SIDEBAR: It's the Functionality, Stupid

Upgrades can be worth it if first 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 co-authored 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 per cent of the AMR survey respondents used that as a justification for upgrading, only 13 per cent 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 per cent more CPU speed, a 72 per cent increase in memory requirements and 33 per cent 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 per cent, said the most valuable result of their upgrades came from adding new functionality, and they spent an average of $US200,000 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 per cent 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.)

SIDEBAR: The Seven Lively Steps to an Upgrade.

The time spent on upgrading enterprise software varies little between small- and large-scale projects. Expect to spend a year or more from the time you begin pondering an upgrade to getting it running.

GET PERMISSION - Enterprise software upgrades are expensive, so they require well-thought-out business cases and a thorough examination of your options. For example, will the upgrade be so different from the previous version that you should consider going to a different vendor's package that better fits your needs? Duration: 6 to 8 months.

PLAN - Most companies wind up customising their enterprise software to fit their business practices. Upgrades are an opportunity to strip out some of that customisation and replace it with standard functionality from the vendor. But it takes time to figure out what stays and what goes - and to make sure the business won't revolt at the changes. Duration: 6 to 7 weeks.

INSTALL - The (relatively) easy part. Get the new hardware and networks up and running and the software loaded in all your different locations. Duration: 4 to 7 weeks.

TEST - The hardest part. Enterprise software packages are highly integrated. Make a change in one place and it ripples through the rest of the system. That - combined with the fact that new enterprise releases are always buggy - makes testing a nightmare, but it's critical to avoiding breakdowns once you go live. Duration: 5 to 9 weeks.

MIGRATE THE DATA - This is where you reconcile three different versions of the same customer record in your database and put a single correct version into the new system's database. Time and expense depend on the rigour and quality control of the data entry processes in your company. Duration: 2 to 4 weeks (or longer depending on data quality).

TRAIN - Even if all the technical steps go well, an upgrade can fall apart if users don't like the new screens they see or can't figure out how to do their job with the new system. Even small changes to the system can mean big changes to business processes and drive users nuts. Duration: 2 to 5 weeks.

CUT-OVER - This is the tenuous stage when you turn on the upgrade and turn off your old system. Most CIOs time their cut-over for a weekend, preferably a long weekend, when few employees are there to see and feel the chaos. Duration: 3 to 4 days.

- SOURCE: AMR RESEARCH AND CIO REPORTING.