The competitive landscape of the manufacturing industry demands operational efficiency and innovation that smart factories promise. These factories can empower manufacturers with cutting-edge technologies and digital processes – which, on the backend, rely on robust Enterprise Resource Planning (ERP) systems to unlock streamlined production, improved development, efficient logistics and optimized supply chains and planning.
However, a significant challenge hinders businesses’ scalability: the issue of pressured ERP system migrations. Manufacturers have found themselves entangled in vendor-dictated roadmaps and pressured by major software providers to integrate disruptive and costly migrations to cloud-based systems. These migrations are not simple upgrades, but constitute significant shifts that can jeopardize years of customization and integration. These are critical factors affecting the operational DNA of manufacturing organizations.
Beyond the “Rip and Replace” Option
The strategy of pushing subscription-based pricing onto customers locks in recurring revenue and provides the vendor with more control over version upgrades. Customers with a history of challenging the vendor mandated “rip and replace” approach understand the potential risks of high costs, prolonged implementations and disrupted operations. Recognizing these potential roadblocks, manufacturing IT leaders are seeking alternative approaches to ERP system transitions.
The path to smart factories isn’t locked into a one-size-fits-all vendor upgrade. Manufacturing leaders are prioritizing flexibility, control and cost-effectiveness, leading them to explore alternatives to pressured, vendor-driven modernization roadmaps.
To navigate an era of vendor-imposed upgrades and migrations, a strategic shift in mindset is required. Manufacturing leaders must recognize that ERP systems are mission-critical to operations, and the path forward must avoid disruptive migrations.
There are alternative strategies that leaders can consider, including leveraging third-party support for existing ERP systems. These modern approaches enable manufacturers to both expand and maintain the value of their current systems while freeing up resources to invest in cutting-edge technologies like AI, IoT, and 5G—tools that are the primary drivers of competitive advantage in the smart manufacturing era.
For example, global manufacturer, Nexen Corp freed up time and resources to invest in technologies including AI/ML, instead of integrating forced S/4HANA upgrades.
Nexen operates a traditional on-premises IT environment, valuing the control it offers over data, applications and infrastructure. This approach aligns with their security, compliance and business process needs. However, their existing SAP system presented challenges. Vendor support response times and the inability to address customizations were significant pain points – threatening Nexen’s ability to fully embrace Industry 4.0 technologies like AI, big data and cloud.
Seeking a strategical solution, Nexen turned to third-party support services. This partnership delivered several key benefits, including:
- Reduced annual maintenance fees by up to 50 percent.
- 24/7 access to qualified technical support.
- Guaranteed support for customizations and add-ons.
- Faster resolution times for IT issues.
- Extended support for SAP Business Suite/ECC 6.0 for up to 15 years.
The path to a smart factory is unique for each manufacturer. Dictating a standard digital transformation model ignores the specific needs and existing infrastructure of individual companies. Manufacturers can navigate the innovation landscape by critically assessing ERP upgrade needs and leveraging alternative support models.
By carefully evaluating migrations and seeking alternative support, manufacturers, such as Nexen, are safeguarding their finances and operations from pressured upgrades. This strategic approach ensures their ERP aligns with broader goals of agility, innovation and differentiation.