Analysis required for a strong ERP business case

Build a strong ERP business case using robust analysis.  Investigate the following areas as part of building your business case so that each part is strong.

Problem Statement

In order to develop a strong problem statement the organisation needs to be clear on WHY it feels the need to implement an ERP system.

Have you undertaken the analysis required to understand the Why?

In a report published by Panorama Consulting here are the 10 reasons organizations have chosen to implement ERP systems:

  1. To improve business performance – An ERP system is a business tool and needs to be viewed as a tool to conduct and execute business processes and transactions. It has no intrinsic value; only the value it creates by delivering benefits to the business organization.
  2. To make employee jobs easier – Employee productivity increases. The benefits here can be real, make sure your new system will deliver these types of benefits if you’re counting on them.
  3. To ensure reporting / regulatory compliance – This can certainly be a good benefit, but make sure the ROI is there and that you can actually realize the return on your investment.
  4. To better integrate systems across multiple locations – This is a big benefit if you now have disparate systems or systems that aren’t or can’t be integrated.
  5. To replace an old ERP or legacy system – This is often given as a reason to implement a new system, but make sure the benefits are there for a new system and that the expected ROI is valid and acceptable. Don’t just transfer old ways of working into a new system. The technology alone, won’t save you; unless you are straddled with onerous maintenance contracts, failing hardware, and/or scarce consulting/maintenance resources to keep the old system running.
  6. To position a company for growth – It’s almost always less painful to implement a new ERP system when your organization is smaller, than when you’re in a huge growth spurt. If growth is predictable in your near future, take the plunge now and implement a new system. The training and familiarity you get with the system now, will pay off handsomely in the future.
  7. To better serve customers – Nothing else to say. Do it.
  8. To standardize global business operations – This can be a huge benefit! Make sure the system you select has language sets and localization’s that fit your current operations and future plans.
  9. Parent Organization or Stakeholder Requirements – When an organization receives funding or is acquired  by another company, those key stakeholders may require specific accounting tools such as ERP in order to standardize reporting, improve transparency and more.
  10. To reduce working capital – This is a basic benefit if the new system is used properly.
  11. Bonus Reason: Because other companies have ERP – This is not a good reason and is probably a predictor for ERP implementation failure. (List taken from the Roseasp website – link below)

If you have any of these 10 reasons for implementing ERP you might want to consider how they relate to your problem statement and if you can clearly define your problem statement.

Requirements and scope definition

Analysis of which business processes are going to be impacted, and how, is key.

Ensure that you have clearly defined, within the background of your business case, what is in scope and out of scope.

ERP implementations are not a small task at the best of times and so consideration of phasing is important.  The decision of what will and won’t be included in each phase will impact on the delivery timelines, as well as your financial estimates, so it is important to have these agreed upon during the business case building phase.

Options

Spend the time brainstorming options.  If you have defined the business processes impacted, what other ways are available to make the process or processes more efficient?

Is there a phasing option that will provide a more palatable implementation for the business?

Are there smaller or cheaper ERP systems available to perform the processes that you want re-engineered?

Who, within your industry has already implemented an ERP system?  Can you discuss their system usage with them to understand what other options they might not have considered?

Financials

Undertake the work to complete a full financial estimate. Having it cannot be underestimated.

Items that may not be obvious and need to be considered include:

  • Server and network infrastructure (or hosting) costs
  • Customization costs
  • Upgrades to the ERP system
  • Maintenance costs, including on-going licence fees
  • Full implementation resourcing (vendor and business resources)
  • Interface integration costs (one way/two way with other systems)
  • Data modelling costs
  • Data manipulation costs
  • Business process re-engineering costs
  • Change management costs
  • Training costs (across the whole organisation)

Ensure that resource costs associated with resource planning are fully considered.  Don’t underestimate the commitment and time required by business resources on and ERP project. This can’t be stressed strongly enough.

Consider back filling key roles so that business resources can work full time on the ERP implementation.  The cost for this back filling needs to be included in your cost estimates.

Be aware of the time to achieve a Return on Investment.  It might be longer than first considered, due to the need to continue improving practices once the system has been implemented.

Having a change resource involved with the business case building phase is valuable. Have a qualified change management resource involved in the analysis and development of your business case.

You will have a stronger case to put forward and the business will feel more confident that the change requirements have been fully understood and impacts included in the business case.

It would also be valuable for a Change Impact Assessment to be developed and presented alongside the Business Case.

Planning

Be realistic with planning analysis.

  • Have all tasks for implementation been included?
  • Are the times being proposed realistic?
  • Does the business case ensure that the resources required for delivering of the time frames will be locked in, either from the business (with back filling of roles where required), or via external resources.
  • Have holiday periods been taken into consideration when planning?
  • Is there a smarter and more agile way of delivering the solution that gets a Return on Investment sooner?
  • Are the resources available skilled and capable of delivering an ERP implementation?

In my experience it is too easy to listen to the vendors who will try and sell you their systems.  They will tell you that it’s easy and won’t be too difficult to implement.  And yet, the business side of the planning is not fully looked at and this is where problems occur when implementation begins.

Risks

What risks have you identified that will impact on your ERP implementation?

Some of the ones that you might consider are:

  • If the system implemented doesn’t meet the future business needs, what then
  • The system is incompatible with other or existing systems
  • If there is a lack of acceptance among stakeholders of the new ERP system
  • After sales support from the system vendor is lacking
  • There is an inability to map and migrate existing data easily
  • An out of the box system doesn’t meet the business needs and configuration is required and is incomplete
  • What if the system doesn’t improve existing processes?

Other things to consider

Consider the need for two business cases.

The first one would be to develop your business requirements and assess your business needs and then prepare your Request for Information (RFI) or Request for Quote (RFQ).

The second would then be for the actual implementation costs and subsequent risks associated with that.

Be careful not to jump in too quickly to agreeing to move to an ERP system, without your business case stacking up.

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