Upgrades Can Be Worth It–If You Focus on the Business Benefits

Many CIOs have begun planning for upgrades as they would a new software installation. In a recent study of 109 companies that had upgraded their ERP software, AMR Research found that most of them spent more time selling the project internally and getting approval and funding than they did doing the upgrade. According to Judy Bijesse, an analyst at AMR Research who coauthored the study, it took many companies quite a long time?as much as a year?to build the business case for upgrading.

Lower cost of software ownership is a dubious component of those business cases. Although 49 percent of the AMR survey respondents used that as a justification for upgrading, only 13 percent actually saw their IT costs go down. In part, that’s because infrastructure costs inevitably go up. For example, to go from SAP R/3 version 3 to version 4 requires 87 percent more CPU speed, a 72 percent increase in memory requirements and 33 percent more disk storage space on each computer that uses the software, according to Gartner.

But it is possible to save money as long as you use the upgrade as a launching pad for adding new functionality. Simply moving from an old version to a new one without doing that is what CIOs sneeringly refer to as a “technical upgrade,” and it’s what CIOs do when they are forced into it by a desupport date.

By far the largest number of respondents in the AMR survey, 61 percent, said the most valuable result of their upgrades came from adding new functionality, and they spent an average of $200,000 on additional software to get it. Web portals were the most popular add-on, followed by procurement applications, data warehouses, HR applications and CRM. (Interestingly, only 27 percent cited new functionality as their primary reason for upgrading at the start of the project. It was during the course of their projects that their belief in the value of new functionality developed.)