A rigorous business case establishes a foundation for discovering the potential benefits of a new technology solution…
Failed IT projects frequently hit the headlines and can even be so disastrous that the vendor is banned from replying to future tenders, as happened to IBM at the hands of the Queensland Government this year. But, as IBM complained, it is not just the vendor’s responsibility to make software projects a success. You cannot simply buy an ERP software product off the shelf and expect the vanilla solution to start paying itself off. Instead, you, as the customer, need to have a clear idea of what results you want from your project and how you will achieve them.
To make sure that your new ERP project does not become a member of the IT hall of infamy, you need to employ the business mantra, “proper planning and preparation prevent poor performance” – commonly known as the six Ps. A successful new ERP implementation will involve significant investments in time and money, so the first step is to build a solid business case. This will help you to answer the question: is ERP right for my business?
The following is a high level guide to preparing a business case:
1. What are you trying to achieve?
Well before choosing a particular product you need to work out what you are really trying to achieve by purchasing a new ERP system.
You should be able to describe not just the tangible benefits such as cost savings, business growth, and improvement of operational efficiency or effectiveness, but the soft benefits such as customer satisfaction and positive effects on employee morale. You also need to consider the impact on overall operations, turnaround time and the environment – technical, social and political. Building high level use cases showing how benefits will accrue will help with communicating them.
2. What are the other benefits of a successful ERP implementation?
There are several other peripheral benefits of a successful implementation. These can include improved efficiency through system integration and automation, better decision-making from enhanced collaboration and centralised data processing, etc. At this stage in building your business case, you should be able to prioritise what’s important to you to help you in your search for a suitable ERP product. Again, use cases can help define these.
3. What are the costs you will incur?
The costs of a successful ERP implementation go far beyond the initial purchase cost of the license. Other costs include implementation effort, server and network infrastructure (or hosting), customisation, upgrades, maintenance and training. Unlike other kinds of software, these are things that are absolutely necessary for an ERP solution. As a rule of thumb, software costs are just one third of the total.
4. What risks will you face during the implementation process?
Besides the obvious risk of the system not being able to support current business processes, consider the risk of not meeting future needs, incompatibility with other systems, lack of acceptance among stakeholders, insufficient after-sales support, and cost and schedule slippages. Every risk needs to be considered against mitigation options. Ultimately your business may need to change to reflect industry best practise rather than the way things have always been done.
5. What is the ERP product that best meets your needs?
Once you have answered the above questions to your satisfaction, the final step before the actual implementation is to determine the right ERP product. For this purpose, the ability of different products to meet your requirements should be assessed and compared using a fit/gap analysis. It’s usually best to choose a flexible, multi-functional product that lends itself to extensive configuration (as opposed to customisation or development) and has a long term reputation for solid after-sales support.
By answering these questions, you will be able to determine if an ERP platform is a suitable investment for you and compare several product options. Also, the exercise will give you a good estimate on the return you can expect on your investment.
For more on best practise in creating business cases, refer to our feature article in iStart magazine Business cases: are you setting up to fail? or download the pdf here.
