More organizations are realizing the benefits of ERP software. Not only are Fortune 500 companies implementing and upgrading ERP systems, but small businesses are taking advantage of niche ERP solutions tailored for their industry. If your organization is looking to realize increased business benefits from ERP software, our experience has shown it is critical to develop a detailed and comprehensive business case.
By developing a business case for new ERP software, you can shed light on operational issues, determine how to solve them and estimate the resulting business benefits. This is easier said than done, as organizations tend to have different ideas regarding what constitutes an effective business case. With that in mind, we want to share seven tips for developing an effective ERP business case:
Understand the Importance of a Business Case
Don’t develop a business case until you understand its importance. You’ll develop a much more thorough business case when you know what’s at stake. So, what’s at stake? Business benefits. A business case ensures your organization realizes measurable business benefits from its ERP software. It ensures the project achieves business goals, not just IT goals.
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Identify Pain Points
A good business case begins by identifying problems and determining what solutions are needed to solve them. Not everyone will agree that problems exist or that they require an ERP solution. A business case can help you achieve organizational alignment regarding the need for an ERP system.
Acknowledge Challenges and Risks
There are, obviously, challenges in every ERP implementation. A business case allows an organization to take an honest look at obstacles that must be overcome, whether it’s a lack of resources, lack of expertise and/or lack of employee and executive buy-in. We have seen many high-profile cases where ERP implementations failed because those responsible for developing the business case and implementing the system were not forthcoming about potential risks.
Determine Your Organizational Goals
Chances are, your reason for implementing ERP software isn’t just to replace an old system. Often, we find organizations have many goals they want to achieve through implementation:
Improving Customer Service
Every business case should consider the customer service benefits of new ERP software. Does your organization want to enable customers to order online 30% faster once an ERP solution is implemented? If so, include this in your business case.
Improving Business Processes
If your operational pain points are related to broken or inefficient business processes, then outline these processes in your business case. Potential process improvements should be specific and measurable.
Improving Employee Morale
An ERP system can improve employee morale by making employees’ jobs easier. Employee morale is measurable since it can be gauged by distributing surveys, conducting focus groups and/or tracking turnover rates.
If processes are streamlined, customer satisfaction increases and employee morale improves, this will most likely result in a positive financial outcome as well. We have found that identifying potential cost savings within a business case increases the likelihood of achieving executive buy-in. The business case also should outline the total cost of ownership of new ERP software, including implementation costs. When you focus on both the costs and the benefits, you can show how the latter outweighs the former. After all, ROI is the language of executives.
Consider Alternatives to Implementing ERP
Instead of implementing new ERP software, some organizations upgrade their existing software, improve their business processes without new technology, or simply decide to do nothing for the time being. It is important to examine the costs of each of these options against the cost of an ERP implementation. For example, it may become evident that the cost of doing nothing and remaining inefficient is greater than the cost of an ERP project.
Develop an ERP Project Plan
Your business case should include a detailed section outlining the components of your ERP project plan. While the business case helps get the project off the ground, the project plan ensures a project maintains momentum and sticks to the expected timeline and budget. Accounting for all essential project activities, including change management and business process reengineering, sets realistic expectations regarding implementation timeline and budget.
Measure the Results
Once you’ve built a business case and begun your project, it’s time to start measuring results. It’s important to measure results throughout the project so you can track your progress, promote accountability and monitor your budget. Measuring results can also help sustain project buy-in when and if it wanes.
A Business Case Supports ERP Success
A thorough business case will, more often than not, result in a successful ERP selection and implementation. If your organization is considering an ERP implementation, Panorama’s ERP consultants can guide you in developing a business case that allows you continuously prove the value of new ERP software.