Building an IT or ERP Business Case

One of the biggest selling points that ERP or IT software vendors use is that implementing their product can result in a short payback period with a healthy Return on Investment (ROI). While there is some truth to this possibility, such an ROI is only achieved if you develop a realistic business case.

Here are some commonly overlooked aspects of developing a solid business case that will drive measurable business results:

1. Identify Hidden Costs. Many costs associated with a large IT or ERP implementation are obvious. For example, software licenses, implementation services, and data conversion are all direct costs that make it into most business cases. However, there are others that are not so obvious, such as internal resources required to support the project team, costs to backfill the day-to-day work of project team members, process improvement, training, and organizational change management. All of these costs should be included to accurately reflect the true project costs.
2. Document the Costs of Benefits. In many cases, technology makes a company more efficient, which may ultimately result in a headcount reduction. However, there are costs associated with reducing staff, such as severance. In addition, there is usually a short-term decrease in efficiency as employees learn the new system, even though there are usually long-term benefits associated with making employees more efficient and effective. These costs should be quantified in a business case as well.
3. Track Benefits After Implementation. Developing a business case is only half the battle; tracking and realizing business benefits is the other half. Prior to go-live, it is important to develop lower-level operational measures that directly relate to the dollars identified in the business case. These measures should then be assigned "owners" within the company who will be responsible for monitoring and tracking actual results. Then, after go-live, actual business benefits should be measured and compared to the business case on a regular basis to identify areas for improvement.

Obviously, there are many other aspects to developing a business case. By avoiding these common pitfalls, however, you are much more likely to have an air-tight business case that drives measurable business results.