The document discusses justifying investment in ERP systems. It notes that ERP implementations often fail due to unclear business strategies and project delays and overruns. A business case is needed to convince decision makers to invest in the multi-million dollar projects. An effective business case for ERP defines objectives aligned with business goals, evaluates legacy systems, benchmarks other companies, assesses risks and costs, and creates a blueprint to ensure the ERP implementation supports business operations.

1. JUSTIFYING ERP INVESTMENT
THE ROLE & IMPACTS OF BUSINESS
Efforts by: Madhav Chhabra
KJ Somaiya Institute of Management
Studies & Research, Mumbai
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2. A PEEP FIRST
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Studies & Research, Mumbai
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• Booming- with high rates of failure
• Need for Justification
• ERP works as a shadow for business

3. WHAT IS IT?
It is large complex information systems that integrate
and streamline the organization’s business process
across departmental and geographical borders
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Studies & Research, Mumbai
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SIMON &
MURPHY

4. CRITICAL SUCCESS FACTORS
• Causes of failure:
– Unclear Business
Strategies
– Cost Overrun
– Project Delays
• CSFs prevent ERP
from failing- being
critical areas where
things must go right
for business to flourish
KJ Somaiya Institute of Management
Studies & Research, Mumbai
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5. NEED FOR JUSTIFICATION
• TLM doesn’t loosen their pockets so easily
• Decision makers need to be convinced with a C-B
Analysis
• Necessity of creating vision & objectives in line
with business’s global strategies &
organizational goals
• Company seeks sustainable competitive
sustainable advantage by investing in a multi-
million dollar ERP system (Risky Investment)
KJ Somaiya Institute of Management
Studies & Research, Mumbai
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6. NEED FOR JUSTIFICATION (contd.)
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Studies & Research, Mumbai
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• Problem #1: No clear basis available why businesses
should adopt ERP (Those who do take an abstract
decision)
• No evaluation methodologies available
• High positives with an equivalent probability of failure
• No real business value in absence of pre-stated clear
objectives of installation
• Fitting short & long term objectives of business doesn’t
add value unless we now what is the driving force
behind

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Studies & Research, Mumbai
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Ross & Beath
IT- Investment
Framework
Business Case

8. IT- Investment Framework
KJ Somaiya Institute of Management
Studies & Research, Mumbai
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• Ross & Beath look at multiple approach to justify ERP
investment that just one
• Look at how strongly it is related to IT
• They found that investments differ along two
dimensions:
1. Strategic Objectives
2. Technology Scope
Highlight trade off between short
term & long term profitability
Distinguish between shared
infrastructure & business solution

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Studies & Research, Mumbai
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DIRECT
COVERSION

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Studies & Research, Mumbai
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Business Case
Definition: A type of decision making tool used to determine the
effects a particular decision will have on profitability. A business
case should show how the decision will alter cash flows over a
period of time, and how costs and revenue will change.

11. How is a BC for ERP different from a
Traditional BC?
• Traditionally, a BC is basically a trade-offs
between cost & profit, which basically is
meant for the budgetary approval from the
higher management.
• However, in ERP projects the BC entails
charting a rather detailed plan or mechanism to
guide the project.
KJ Somaiya Institute of Management
Studies & Research, Mumbai
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12. Short-comings of a traditional BC
• Lack stakeholder involvement and Commitment
• Lack of alignment of technology with business
objectives
• Unclear documentation of facts
• Doesn’t identify the potential benefits
• Isn’t focussed on achieving benefits
• Ignores risks & mitigation strategies
• Unrealistic parameters
• Doesn’t guide the projects
KJ Somaiya Institute of Management
Studies & Research, Mumbai
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13. A Business Case for ERP
• Controls the scope of the project
• Provides the decision makers the ability to
evaluate their preparations for ERP
implementation and ensures that the expected
outcome be achieved
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Studies & Research, Mumbai
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14. 1. Building the Business Case
• Technical Executives : To educate people how the
technology works and its implications
• Business Executives : To determine the business
directions & requirements for successful
implementation of the objectives
• The conclusions should then be presented to the
Senior executive team
• The results should be communicated to the entire
organisation
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Studies & Research, Mumbai
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15. 2. Components of a Comprehensive
BC
• A review of organisation’s vision objectives and
strategic goals and alignment with that of ERP
• A futuristic point of view
• Quantifiable objectives : achievable & deliverable
• Clarity in vision and objectives with justification
of the triple constraints : SCOPE, TIME, COST
• Clear Understanding by top management
• Setting metrics for evaluation
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Studies & Research, Mumbai
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16. 3. Evaluation of legacy system
• What?
These are business and IT systems prior to
ERP that encapsulate the existing business
processes
• Why?
To determine the amount of change required to
successfully implement an ERP system &
determine base line for start
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Studies & Research, Mumbai
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17. 4. Benchmarking other companies in the same
industry who implement ERP
5. Define desired State and Expected benefits
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Studies & Research, Mumbai
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18. 5.1 Benefits
• Tangible & Intangible
• Benefits realisation & measurement
• Following up
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Studies & Research, Mumbai
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19. 6. Risk assessment & mitigation
planning
Six main risks in ERP implementation
• Organisational
• Business-related
• Technological
• Entrepreneurial
• Contractual
• Financial risk
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Studies & Research, Mumbai
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20. 7. Cost in relation with benefits &
risks
• This is an exercise done after estimating all
expected benefits and assessing all associated
risks for an ERP project.
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Studies & Research, Mumbai
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21. 8. Blue Print
• What?
It is the project plan and schedule that ensure
to implement the ERP software in a way that
supports the organisation business
operations, ultimately saving time, money and
risk while increasing benefits.
KJ Somaiya Institute of Management
Studies & Research, Mumbai
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22. How?
• Develop detailed implementation project
• Conduct risk assessment & risk mitigation plan
• Establish project core team, project charter and project
controls
• Define software vendor technical scope and system
requirement
• Develop a data standardisation and migration plan
• Conduct organisational readiness assessment
• Manage technical infrastructure upgrade plan
• Business case life cycle
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Studies & Research, Mumbai
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Studies & Research, Mumbai
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