Analysis required for a strong ERP business case

In order to build a strong ERP business case, robust analysis is required.  I suggest that the following areas be fully investigated as part of building your business case:-

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?

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

Requirements and scope definition

Analysis of which business process 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 will impact on the delivery timeline, 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 now have considered?

Financials

The work to pull together a complete financial estimate cannot be underestimated.

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

  • Server and network infrastructure (or hosting) costs
  • Cost of customisation, if non-standard out of the box functionality is required
  • Upgrades to the ERP system (how often and what cost, especially if customisation is undertaken)
  • 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 is fully considered.  Don’t underestimate the commitment and time required by business resources on the project. This can’t be stressed strongly enough.  You should consider back filling key tasks 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 and look at the time to achieve the 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. If you 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 as 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 timeframes 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?

Risks

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

Some of the ones that you might consider are:

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

Other things to consider

In the next in our series of podcasts on writing a business case, we discuss the business case for ERP.  You will find some other tips and ideas on writing your business case too.

You might  also want to 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.

Karen

Written by Karen Munro