If you are still using legacy ERP systems, there is a high chance that it’s draining your system. Legacy enterprise resource planning (ERP) systems are short of contemporary features and do not bring the features that can help small businesses or even enterprises scale in the long run.

If you want to resolve the challenges that come with legacy ERP systems, it is best to use a cloud-based ERP software that can help you manage business operations seamlessly.

Based on a report by NetSuite, the global cloud ERP market is expected to grow at a CAGR of 16%, reaching $140 billion by 2030.

In this blog, we focus on the top five hidden costs of legacy ERP systems and how you can cut them down by using a better, cloud-based version of ERP.

What are the Hidden Costs of Using Legacy ERP and How Can You Fix Them?

The hidden costs of using legacy ERP systems include high maintenance and upgrade costs, integration limitations, lack of real-time visibility, limited scalability, and a threat to data security.

Let’s take a look below at the brief description of them and how cloud-based ERP can overcome these challenges.

1. High Maintenance and Upgrade Costs

Legacy ERP systems often have outdated hardware and manual upgrades that are expensive, and companies have to use expensive support services. In addition to that, most businesses end up dedicating a significant portion of their IT budget just to keep the system running.

They have to get vendor support for such a legacy ERP that is either reduced or discontinued. Also, upgrades are infrequent, highly disruptive, and sometimes require full reimplementation, which takes up a lot of time from internal IT teams.

On the contrary, Cloud-based ERP, such as NetSuite ERP software, is updated and operates on a subscription model that includes automatic updates and cloud-based maintenance. For example, an ERP system, NetSuite for small businesses, provides an all-in-one solution that is regularly updated and charges no on-premise hardware costs.

This alone can cut IT costs by 30-50% annually, freeing up capital for innovation.

2. Integration Inefficiencies

Another top issue of legacy ERP systems is found in their integration efficiency. In the current times, integration has become the most important requirement for businesses.

One of the main problems with ERP systems is that they do not easily integrate with modern CRM, eCommerce platforms, or third-party analytics tools.

This leads to errors and time consumption.

Now let’s see in comparison how companies that have legacy ERP systems can overcome the integration challenges using cloud-based ERP software, as they have open APIs and also have native integrations.

SMBs, startups, and enterprises with cloud-based ERP software can connect with different platforms (Salesforce, Shopify, and HubSpot), and this gives them a major advantage.

Also, you will have real-time data synchronization for faster decision-making through a unified data view.

3. Lack of Real-Time Visibility

Legacy ERPs do not offer analytics and reporting capabilities. Result? Stakeholders have no data visibility, which frustrates them for poor decision-making.

It leads to missed opportunities and slow reaction times, as financial reports may take weeks or even months to compile. And, no growing business wants that.

Inventory, sales, and custom data are siloed and not accessible in time that makes tracking retrospective instead of proactive.

The real fix is using a cloud-based ERP that provides real-time dashboards, automated KPIs, and role-based access to data, especially for eCommerce, manufacturing, and similar industries.

We can take the example of manufacturing companies that need inventory forecasting, management, order management, and other processes, all in real time. With legacy systems, this is not possible. How to fix this, then? The best way to fix this is by switching to a cloud-based system like NetSuite Manufacturing. It gives you real-time access to your financials, sales performance, and other key metrics.

These systems are faster and provide visibility that helps in data-backed decision-making, improving agility and responsiveness.

4. Limited Scalability

As businesses grow, legacy ERP systems often become an issue.

Users face limitations in adding new entities, managing global operations, or increasing transaction volumes. This can break the system or require major custom work.

Also, legacy ERP systems often lack multi-entity and multi-currency support, the infrastructure is not high-end enough to support high transaction volumes, and you might have to get manual intervention for new user setups and scenarios.

In contrast to this, cloud platforms like NetSuite provide scalability to businesses as they grow. You can still add subsidiaries, currencies, tax jurisdictions, and languages, get support for multiple user roles without heavy reconfiguration, and handle growing data easily.

5. Security and Compliance Risks

Regulations for security and compliance are becoming stricter day by day. All the systems must comply with these regulations; however, legacy systems may not be able to do so.

Legacy ERP systems have no built-in compliance tools for GDPR, HIPAA, SOX, etc,.

It means that the client and customer data are at a strong risk.

Features like data encryption, backup, and disaster recovery options are limited, which leads to cyberattacks due to outdated architecture.

Cloud ERP fixes this problem smoothly by including security and compliance as its core features.

NetSuite’s cloud ERP for small businesses is actually solid when it comes to security. It will encrypt your data with encryption, and you can control who can see what with role-based access, and it adds that extra layer of safety with two-factor login.

Bottom Line

A recent report shows that around 94% of organizations have adopted cloud services, up from 80% in 2020.

At the start, migrating from a legacy system to a cloud-based system might be high through implementation and licensing. But, once you have migrated, it leads to a long-term ROI and saves costs through extra expenses.

How to fix the problems that you have been facing in a traditional legacy system? Use cloud-based ERP, as it does not compromise on factors like security, integrity, integration benefits, and visibility.

All the companies that have migrated from a legacy system to a cloud-based system have only noticed benefits, and there is a sign for you as well if you are trying to make a decision!

Frequently Asked Questions

What is the major disadvantage of Legacy ERP?

The major disadvantage of a legacy ERP is its lack of adaptability. It does not offer integrations, real-timeC visibility, and analytics that are all available in cloud-based ERP. Businesses should never compromise on these factors.

Why should businesses consider switching to cloud ERP?

Switching to a cloud ERP will eliminate your limitations of outdated systems and will have all the solutions available in one click. Also, you will have real-time visibility, automated updates, built-in integrations, and scalable infrastructure.

Is cloud ERP more cost-effective in the long run?

Yes. There will be high investment costs in licensing and implementation.

There are the best built-in features for startups, SMBs, and enterprises, like automated backups, real-time reporting, and compliance tools that would otherwise require expensive third-party solutions.

Can cloud ERP support complex, global business operations?

Absolutely. Modern cloud ERPs support global operations.

They offer multi-subsidiary management, multi-currency support, global tax compliance, and consolidated financial reporting, all on a single platform.