A step-by-step guide to building the business case for ERP
You know your company needs ERP, but how do you convince the decision makers to buy in? Here’s our step-by-step guide to building the business case…
Do you need to build a business case for Enterprise Resource Planning (ERP)?
If you’re reading this, you already know the answer is ‘yes’. For starters, many people don’t fully know or understand what ERP is or how it can help their business. All they know is that it’s a huge investment, which makes it difficult to convince management and shareholders to buy in. Elsewhere, they might know about ERP but be naturally resistant to change. While others might well be interested but have no idea where to start or what to do next.
Building a business case for ERP solves all these problems. Because what you’ll get is a comprehensive plan detailing why you need it, how it will help, and what you should expect as a result. And once you’ve convinced the company to invest, it will continue to provide a single point of reference for everyone involved that will keep the ERP implementation on track for the best chance of success.
Step 1: Determine the reasons for change
You need to identify why you are considering such a big organisation-wide change. There can be one reason or many, with the top reasons we’ve come across being:
- Dwindling productivity
- Inaccuracies creeping in across the business, costing you time and money
- Old systems or processes hindering company growth
A professional ERP implementation can help most companies revitalise their productivity, minimise costly errors, and give them a better foundation for future growth and success. But it’s a big job and will require a clear and focussed vision for everyone to hold to during the process (see Step 3).
Understanding why you have to change is an essential part of this. So, talk to people across the company to ensure you have a good idea about where things might not be working effectively and where there are insurmountable obstacles ahead.
Step 2: Show where you can benefit from ERP
Knowing what you want to change is crucial to begin with, but the next step is just as important. Because you need to understand exactly where you can benefit from an ERP system before you can convince others to invest.
This might be something you do in-house. But a fresh perspective from an outside ERP specialist is often invaluable in helping you analyse where it’s going to help you the most, based on your current challenges. They will be able to show you where business processes could be more efficient, identify areas for improvement in data management, and where new technologies might boost revenue and margins (for example)—as well as which departments are likely to benefit the most.
The results of this step will then show you who will eventually need to review and approve this business case. Top tier management, who run the company, will automatically be included as standard. But senior people in those operational departments identified above (logistics, sales, engineering, etc) should also be on the list, because they will be the most impacted, and the implementation’s success will ultimately rely on their support.
Step 3: Identify realistic goals and targets (and set your vision statement)
You’ve highlighted where there are problems and where they can be fixed. Now it’s time to set goals and show what you want this project to accomplish. In other words, what does your business hope to achieve through bringing in the ERP system?
Do you want to boost revenue by 10%? Increase productivity by 20%? Do you want the flexibility to grow the company for a 5% bigger market share or allow for the introduction of offices overseas?
Write a list of goals and targets you’d like to accomplish (in line with where you see them working best, as identified in Step 2). Make them realistic and make them measurable. And when you’re done, you’ll have set a path for this project to follow and provided the opportunity to measure your success.
Together with the information in Steps 1 and 2, this will now form your ‘vision statement’. It will remain a consistent reference point for decisions made during the project, allowing you to stay on track in ensuring the ERP system helps your business in the way it was intended.
Step 4: Showcase the cost vs benefits
This is the all-important step for most business leaders when it comes to approving the project. Where they can see what the implementation will cost versus what the business should get out of it.
With the costs, there are two key factors you need to consider:
- The technological element—such as software and infrastructure to house/run the ERP system, installation, testing, and ongoing maintenance.
- The people element—such as creating new roles for the project leader and team, and investments in training for all relevant employees.
The benefits will most likely tie into the goals you set in Step 2. However, you should also try to forecast the financial gains of each one. For example, you might be expecting the ERP system to eliminate shipping errors, which you know have cost you ‘X’ pounds in the past. Or you might have identified the potential for reduced purchase costs of 11%. Or you have forecast ERP to help you increase productivity by 20%.
Weighing up the figures like this will allow you to demonstrate that this should be a worthy investment, which will go a long way to making the business case for ERP in the minds of the decision makers.
Step 5: Analyse the resources you need for implementation
It’s all very well convincing your senior management there is a reason to invest. But unless you can show them you have the resources to make the ERP implementation successful—both in the short and long term—it will all be for nothing.
The first part of this is making sure those involved understand what ERM is and how it needs to be implemented. Make it clear that this isn’t a ‘one-off’ process. Rather it will be implemented in stages, to ensure minimum disruption to everyday working. And it will require ongoing analysis and tweaking post-implementation to ensure it continues working for the business and maintains optimum ROI.
The second part is identifying who will do the work. Do you have the right person in-house who has the time, oversight and experience to successfully lead the project, or will you need an outside hire? Similarly, do you have the necessary skills and infrastructure already in place to undertake this organisation-wide change, or will you need to bring in more resources?
If you’re unsure, don’t hesitate to look outside the company for experts who will be able to do the job as quickly, smoothly and cost-efficiently as possible—and who have a history of successfully implementing ERP in your industry.
Step 6: Identify ERP partners who can help
A recent survey found that less that 50% of businesses get what they want with their ERP implementation. Meaning that millions is currently being wasted on poorly thought out or executed ERP projects that ultimately fail to do the job.
In our experience, there are many reasons which contribute to these poor statistics. Businesses might have considered it a one-time process and didn’t continue monitoring and fixing down the line. Or maybe they hadn’t properly built their business case in the first place, to identify the reasons why they were changing, what goals they wanted to meet, or how they’d get there.
In most cases, however, we’d argue that it’s simply a lack of experience. Because very few people in-house will have led previous ERP implementations and will inevitably make a mistake during the process, no matter how skilled they might be.
Finding a professional partner in ERP implementation who has previously worked in your industry is the best way of finding success. Because they have done this before for other businesses like yours. They will know the challenges you currently face and what obstacles you have to overcome with the implementation. And they will be ready to help you meet them. Meaning less wasted time and money trying to figure things out, a far quicker and smoother process, and a greater chance of business success in the long run.
Want more help building a business case for ERP? Contact us today to arrange a free ERP consultation where we’ll discuss what’s possible and how it could transform your business.