It’s no secret that enterprise resource planning (ERP) software is a great way to consolidate your business functions. It also can reduce process times, increase collaboration and centralize data throughout the enterprise.
Clearly, ERP systems have a wide range of benefits, but how can you convince executives to see eye-to-eye with you? What arguments will you need to make and back up?
The 2022 ERP Report
This annual report summarizes our independent research into organizations' selection and implementation decisions and their project results.
7 Tips for Developing a Business Case
1. Identify Issues with Your Current Systems
Before you can talk about the reasons you want to implement a new business system, you’re going to need to prove that there are issues with the way your business is currently operating. After all, executives won’t want to pay for a system change unless they see that the old system is causing issues.
We recommend beginning your business case by discussing the issues your business is currently experiencing. For example, you may be experiencing data inconsistencies that lead to late shipments.
If this is the case, explain how ERP software integrates multiple functions into one system, meaning purchasing, manufacturing, distribution and sales all have access to the same, real-time data.
2. Determine Your Organizational Goals
Once you understand the pain points of your current system, it’s time to ask executives what overall changes they’d like to see in the business. You can use this insight to determine what ERP benefits to highlight.
Do executives want increased visibility across the organization? Then, talk about the advanced reporting capabilities of modern ERP software.
Do executives want to the transform the customer experience? Talk about how CRM functionality can personalize touchpoints along the customer journey.
3. Quantify Specific Business Benefits
Now that you’ve shown executives some high-level benefits, it’s time to provide more detail by quantifying specific ERP business benefits. This tells executives that you’ve done your research and can speak their language.
When we help clients develop business cases, we encourage them to ask employees about their pain points. These pain points often can be quantified in terms of their cost to the business. For example, many clients have employees performing manual processes that could be streamlined through automation, saving the company money.
4. Acknowledge Risks and Prepare for Tough Questions
As with all business ventures, ERP projects and digital transformations have risks. Executives are likely going to recognize these risks and ask you if the potential benefits are worth the possibility of failure.
The best thing you can do here is to acknowledge the risks, and show how you plan to mitigate risk, through best practices, like focusing on organizational change management.
Have change management initiatives failed in the past? Discuss the lessons learned from these failures and how you plan to apply these to the next initiative.
5. Estimate Project Duration and Costs
Just as executives are concerned about risk, they are also concerned about cost. ERP projects can cost millions of dollars and can last years.
There’s no reason to hide these estimates from executives – they’ll find out eventually. It’s best to provide realistic benchmarks based on your project scope, company size and industry. This allows you to demonstrate how the benefits of ERP outweigh the costs. In other words, what is the ROI?
Similarly, realistic timeframes help executives understand when they can realistically expect to recoup costs and see benefits realization. According to our 2020 ERP Report, companies take an average of seven months after go-live to recoup costs.
When developing benchmarks, we don’t recommend relying on time and cost estimates from ERP vendors alone. These estimates often do not include success factors, such as comprehensive organizational change management and business process management.
6. Consider ERP Alternatives
In your discussion, it’s also important to acknowledge some of the alternatives to implementing an ERP system, such as business process reengineering. In fact, we often find that employees’ pain points are more related to process issues than technology issues.
While this may not be the case for your organization, you’ll still want to show that you’ve considered this possibility because executives like to see that you’ve investigated less expensive options.
If you do find that process issues may be more of a problem than technology issues, it can be helpful to hire a consulting firm that doesn’t force you toward a new ERP system when process improvement may be a better option in the short-term.
7. Use the Business Case to Develop KPIs
Key performance indicators (KPIs) are a set of concrete measurements that a company uses to track its performance over a period of time. While building a business case, it’s important to create KPIs for each of your expected benefits.
KPIs give you a quantifiable means of measuring performance and provide an indicator of how well your new systems and processes are working. If KPIs are not being met, you should reassess your ERP project plan to determine if you’re following ERP best practices.
Gaining Executive Buy-in Takes Time
If you use these tips to craft an ERP business case, you’re likely be met with open-mindedness. However, this may not happen right away. Be patient and keep quantifying those benefits!
Panorama’s ERP consultants can support you in your quest to convince executives. Request a free consultation below to learn about some of the quantifiable benefits that can be used in a business case.