Dive Brief:

• Ulta is undergoing a multiyear modernization effort to overhaul its ERP systems and transform operations, the company said during its Q3 earnings call Thursday. 
• The beauty retailer plans to invest $160 million to $180 million into the effort, dubbed Project SOAR, over the next three years. The majority of investments are planned for fiscal years 2022 and 2023.
• The overhaul represents a "multigenerational opportunity" to reshape business flows, improve processes and remove inefficiencies, according to Scott Settersten, CFO at Ulta. 

Dive Insight:

Retailers are usually looking to leverage modern ERP solutions that can tie into areas such as product management, inventory and supply chain, said Forrester VP and Principal Analyst Liz Herbert in an email. One key advantage is visibility: knowing what's in stock, what's out of stock and what's needed where. 

To become more predictive, a modern ERP system with embedded analytics "is the path to doing that," Herbert said.

Following a brief pause amid the pandemic, companies have taken on more ambitious IT projects in 2021 to make supply chain operations more efficient and to stay in line with leadership's guidance to accelerate growth. Ulta is looking at modernizing its ERP systems — typically a central component of the tech stack — as a way to improve operations and cut costs. 

"In addition to providing us with more flexible and scalable operating environment, this new platform will support future growth and innovation," said Settersen. "We expect to begin to see operational benefits from this investment in fiscal 2023."

Companies normally seek ERP overhauls because of two main reasons, according to Herbert:

• An existing platform reaches end of life, whether that's a system going out of support, no longer receiving meaningful vendor updates, or becoming so archaic that there are no resources still familiar with the system.
• The system no longer serves the business, either because it has poor usability, performance, flexibility, or it's no longer based on modern business models and needs.

Bed Bath and Beyond moved to upgrade its legacy tech during the pandemic as part of its plan to modernize its supply chain. The company's new ERP tool provides real-time data and is designed to apply analytics to inventory management and product life cycles.

But ERP modernization is complicated because the systems tend to interact with multiple core company processes. More than half of projects to modernize legacy technology ended in failure, according to a Boomi survey of 1,675 tech leaders. Of organizations that have completed ERP implementation, just four in 10 managed to do so at or under budget, according to the 2021 ERP Report published by Panorama Consulting Group.

"Even with an ERP that's really well suited to your industry, there's always going to be things that you do that are different," said Herbert. "Being able to customize it and test your customizations, that takes time."