Building the business case for ERP

The Platform Economy, Digital Transformation, the Internet of Things, and Artificial Intelligence are exciting new business models and technologies that are changing the way the world does business.
Your core business platform – ERP – will stand at the centre of these technologies. But is it modern enough to work in the new world of technology, and how do you justify the cost of upgrading to meet the new demands that will be made on it?

The answer, quite simply, is to build a compelling business case. Those new technologies and business models have the potential to deliver real business value, and a business case will help your executive decision-makers to assesses the business value of this IT investment.

If you’re afraid that your business case is going to attract criticism, then rest easy. With the right approach and process, a solid business case can be (fairly) easily created and it will deliver value well beyond the approval process.

In this 4-part series we’ll look at the important roles that the business case plays in an ERP project, the development process, and some examples of how to quantify business benefits.

The typical ERP project also carries elements of risk, and these can impact the chances of approval. In the final part of this series we’ll show you how to proactively outline the risk factors, and how your business case can help ensure the success of your ERP project.

More than just a cost/benefit analysis – the 6 important roles of a business case

During the Approvals process

Role #1: “Funding Proposal”: A business case’s common role is to win financial support. It should demonstrate that the ERP project will pay for itself, is more profitable than other funding candidates and is the lowest cost solution available.
During Implementation
Role #2: “Crowd Pleaser”: It helps win the support of reluctant users of the proposed new system (who may have been excluded from the program justification process) by explaining how the new system overcomes the problems that they care about.
Role #3: “Ownership”: Value realisation depends on the willingness and ability of stakeholders to make changes in processes, procedures, policies, and structures. The business case pinpoints the agreed-upon benefit targets for measuring and tracking their success.
Role #4: “Compass”: When program scope extensions (“scope creep”) threaten to add extra time and effort, the business case keeps the program focused by highlighting the value of its original boundaries. This keeps the focus on an on-time/on-budget/on-value arrival at the planned destination.
Role #5: “Designing for Value”: The value expectations defined by the business case become the objectives for the business process designers and system developers. This keeps the focus on value realisation for all activities in the development process.
During a System’s Operational Lifetime
Role #6: “Value Realisation Tracker”: The business case should be the foundation of a feedback loop for measuring value creation.
In the Approval process, the business case forecasts value. As a Value Realisation Tracker, it becomes the yardstick for determining whether that forecast has become a reality.

Conclusion

Your ERP system is arguably your most mission-critical system. In proposing to upgrade it, you will encounter cost concerns and strong resistance to that change. You will, therefore, require a very substantial motivation.

Your business case motivation must be clear, concise and compelling. A lengthy and dense proposal is unlikely to win the support of your key decision-makers, who will be focused on their own narrow areas of interest:

  • For C-level business executives, the business case provides practical guidance for minimising costs, maximizing returns and mitigating risk
  • For Finance executives, the business case delivers accurate forecasts of future spending needs and incoming revenues
  • For project and program managers, the case reveals critical success factors and contingencies they must manage to achieve their goals
  • For directors and board members, a solid business case shows that decisions were made responsibly, with sound judgment and using solid decision criteria

Coming up next: The business case development process

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2019-09-30T08:11:19+00:00