How difficult is it to upgrade ERP software?
It’s extremely difficult, unless you are one of the rare companies that did not tinker with the system while installing it. In the early days of ERP, vendors pursued a vision that has since been disproven: Business processes built into the software should be adopted by every customer. Change your business to fit the system. CEOs like the sound of reengineering, but take that logic to the departmental head who won’t be able to serve her customers as well with the process in the software box and suddenly reengineering sounds less compelling. CIOs were forced (or acquiesced) to tinker with the innards of these packages to avoid losing valuable chunks of business processes, and it made their lives hell. Vendors ignored this reality for years. They thought changing the system to fit your own processes meant you were a weak girly man who couldn’t stand up to your business people. Those processes couldn’t be any good anyway if they hadn’t made it into the vendors’ best practice pool when they developed the stuff. Modifying the core code of ERP was like turning your Pinto into a low rider. You just voided the warranty, dude. Tough luck. ERP vendors would not support customized versions of their software.
When a new version of the highly integrated suite arrived with cool new features, customers sometimes could not afford to install them because they had made so many changes to the previous version. CIOs had built so many different links to the enterprise systems to get them working with other systems in the company that an upgrade was akin to starting over. Many of the old links had to be torn apart and rewritten to fit with the new version. And many of those rewrites were completely pointless. The new suite might have one new piece and nine others that had changed little since the last version. But it was all so integrated together that every custom link had to be redone, even to the pieces that didn’t change.
When vendors began breaking up and componentizing their suites to make them easier to integrate with each other and with legacy systems inside the company, they also broke up one of the value propositions that had been so enticing in the first place: “free” upgrades. Freed of the suite model, enterprise software vendors started charging fresh license fees for the new components they developed. Many early ERP suites had their development “frozen.” Customers could continue to get support, but newer features cost extra and worked much better—or sometimes only—with the newer version of the vendor’s software. And CIOs stuck with the old suites began wondering where all their maintenance fees had gone. They couldn’t afford to upgrade to the newer, componentized version of the vendors’ software models and if they could, they’d pay a new license fee for their trouble.
In theory, early users of ERP paid for those new versions of the software through yearly maintenance fees to the vendor that every ERP vendor charges. The largest percentage of those fees went to R&D rather than to support and maintenance of existing software. But the economics became untenable for vendors. When the ERP boom crashed after 2000, sales of new software slowed to a crawl and vendors said they were forced to charge for new components. It may be true, but it ended the short era of “free” upgrades.