What is ERP modernization? When and how to upgrade (+ solutions to common challenges)

Keeping your business competitive in 2025 is all about being agile and making smart, data-driven decisions, especially with today's multi-cloud setup. That's where modernizing your enterprise resource planning (ERP) solution comes in. We break down what ERP modernization really means for your business, helping you streamline your operations and ultimately boost your bottom line.

Industry experts and leading tech sources agree that modern ERP systems are key to boosting efficiency and staying innovative. Cloud solutions, offering scalability and flexibility, are powered by artificial intelligence (AI) to automate tasks and enhance decision-making. This article explores how to transform your ERP solution into a new, modern solution and set a solid foundation for growth.

Understanding ERP modernization

Benefits of ERP system modernization

6 key steps in the ERP modernization process

ERP modernization strategies

Challenges of ERP modernization (and solutions)

Boost productivity and enhance profitability

Understanding ERP modernization

Legacy ERP systems that often live on-site can become outdated and no longer support your growing business needs. Modernizing your ERP means moving your current ERP software to a new cloud-based platform or optimizing your operations. Essentially, this complete overhaul provides more flexibility, scalability, and access to modern features, offering significantly more transparency across your business. 

If you currently have an ERP solution, assess if it meets your needs. Look for issues like functionality roadblocks, high costs, or manual workarounds. Business changes or competitors outperforming you with better systems are also key indicators for implementing a modern ERP product.

Signs you need to transform your ERP 

Upgrading an ERP system typically involves moving to a newer version of the same software from your existing vendor. This often focuses on applying updates and patches to enhance performance and security. 

Modernization, on the other hand, is a more comprehensive transformation that may involve switching to a different ERP vendor or deployment model (like moving to the cloud), aiming to leverage newer technologies. While upgrades are usually less disruptive and costly in the short term, modernization offers the potential for significant long-term strategic advantages.

When to upgrade

Consider a simple ERP upgrade if your current ERP is under seven years old and the vendor still actively supports it with regular updates and security patches. This is often the most cost-effective and least disruptive path, allowing you to benefit from the latest features and security protocols without the complexities of a full system replacement.

Consider an upgrade if your existing ERP meets most of your current operational needs and doesn't significantly hinder growth. This will provide improved performance or better integration with newer technologies, without completely overhauling your entire system, saving you both time and money. 

When to upgrade:

• The current ERP is under seven years old and actively supported by the vendor.
• Your existing ERP meets most current operational needs and doesn't hinder growth.
• You're seeking improved performance or better integration with newer technologies.

When to modernize

A clear sign you should modernize your ERP is if the user interface (UI) is old and antiquated. If your employees think the system is clunky, hard to navigate, or unattractive, they will quickly become frustrated, productivity will suffer, and mistakes will occur. 

Today’s ERP systems have modern UIs designed to have a natural user flow and make it easier for employees to adopt new workflows.

Another important indicator you should consider modernizing is poor ERP integrations with essential business systems. If your ERP cannot connect with your CRM, or other critical applications, there will be data silos, manual data entry, and inefficiencies. 

Signs it's time to modernize: 

• Your current ERP has an outdated user interface (UI), leading to frustration and decreased productivity.
• Your ERP struggles to integrate with essential business systems, causing data silos and inefficiencies.
• You need open architectures and developer-friendly APIs for easier integrations and a unified business view.

More modern ERP systems are created with open architectures and developer-friendly APIs to enable easy integrations that provide a unified view of your business data and processes.

A growing business might choose to modernize its ERP rather than simply upgrade if the current system's architecture is becoming a bottleneck, preventing it from scaling efficiently. Modernizing your ERP provides a more adaptable platform for future growth and seamless integration with new technologies, offering a greater competitive advantage than a simple upgrade.

Benefits of ERP system modernization

Moving to a more modern solution brings several advantages to your business, ultimately driving growth and improving profitability. While you might think that a modern system is only good for one or two specific areas, the reality is that it can positively impact nearly every facet of your operations.

Increased efficiency 

One of the primary benefits of ERP modernization is increased efficiency, particularly through automation. A modern solution can handle repetitive, manual tasks like data entry and even automate payroll processing. This not only saves time but also reduces the chances of errors.

Another key benefit is streamlined workflows. Older systems can require several manual steps to transfer information between different departments or systems. A modern ERP can seamlessly connect all the different parts of your business. For example, when a customer places an order, the system can automatically update your inventory, trigger the shipping process, and generate an invoice, all without anyone having to transfer information manually. 

Bottom line benefit: Modern ERP modernization ultimately boosts your bottom line by automating tasks and optimizing processes, freeing up valuable time and resources while minimizing errors.

Enhanced data accuracy and visibility  

With real-time analytics, a modern ERP system provides you with current information on key metrics like sales, inventory reports, customer activity, and financial outcomes. This means you can access the latest information, enabling you to make informed decisions.

For example, you immediately see what products are most popular, potential bottlenecks in your supply chain, or emerging trends among customers' needs. This visibility lets you respond quickly to changing conditions, improve operations, and ultimately enhance the bottom line.

Bottom line benefit: Modern ERP systems provide real-time analytics that directly enhance your profitability by providing immediate visibility into key business metrics.

Better user experience 

Modern ERP systems feature clean, intuitive interfaces that are visually appealing and easy for your team to use. This results in a better overall user experience, which can significantly reduce the learning curve, minimize errors, and boost overall user satisfaction.

Another way these modern systems enhance the user experience is through mobile access. Modern ERP systems often offer mobile apps or responsive designs, allowing your team to access critical information and perform tasks on their smartphones or tablets. 

The flexibility ensures that business operations can be done anywhere, making it easier for your team to collaborate and respond quickly to opportunities. 

Bottom line benefit: The user-friendly interfaces and mobile accessibility boost your bottom line by increasing efficiency, leading to greater productivity and potentially higher revenues.

Scalability and flexibility  

A modern cloud-based ERP enhances scalability and flexibility. You can easily and automatically scale your resources according to your evolving business needs without needing to make a heavy upfront investment in hardware or infrastructure.

With cloud-based ERP solutions, you also have fantastic flexibility. As your business needs change, you can typically add new modules and functionality to the ERP, allowing you to shape the software to suit your requirements easily. This flexibility ensures that your ERP software aligns with your business strategy, no matter the changing direction of your company.

Bottom line benefit: The enhanced flexibility of modern ERP directly benefits your bottom line by allowing you to adapt resources to your needs, ensuring the technology always aligns with your evolving business strategy.

Competitive advantage  

Staying ahead of the competition is crucial, and a modern ERP system can provide a significant competitive advantage over a legacy system by allowing faster decision-making.

Using a modern ERP means having access to real-time data on sales trends, customer behavior, and financials. With accurate, timely ERP data readily available to learn from, you and your team can make empowered business decisions.

Bottom line benefit: A modern ERP system enhances your bottom line by providing real-time data and more informed decision-making, allowing you to capitalize on opportunities and outmaneuver competitors.

6 key steps in the ERP modernization process

When it comes to ERP modernization, there are several steps to take before you make the transition for your business. First, once you've defined your needs, you'll select the right modern ERP solution for your strategic goals. Then you'll develop your data migration strategy, prepare for any process changes in the new system, and complete thorough testing before going live.

1. Assess and plan 

Evaluating and planning for ERP modernization is an important step in setting the foundation for success with your project. The first step is to conduct a thorough gap analysis, comparing the capabilities of your current ERP system with your current and future business needs. This involves understanding your core processes, identifying pain points, and outlining your strategic objectives for the ERP modernization. 

2. Choose the right ERP solution  

There are three main types of ERP solutions available to choose from: on-site, cloud-based, and hybrid. 

On-premise ERP involves hosting the software on your own servers in your own business building. This option provides greater control over your data and infrastructure, but usually requires a larger upfront investment in hardware and IT staff for ongoing ERP maintenance and upgrades.

Cloud ERP solutions leverage the vendor's servers with internet access. They offer great scalability, flexibility, and lower costs of entry. Most vendors will provide automatic updates and maintenance to the platform, reducing the local IT resources spent managing the solution's obsolescence. 

Hybrid ERP is a combination of approaches. For example, you can host certain critical applications on-site or manage sensitive data on-premises, but leverage cloud-based modules to achieve other operational functions. 

A hybrid ERP solution allows operational flexibility while meeting your specific needs and compliance requirements.

3. Create a data migration strategy  

An effective data migration strategy is essential for successfully transitioning to a new ERP system. To ensure there are no errors or duplications, it will be a priority to ensure your data is accurate as it moves from your legacy system to the new ERP system. 

• You'll want to map your data fields, set the rules for data quality, and probably consider new trial migrations in a nonproduction setting to check data integrity. 
• You'll also want to provide the appropriate level of security throughout the data migration process. The migration strategy should document the processes for securing sensitive information during extraction, transfer, and loading into the new ERP system. 

Your strategy may include methods for secure transfers, setting access controls, and even encrypting data in transit or at rest in your landscape. 

4. Optimize the process  

You will need to optimize the ERP modernization process, which is more than just installing new software. It takes into account aligning the ERP system with your fundamental business workflows for maximum efficiency and effectiveness. 

Aligning workflows may mean re-engineering some processes to utilize the modern ERP features or automating manual steps that are slowing your process down. 

5. Complete change management and training 

Change management and training are crucial in ensuring that your team understands and fully adopts the new system. This involves proactive communication about the new ERP's benefits, addressing concerns, and involving key stakeholders early in the process to foster buy-in and ownership.

Comprehensive training programs, tailored to different user roles and responsibilities within your organization, are important for empowering your employees to utilize the new ERP system effectively. 

6. Test and go live  

The final stage of ERP modernization is testing and going live with the new system. All the preparation comes together at this stage, and the focus shifts to ensuring a smooth transition while minimizing downtime. 

Rigorous testing of all functionalities, integrations, and data migration in a nonproduction environment that closely mirrors your setup is important for identifying and resolving any issues before they impact your live operations.

A well-planned go-live strategy is essential for minimizing disruption to your business when launching the new ERP system. This might involve a phased rollout, where you bring different departments or functionalities online incrementally, or a "big bang" approach, where the entire new system goes live at once. 

ERP modernization strategies

Knowing the proper steps to modernize your ERP is important for a smooth transition. However, you have a few key strategies when deciding exactly how quickly this change will happen, with the two popular ones being the “lift and shift” strategy and the phased approach. 

Use the lift-and-shift strategy 

The lift-and-shift strategy for ERP modernization involves transferring your entire existing ERP system to a new ERP with very little change to the core functionality of the existing system and its architecture. In most cases, this type of migration happens in a cloud environment, which usually has scalability and lower up-front costs. 

The lift-and-shift strategy may not give you the full benefits of a modern cloud-native ERP with cost efficiencies and advanced features. It may also carry over existing inefficiencies or limitations of the legacy system.

Take the phased approach

On the other hand, a phased approach to ERP modernization suggests a slow and more strategic development of your ERP capabilities. 

Instead of totally replacing, you could install new modules or functions along with your legacy system or gradually begin replacing functions or groups of functions after the effective change. 

This process allows your team to transition to the new system at their own pace. Overall, this reduces the chance of disruption while providing opportunities for improvements, and the changes can be done gradually. 

Many teams prefer a phased approach, as it is often less overwhelming. It allows you to focus on those areas (functions, processes, departments) that will yield the immediate return-on-investment to your business, and you will be able to develop a more nuanced and potentially less risky modernization plan.

Go fully cloud-based 

Cloud ERP is when the ERP software and the data are hosted on a third-party hosting provider's servers, using the internet to connect to them. Cloud ERP deployment is usually faster than traditional on-site ERP usage (which can take several months or years to deploy). Because the data is already stored in the cloud, your business can be up and running using your new modernized cloud ERP system.

Choose a hybrid ERP solution

Hybrid ERP, on the other hand, combines elements of both on-premise and cloud-based ERP systems. A hybrid approach allows for a gradual transition to the cloud for businesses with significant investments in existing on-premise systems. 

You can modernize your ERP incrementally by deploying new cloud modules while still utilizing your existing infrastructure. This minimizes disruption to your operations and spreads the investment over time.

Challenges of ERP modernization (and solutions)

Although there are many advantages to ERP solutions, ERP modernization can pose some challenges. Navigating these challenges effectively is crucial for businesses to realize the long-term benefits of a modern ERP system fully.

High costs 

Thorough budgeting is key for businesses concerned about high ERP modernization costs. Evaluating current IT spending is essential to identify long-term savings through reduced maintenance and increased efficiency. 

Additionally, create a detailed budget covering software, implementation, data migration, training, customizations, ongoing support, and a contingency fund. Prioritize essential features and consider a phased rollout to manage investment over time.

Solution: You can justify the ROI, even though it's challenging to put an exact value on intangible benefits like improved customer satisfaction, increased productivity, and better decision-making. 

If you can, quantify the tangible cost savings—automating processes to save employees time, decreasing errors, decreasing IT costs by reducing the number of suppliers, or improving inventory management. 

Data mitigation risks  

While ERP modernization brings countless benefits, businesses must confront the inherent risks related to operational data migration, namely concerns around data loss, corruption, errors, and conflicts when moving data from an old legacy system into a new ERP. 

Addressing data security issues is also critical when managing sensitive customer or financial information.

Solution: Fortunately, there are best practices for clean data transfers, and mitigating the risk of inaccurate, incomplete, or duplicate data is key to a successful migration. This often means reviewing your data for accuracy, consistency, and completeness before migration. 

Data validation and reconciliation procedures employed for data transfer during migration and ongoing testing after the migration will establish the integrity and accuracy of your data. Secure data transfer methods, including encryption and protocols, will protect your data by preserving confidentiality and preventing unauthorized access.

Employee resistance  

One significant challenge during ERP modernization for businesses can be employee resistance. Employees may hesitate to adopt new systems due to fear of the unknown, concerns about job security, or simply a preference for familiar processes they've used for years. This resistance can manifest in various ways, from vocal opposition to a lack of engagement with training and the new system, which may hinder successful adoption across your organization.

Solution: To effectively address employee resistance, proactive change management tactics are essential. Clear and consistent communication about the reasons for ERP modernization, highlighting the benefits for both the organization and individual employees, is also crucial. 

Involving employees from different departments in the planning and testing phases can foster a sense of ownership and make them feel valued. Providing comprehensive and role-specific training, tailored to the needs of your workforce, is essential to build confidence and competence in using the new system. 

Integration issues 

One of the most common challenges in ERP modernization is integrating with current business systems. Your organization probably uses many types of software for different tasks, such as CRM, e-commerce platforms, or specialized solutions within your industry. 

It will be necessary to ensure that those systems can effectively share data with the new ERP system and work together seamlessly. If you fail to create effective integrations, you may end up with data silos, need tier manual data entry, or create broken workflows—which are some of the very problems ERP modernization is meant to solve.

Solution: Application programming interfaces (APIs) are vital in mitigating integration issues by providing standardized ways for different software applications to interact and share data. Modern ERP systems often have well-documented APIs allowing custom integrations with other platforms. 

In situations where direct API connections are complex or unavailable, middleware solutions can act as a bridge between disparate systems.

Boost productivity and enhance profitability 

Midsize businesses operate in a dynamic space with distinct challenges and exciting possibilities. ERP systems provide a powerful solution for mid-sized companies to tackle these challenges head-on. And by undergoing ERP modernization, businesses can future-proof their operations, enhance their agility, and unlock new efficiency and growth potential. 

For growing businesses seeking a modern ERP solution, the Intuit Enterprise Suite offers the robust tools necessary to manage finances precisely and easily. Fuel your continued growth with a more powerful suite, boosting productivity through integrated business and financial management, all in one solution tailored for businesses.