Key Takeaways
- A legacy ERP system is outdated software that hinders business operations by limiting integration with modern tools and requiring high maintenance costs.
- Around 40% of business leaders cite legacy systems as a major barrier to digital transformation
- To stay competitive, many enterprises are embracing modern ERP trends and practices.
- As ERP use grows, companies are expected to spend $183B on ERP systems in 2024.
- Modernizing a legacy ERP system allows enterprises to leverage big data, improve business agility, and enhance security while future-proofing business operations.
The enterprise resource planning (ERP) system is at the heart of any company’s operations. But without timely updates, it can become a roadblock for routine procedures, scaling, and embracing new opportunities.
Too many companies underestimate the importance of legacy ERP system modernization and continue using software that outlived its lifespan. It can result in poor performance, lack of visibility, high maintenance costs, security issues, and even financial meltdown. Yet, modernizing a legacy ERP system is no easy feat. It is a costly and skill-intensive task.
Since 2023, 78% of companies choose remote over on-site teams to handle large enterprise ERP deployments cost-efficiently. Thus, it is only logical to select a globally recognized enterprise app partner like Acropolium.
With years of providing custom mobile apps and legacy software modernization services, we are here to help you face the future with up-to-date ERP solutions.
So how to replace legacy ERP software? And what are the signs it’s time to modernize it? Read on to discover the answers.
What is a legacy ERP system?
A legacy ERP system is outdated enterprise software that no longer aligns with modern operational demands. Its older technology limits integration with contemporary tools and often requires costly maintenance. Lagging behind, this system provides irrelevant insights and gives little to no visibility into future opportunities and risks.
Accenture found around 40% of business leaders identified legacy systems as a key obstacle to their company’s digital transformation. As businesses’ reliance on ERP systems grows, the global market anticipates expenditure of $183B by 1.4 million companies in 2024.
To remain competitive and maintain their positions on the market, large companies embrace legacy system trends and practices.
How legacy ERP systems stand in the way of modern businesses
Outdated software affects your company’s productivity, day-to-day operations, and strategic planning. Delays or the lack of automation are obvious consequences, but others come to the surface only once a serious problem happens. These hidden issues include skill and knowledge gaps in maintaining your legacy ERP system.
How to check that you are not one of them? Here are the 8 surefire signs that you need to modernize or replace your legacy ERP system.
Workarounds and lost productivity
When your ERP software is old, workarounds become its second name. Legacy ERP systems gradually slow down and underperform. It all starts with a long response time and data storage and retrieval delays. Next follows employee frustration and poor productivity.
Your staff wastes time hoarding valuable information in multiple spreadsheets or standalone apps. And then they waste it some more to copy it to your ERP system.
Regulatory, audit, or compliance challenges
Legacy ERP apps offer few details about user activity and personal data, including who, when, and where accessed it. The lack of detailed user activity logs means hours of manual analysis, long preparations for audit requests, and regulatory non-compliance risks.
Reliance on manual data entry
Lack of end-to-end automation and data exchange lowers your team’s productivity. The risk of errors and duplication grows.
Target Canada, a large Canadian retailer, is the telling case. The company wanted to import data from its legacy ERP systems to its brand-new infrastructure. But they made a fatal decision to enter all the data manually. As a result, the company’s supply chain collapsed as about 70% of fresh data was riddled with errors.
Lack of data-driven visibility
Legacy ERP systems do not support real-time data sharing. It can affect your analytics capabilities and slow down decision-making processes. The lack of the latest data might also lead to a bad customer experience.
Too many companies realize they need to replace their legacy ERP system only after the software impairs their operations and drives their customers away. In that case, the company spends double, as it still needs to invest in maintaining its legacy system while developing a new one.
High maintenance cost
You need to change or modernize your legacy ERP system once it starts to eat into your IT resources and dumps too many manual tasks on you. Let’s not forget the money your company wastes on renting facilities to house the hardware with legacy ERP software and pay electricity bills.
Obsolete systems are often written using outdated programming languages like ABAP for SAP and PL/SQL for Oracle. They also include custom code, often with multiple patches and redesigns and without proper documentation. Maintaining and managing such old ERP systems drains your company’s budget.
Security holes
Frequent downtime, data losses, lack of updates, and system delays are can’t-miss signs of an outdated ERP solution. These issues pose serious security challenges and result in data breaches. They inflict regulatory penalties, too.
For example, in 2019, the US federal government spent more than 80% of the total IT budget (over $64 billion) operating and maintaining aging legacy systems. It created grave efficiency, cybersecurity, and mission risks.
Limited integration with external systems
Old ERP systems can no longer integrate with newer products. They might need endless workarounds, patches, and custom code writing. It turns integration efforts into cost- and time-consuming endeavors with no guarantee that integrated software will work as expected.
A good example here is Lidl, a German supermarket giant. The company scrapped a seven-year-old project to move away from its outdated in-house inventory system.
The problem lay with Lidl’s record-keeping and the resistance to change it. It triggered a cascade of implementation problems to customize the system. The company spent a whopping €500 million only to see its project fail.
Wasted scalability & market opportunities
Old ERP solutions cannot handle expanding operations. They just weren’t built for agile business pivots or entering new markets. If every new process needs tiresome workarounds or manual interventions, it’s a clear sign to modernize your legacy ERP system.
Outdated ERP software solutions do not provide a holistic view of your company’s operations. It leads to patchy cross-team collaboration and communication. Sticking to an obsolete tech stack, you also lose your chance to scale and leverage the power of new technologies like AI and ML.
Benefits of replacing a legacy ERP system
Modernizing a legacy ERP system is often about leaving your comfort zone. That’s why many companies find it hard to take a step toward revamping their flaw-ridden obsolete ERP solutions.
Yet, the value your business can get by replacing an obsolete ERP solution outweighs any savings from maintaining it. Here’s how.
Big data opportunities
By updating the legacy ERP software, you will be able to smartly use the big data that your company has stored over the years. You will get a full picture of your processes using AI and ML technologies and leverage business intelligence and analytics grounded on big data.
Business agility
A shift to a modern ERP system prepares your business for ever-changing business requirements. You can quickly scale up whenever your organization expands. Keeping up with the latest technological advances, your company gains a competitive edge and becomes more resilient.
Cost savings
Modernizing a legacy ERP system may need substantial investments, but in the long run, it lowers capital expenses. You can save costs by turning to pay-as-you-go cloud-based offerings and SaaS databases options. It is a handy way to automate simple, repetitive tasks, cut errors, and reduce manual labor.
Data centralization and accessibility
Keeping your ERP data in the cloud helps your employees and stakeholders access it from any internet-connected device safely and easily. This centralized platform improves cross-department collaboration and real-time data sharing, enhancing productivity and decision-making.
Security and compliance
Moving to a modern cloud-based ERP system is a path toward better data security and penetration resistance. Cloud-based solutions offer stronger security frameworks than legacy systems, as cloud providers handle critical regulatory compliance requirements and implement the latest security protocols.
Regular updates ensure that the system remains secure against evolving cyber threats, which is especially important for healthcare and banking systems.
Future-proofing and innovation
Modern ERP systems offer built-in integrations with emerging technologies like IoT and blockchain. These systems can evolve alongside technological advancements, ensuring businesses remain innovative and competitive in the long term.
Better customer experience
With real-time data and seamless system integration, companies can provide faster response times, personalized offerings, and superior customer service. An updated ERP will help you meet customer expectations more efficiently, improving satisfaction and loyalty.
Fast introduction of new services
Modernizing legacy ERP systems significantly reduces time to market for new products and services. With streamlined processes and real-time data access, organizations can accelerate product development cycles and communication between departments.
When your system supports integration with other tools, you can incorporate new features and offers faster. Or, if you want to create another product as part of your digital ecosystem, a tool with robust interoperability capabilities will give you a competitive advantage.
Implementing a new ERP system needs careful planning and change management. It also takes a significant financial and time investment. These efforts may not seem worthwhile at first, so companies turn instead to an upgrade—a less disruptive approach. But you should be aware of roadblocks that may come along the way.
Challenges your business might face modernizing a legacy ERP system
An outdated technology stack is a weak foundation for future upgrades. A legacy ERP system may contain countless custom code lines, patches, and workarounds. The removal of one element can bring everything crashing down.
Here are the challenges you may bump into should you decide to modernize a legacy ERP system:
- Time of transition. Obsolete system modernization is a massive undertaking that could take months. It’s hard to provide any kind of estimate as the code might have a lot of hidden pitfalls.
- Modernization expenses. The costs to upgrade the system built and supported for years can exceed the business value in the short run.
- Quality of the source code. The code of a legacy ERP system might resemble a house of cards. Some of its pieces may be no longer relevant but still serve as a building block for other features. One hasty step can ruin the whole process.
- Risk management. Legacy ERP system modernization often needs to involve third parties in backstage activities. Without a risk management plan, a company can face the risk of a data breach.
- Talent shortage. In 2024, a shortage of developers with deep knowledge of legacy ERP systems and experience in modern technologies can complicate the transition.
- User adoption and training. Old ERP systems tend to have long-standing users, and modern interfaces or processes can meet resistance, requiring substantial training and support to ensure smooth user adoption.
- Integration complexity. As companies increasingly use a variety of modern software tools, ensuring seamless integration between new ERP systems and existing systems—especially cloud-native applications—can be challenging.
Successful software modernization needs a solid strategy, skillful developers, and great attention to detail. Check out these top five approaches to tackle this task.
5 approaches to legacy ERP system modernization
Whether you plan to make incremental improvements or completely replace your legacy ERP, you will likely use one or several of the following approaches.
Rehost
Rehosting is a legacy ERP system modernization approach when you upgrade only the software backend and the hardware storing the ERP data. It’s a typical case since many legacy ERP systems use on-premise infrastructure. To maintain its stable performance, they constantly invest in hardware and pay hefty electricity bills.
Moving the ERP system from an in-house server room to the cloud can help your company gain more processing power, flexibility, and fast and easy access to data for a reasonable price. The recent research expects the demand for cloud-based ERP systems to grow by 18% each year. Real-time access and analysis of massive data are two major drivers of cloud adoption.
Refactor
Refactoring helps revitalize the legacy ERP system and clean it up. This approach is about restructuring and optimizing existing code without changing its external behavior.
Refactoring pays down technical debt and removes redundant functionalities. It quickly enhances your ERP processes and data flows. It may also include re-coding some portion of an existing ERP app to improve workflows and remove patches.
Rearchitect
This approach is about altering the code to move to a new application architecture — from monolithic to microservices. Third-party integrations are made to add the missing features. You redevelop your legacy app while keeping the business processing intact.
Rearchitecting is a lengthy and expensive process, yet it can solve many business issues and extend the life of your legacy ERP system.
Rebuild
Rebuilding allows you to redesign or rewrite the whole application or its components from scratch while preserving the original scope and specifications. Just like refactoring, it aims to optimize existing business processes. When rebuilding its ERP system, the company may also decide to add new tools and features to leverage the capabilities of modern technology.
Replace
Building a brand-new solution is often a choice when your legacy ERP system components are ineffective, no longer meet your business requirements, and restrict your company’s growth. A replacement strategy requires you to carefully assess your company’s internal needs, gaps, and inter-dependencies around the legacy system. Step number two would be developing new criteria and judging available software options against them. To pursue a replacement approach, the difference a new ERP system will make must be significant enough to justify the time and effort needed to build it.
Encapsulate
Encapsulation revamps legacy systems by isolating the old software and building new modules with modern technology, allowing for gradual integration with other systems. This partial modernization process creates a modern interface around the legacy application, decoupling services and components into microservices.
It is especially useful when retaining critical business logic or when a full system overhaul is not practical due to cost or risk. In other words, it enables legacy ERP upgrades while preserving valuable functionality and minimizing disruption.
Adopt cost-effective modernization technologies
Since software modernization is a task requiring specialized expertise and talent, you’re most likely to cooperate with an offshore or nearshore development team. Progressive outsourcing firms focus on saving your resources by employing cutting-edge solutions:
Cloud ERP offers flexibility by scaling resources as needed, reducing hardware costs and ensuring easy accessibility. With regular updates, enhanced security, and subscription-based pricing, businesses can lower maintenance expenses. At the same time, you will be able to support remote and global operations.
Low-code/no-code platforms simplify ERP customization and integration without heavy coding. They allow businesses to quickly build workflows and add features, reducing development costs. It also aids in speeding up deployment while minimizing reliance on IT teams.
Similar to the encapsulating approach, hybrid ERP strategy merges legacy systems with modern technologies, reducing the risks and costs of a full upgrade. It allows businesses to adopt new features gradually while maintaining operational stability.
Now that you know the approaches you can use to modernize your legacy ERP system, let’s shed some light on how to select the best fit that would cater to your business needs.
How to choose the right approach?
Modernization of your legacy ERP software isn’t only about upgrading your old tech stack. It’s a complex process that should also reflect your business priorities and short- and long-term goals.
To choose the right approach, you should consider the following factors:
Current ERP system state
Assess your legacy ERP system by getting back to a discovery phase to get a clear picture of its drawbacks and constraints for your business and customers. For example, if the problem lies in cumbersome and costly on-premise data storage, rehosting will be enough. But if your company struggles with inefficient processes and workflows, rebuilding or replacing would show better results.
Business risks
Every modernization approach involves certain risks, as they disrupt existing business processes. Refactoring and rehosting are the least risky as they focus on optimizing infrastructure and ERP procedures. But a quick upgrade isn’t always an option. Rearchitecting, rebuilding, and replacing are more disruptive approaches that require a much higher risk tolerance.
Budget and time constraints
Companies need first to evaluate whether they can afford the cost of a particular legacy ERP system modernization approach. Rehosting is the quickest option if you are limited in time but want a serious performance boost. Refactoring is also a quick way toward better compatibility and lower maintenance costs.
Each approach has its benefits and limitations. The right tech partner can help you navigate those waters and choose the most efficient way to modernize your ERP system to meet your goals. Below we gathered the examples of how successful partnerships helped companies change or replace their legacy systems.
Legacy ERP system modernization: Real-world & Acropolium’s success cases
Modernizing a legacy ERP system can be a costly and tedious task, especially if you haven’t touched it since the day it was built. Yet, companies that fail to modernize their ERP systems in good time lag behind and can be even driven out of the market by their competitors.
A 169-year-old company with a dated ERP system
Levi Strauss & Co. started its ERP system transformation in 2018 with a dedicated team made up of business and technical talent. Their main objective was to build a globally aligned process, introduce automation, and move their infrastructure to a cloud-based environment.
The clothing company began its migration to the cloud in 2019, with the first major deployment in late 2020 and the second one in late 2021. Now the modernized ERP system:
- Provides real-time insights into the company’s transactional systems
- Mitigates supply chain problems
- Allows forecasting and strategic planning
Harmit Singh, chief financial officer at Levi Strauss & Co., said in his interview with CNBC: “The investment in technology is often intimidating. Returns are not overnight, making it hard to justify the cost.” But it is all worth it.
Modernization for the sake of smooth scaling and development
Acropolium is not a rookie when it comes to modernizing legacy systems. One of the latest examples is a massive enterprise construction management software with a range of modules and features. The client wanted to optimize and modernize certain software segments using new technologies to provide smooth scaling and implement extra features.
Our successful cooperation resulted in:
- Migration of several main modules to new technologies
- Documentation of all sub-systems: now, the work of the distributed team is 73% more efficient
- Modernization of the frontend
- Although the company had an in-house development team, it decided to hire an experienced partner, Acropolium, to help it tackle the modernization challenges. And it worked.
ERP legacy system modernization to boost operational efficiency
We were also tasked with modernizing the ERP system of an oil and gas company to enhance operational efficiency. The client’s legacy system was struggling to keep pace with evolving industry demands, leading to inefficiencies and operational bottlenecks. Acropolium’s approach focused on upgrading critical system components while ensuring minimal disruption to ongoing operations.
Key outcomes of the project included:
- Uptime increased to 95% following a complete migration to a cloud-based infrastructure, supported by the integration of advanced cloud services.
- The modernization efforts led to a 70% reduction in reported software bugs, significantly improving system reliability and user satisfaction.
- The revamped ERP system boosted business operation durations by 45%, streamlining workflow and enabling better resource management.
Digital signage software modernization to improve platforms uptime
Recently, we undertook the modernization of a digital signage software system, addressing the client’s need for improved performance and expanded functionality. The legacy system was outdated, with limited integration capabilities and scalability issues. Acropolium’s solution involved redesigning the software architecture to support new technologies and ensure smooth performance.
Here’s what we achieved after our cooperation:
- The uptime of the digital signage platform improved by 20%, now operating at a reliable 99%, ensuring uninterrupted service.
- Security was bolstered through the implementation of IdentityServer Single Sign-On (SSO), enhancing data protection and access control.
- User onboarding time was reduced to under five minutes, thanks to an upgrade of the on-premise digital signage system.
- A redesigned UX/UI increased the Net Promoter Score (NPS) by 30%, reflecting improved user engagement and satisfaction.
Conclusion
Relying on legacy ERP systems is like steering your old leaky ship into the open water—you never know whether it will survive even the weakest storm. In today’s highly digitalized business world, legacy ERP system modernization is the only way for the company to stay afloat and maintain a competitive edge.
You can upgrade or fully replace your ERP system—it depends on how long it has been in place and how well it scales and copes with your business demands. Any of these approaches will push you out of your comfort zone. But with the right partner, modernization can still be stress-free and smooth.
Acropolium can get you covered and help you explore the options on how to modernize your legacy ERP system. Contact us, and our team of experts will be happy to help your business stay ahead of the curve.
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