Thinking of Upgrading to ERP LN or Expanding the Search?
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Enterprise Resource Planning (ERP) Archives
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June 8, 2011 7:45 AM
Many companies running Infor Baan ERP software are reaching a crucial juncture. Do they upgrade to Infor's ERP LN software, stick with their current software or expand the search to include other vendors.
When to Consider Expanding the Search Beyond ERP LN
In general, companies running Baan IV ERP software should consider expanding their search to include vendors in addition to Infor. Why? Because LN represents wholesale changes in technology, user interface and functionality. Implementation and training will probably be more akin to a new implementation than a version upgrade.
Companies in this position are - for all intents and purposes - evaluating a different product in ERP LN. Given the differences, there is no certainty that LN will be the right fit. And, even if LN is good enough, another system might prove to be an even better fit.
For example, in a recent ERP selection project (not relating to Infor), our client decided to partner with a new vendor rather than upgrade to a current version of its legacy system. Not only was the new system a better functional fit, but the client got a great deal. Since the new vendor was hungry for the steal, our client was able to extract pricing that beat the incumbent's offer.
From a negotiations perspective alone, a Baan IV customer would be well served to make it a two or three horse race. A little competition goes a long way in incentivizing the vendors to put their best feet forward.
If your business is thinking of migrating from Baan V, the above arguments become slightly less compelling.
LN evolved from Baan V and is based on the same technological foundation. As a result, the upgrade from Baan V to ERP LN would be much simpler and cheaper as compared to an upgrade from Baan IV. Under this scenario, a company is likely to experience fewer business disruptions (and face a shallower learning curve). Also, other vendors will probably find it tough to compete against true upgrade implementation pricing.
However, there are some scenarios where it would make sense for Baan V customers to expand their searches. For example, where Baan V is a poor functional fit, where the company isn't receiving the levels of service it requires, or where the company doesn't have confidence that LN (and Infor) will be capable of meeting future needs.
Future Development and Systems Risks
It's important for companies to remember that ERP is a long-term investment with relatively high switching costs. They need to make sure that the vendor is committed to future product development and support.
And, our analysis on the future of LN yields inconclusive results.
On one hand, Infor has made statements that LN is a flagship product. On the other hand, multiple sources tell us that Infor has been pushing its competing Syteline product at the expense of LN.
Prospective LN customers would want to take measures to satisfy themselves that Infor will continue to develop LN in a way that meets their future needs.
User Community Risk
Users and vendors alike benefit from an active ERP user community. An active community drives innovation in both the software and in operational best-practices.
Unfortunately, Mosaic - the Baan and LN users group - recently shut its doors. Baan and LN users have been given a home in SUN - the Syteline User Network. LN prospects who value the benefits of a user community should take measures to satisfy themselves that there will in fact be a stable, active community that drives innovation in the areas of interest.
Vendor Corporate Risk Profile
The issue of vendor corporate risk profile ties into product strategy, development and support. Users will want to satisfy themselves that the vendor is a stable, going concern that will continue to fund operating activities.
Again, our analysis in this latter respect yields somewhat mixed results. On the one hand, Infor is among the largest ERP vendors. It is backed by Golden Gate Capital - a deep pocketed private equity firm with significant enterprise software assets.
On the other hand, sources tell us that Infor's capital structure has heavy debt weighting - with a significant portion of that debt maturing in the short term. LN prospects should satisfy themselves that Infor's debt repayment obligations won't interfere with operational and R&D funding.
In conclusion, companies thinking of migrating from legacy Baan systems should turn their minds to some of these difficult questions.
Originally posted on Pemeco's Blog
| Blogger Profile: Jonathan Gross | |
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Jonathan manages ERP selection projects drawing upon his experience as a commercial lawyer and his M.B.A. education to help clients select the right-fit ERP systems and negotiate the best deal. He is an industry analyst and advises boards of directors on issues relating to business, strategy and law. |
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