Legacy ERP infrastructure is becoming a constraint on companies’ ability to invest in and benefit from AI’s capabilities, says Courtney Hounsell, Client Experience Manager at Braintree. Many companies have merged migration and modernization, resulting in a gap that creates incoherence and a lack of visibility.
This gap constrains their ability to benefit from AI and its capabilities. Cloud migration has been sold as digital modernization, but it only changes the address of the system.
Migration vs Modernization
Real modernization changes architecture, data models, integration logic, and the capacity to generate value. Companies want their modernization projects to reduce costs, show long-term ROI, and empower staff with systems that work faster and smarter.
When migration and modernization are confused, companies end up paying cloud prices for on-prem problems and arrive in the AI era without the foundations required to ensure AI can function effectively.
The Impact of Legacy ERP
The widening gap between technology investment and business outcomes creates problems. Invisible data and constrained AI capacity tend to fall in the cracks left by this gap and leave companies behind on the curve of adoption.
Predictive analytics, natural language querying, automated reconciliation, and intelligent workflow routing are all cloud-native by architecture and can’t run on a legacy on-premises ERP.
A recent McKinsey report found that 88% of companies have started to use AI in at least one area of the business, but only 39% are able to attribute any measurable EBIT impact to AI.
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Companies that are extracting value share one structural characteristic – the AI can see their core systems. On-premises ERP systems hold their data in local databases, which must be extracted, cleaned, and pushed somewhere accessible for AI to use.
Modernizing ERP Systems
According to the Forrester TEI study on Trends 365 Business Central, companies moving into ERP modernization can see a potential return on investment of 265% with measurable productivity gains across operations, sales, and finance.
ERP systems benefit from automatic updates and refreshes, now bringing new AI capabilities with each update cycle.
Getting the tech right before the migration determines whether or not the project delivers on its promise. The quality of the migration partner is as important as choosing the right ERP.
They emphasize that modernization is not migration, but the right migration is definitely a step towards modernization and removing the barriers inhibiting access to next-generation AI capabilities. This is especially important as companies try to minimize expenditure and tighten budgets.
It is essential for companies to understand the difference between migration and modernization to make informed decisions about their ERP systems.
