Reason #1: The current vendor no longer supports the product.
Cloud applications are here to stay. In the next few years, the vast majority of companies will be running their back office systems in the cloud. If you take a close look at the legacy ERP vendors, every single one of them is either building a cloud product or trying to put a cloud veneer on their existing products (be careful, though not all clouds are equal). They are pushing the vast majority of their R&D dollars to their cloud products and aggressively reaching out to their customers to get them to switch. In addition, from a strategic standpoint vendors will not support older versions of their product indefinitely and at a level that is acceptable to most companies. Thus, CFOs need to make one of three decisions:
Option #1: Do Nothing (the status quo you know)
Some companies may choose to stay on the older version. If so, they are putting themselves and their financials processes at risk. The vendor will stop fixing issues and providing tax, regulatory, and security updates. The vendor will also stop addressing any new security vulnerabilities — this is a risky proposition. As one controller succinctly put it, “The status quo will only work temporarily and would necessitate longer term project being in place to replace the system. It is just way too risky, unless it is a means to an end.”
Option #2: Upgrade with the same solution/vendor
If you are not on the current version of the software, you can upgrade and buy yourself a few more years of support. While this is certainly an option – it is still temporary by nature. Upgrade projects are expensive, risky, typically offer little value add, and will distract your business and IT teams from working on other more value-added activities. Upgrading also prolongs existing problems with your current solution that you have just come to accept as normal. These include lack of functionality, manual data entry, the need for additional point solutions and one-off systems to meet your needs, maintaining a team to support the application and the burden of maintaining all of the hardware and software components needed just to process a journal entry.
Option #3: Migrate to a new modern solution
I often suggest that companies do a holistic total cost of ownership assessment of upgrading vs. re-platforming. When you look at all of the costs associated with upgrading and maintaining your existing (hosted or on premise) systems and compare that to what a new modern cloud-accounting application can do, the numbers often look very similar. If you then factor in the benefits of the cloud – a simpler IT architecture, lower risk, easy upgrades/updates and the ability to address many of the pain points of the status quo you know –you really have a great business case.
I have worked with twenty different companies this past year on their application strategies. We often collectively come to the same conclusion: the cost benefit of going to a new system typically far outweighs the costs and efforts of upgrading. It then just becomes a matter of when and not if you pull the trigger and start selecting a system that best meets your current and future needs (and don’t worry about the bees – most of them don’t sting anyway!)