvious applications you don't need are the ones you have more than one of. Running 100 licenses for one application will invariably be cheaper than running two instances of that application with 50 licenses each.
Further, it's much easier to migrate one instance of an application to the cloud or to a new platform than it is two. Synergising and streamlining your application portfolio with application rationalization is, therefore, the best way to prepare for an ERP transformation and to save money at the same time.
The LeanIX EAM supports you in both. To find out more about using the LeanIX EAM to map your application portfolio and build a roadmap for application rationalization and transformation, see our solution page:
USE CASE: ERP Transformation
In the meantime, let's consider why ERP transformations are so important, how you go about consolidating duplicate apps, and also the dangers of over-consolidation.
Why Do You Need An ERP Transformation?
Enterprise resource planning (ERP) transformation means replacing the systems that co-ordinate and run all the day-to-day operations of your business. It's an expansive process that will involve a complete redevelopment and re-integration of all your workflows and processes.
Given the scale of the challenge, it's easy to lose sight of the benefits of transformation:
- Cost savings
- Improved efficiency
- Enhanced agility
- Better compliance
- Simplified future transformations
With the economy in turmoil in the wake of COVID-19, it's never been more important for your business to be lean and agile. That's why so many organizations are looking to cut back on the number of applications in their portfolio and also streamline to fewer ERP systems.
READ: ERP Transformation - 5 Blind Spots Of Having Multiple Systems
Many of our customers, however, have told us they were hesitant to begin their ERP transformation. They persevered with an outdated version of a tool like SAP because they simply didn't know where to start with their transformation.
Thankfully, the LeanIX EAM is here to guide you through your transformation.
Application Rationalization Is Your First Step
Enterprise resource planning (ERP) transformation may seem like a simple process of migrating your current tech stack to a new tool. However, it's far easier said than done.
Increasing the challenge of the process are the myriad imperfections in your existing application portfolio. Just as you are likely running multiple, layered ERP systems on top of each other, you likely have duplicate, overlapping applications.
When your application portfolio doesn't make sense, it's much harder to unpick it to apply it to a new platform. Taking the time to organize your application portfolio before you begin your transformation will save effort in the long run.
The Risks Of Jumping Into ERP Transformation
If you don't make sense of your application portfolio before you begin an enterprise resource planning (ERP) transformation, you'll likely find yourself having to do so on the fly as you migrate. This will make the process much more challenging and often cause you to miss important deadlines and targets.
Equally, you'll be wasting time migrating software that you know isn't fit for purpose and could well be outdated or soon-to-expire. Removing these living dead 'zombie' applications before you migrate will make everything much simpler.
Before you can remove your unneeded applications, however, you need to get a clear overview of your application portfolio. Particularly, you need to know who is using each application and for what.
That's where the LeanIX EAM comes in. Our EAM can connect to all of your APIs and send automated surveys to anyone in your organization to return all the information you need about your application portfolio.
Yet, even when you have this information, you still need to decide what apps to keep and which to remove. How do you make those decisions?
What Applications Do You Need To Consolidate?
Enterprise resource planning (ERP) transformation is an optimization exercise. This means you want to get the most out of the applications for the least investment, both for your ERP platform and other software.
Once our LeanIX EAM has given you complete oversight of your application portfolio, including your ERP systems, it's time to start removing unneeded applications. The most important applications to remove are the ones with duplicate capabilities, as those are the low-hanging fruit that can be easily plucked from your application tree.
It's unavoidable that, at some point, one of your teams will have paid for an application they didn't know another of your teams was already paying for. Maybe, on the other hand, you wanted to update an application, but found you weren't ready to migrate capabilities to the new platform, so you found yourself with two.
Whatever the reason, our annual IT Cost Optimization survey found that 26% of wasted IT budget is spent on poor application portfolio management. In fact, an Infosys case study showed that a single organization can save up to USD 2 million by sorting out their application portfolio.
Let's not be too hasty to remove those duplicate applications, however. There can be downsides to over-consolidation.
Beware Over-Consolidation
Enterprise resource planning (ERP) transformation isn't just about reducing cost. The key is to optimize value.
Cutting a huge chunk out of your budget will be pointless if you also cripple essential business capabilities within your organization. Removing the ability to make money won't help with your bottom line.
Applications that are true duplicates of other capabilities are obvious choices for removal. However, having two different versions of an application may be a less-than-ideal, but necessary, sacrifice in optimization.
You might find that you have two versions of the same application. The older version may be compatible with an essential legacy application you need to maintain, while the newer release may work with a mission critical innovation platform you're leveraging.
In this case, while it isn't ideal to have two instances of the same platform, removing either would cripple essential functionality for your organization. In these cases, it's important to compromise for the time being, with a view to remedying the situation with a new set of apps in the long term.
LeanIX For ERP Transformation
Making decisions like the above for your enterprise resource planning (ERP) transformation requires you to have essential intelligence about your application portfolio. That's why the LeanIX EAM is an essential tool for consolidation.
Empower your ERP transformation with full visibility into your current software landscape and build a comprehensive roadmap towards your target state. This roadmap will then inform all your future transformations.
Find out more about the LeanIX EAM on its home page:
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