Postmodern ERP: A Business Case Tutorial
Creating a business case is time-consuming and contentious - yet foundational for successful postmodern ERP projects.
Research and advisory firm Gartner have identified a process for CIOs and their business peers to follow, in order to document a business case, and subsequently fully understand the potential benefits of an ERP project.
You can find an overview of the report findings below.
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The Value Of A Solid Business Case
Developing a business case for an ERP project is often viewed as a cumbersome task, an administrative hurdle to jump over, a board approval to get that is never used again and is often inaccurate, or something to get out of the way to get on with the real project. This attitude is misguided, because a business case lays the foundation for a successful initiative.
A solid business case:
- Provides decision makers with the information needed to make sound choices
- Outlines the objectives, success factors and risks associated with the initiative
- Enumerates the costs and benefits to the organisation
- Creates a baseline for measuring the initiative's success at a future date
An Important Consideration For A Postmodern ERP Strategy
In ERP strategy adoption, business case development becomes more complex. Some organisations choose to create one overarching business case that covers the entirety of the ERP scope. However, for most organisations this is not a feasible approach. For these, what results is a number of interconnected business cases being created over what can be a quite lengthy period of time. As such, following a standard process and establishing standard governance mechanisms are paramount for business case development and subsequent value realisation efforts, to avoid potential pitfalls such as double counting of benefit.
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The Four Stages For Creating An ERP Business Case
In creating an ERP business case, an organisation should undertake a series of tasks in four stages (see image below). Remember that building business cases is an iterative process. Usually some form of rudimentary business case is put together during the "strategise and plan" phase of the ERP life cycle (see "Defining the Five Phases of the ERP Life Cycle"). As more is learned about the objectives and benefits during the "architect" phase, the business case is revisited, becomes more detailed and is refined.
Stage 1. Initiation
Three main tasks in this brief-but-important stage set the scene for the business case. They define the purpose of the business case, the major stakeholders and the audience, and those responsible for writing the business case. The tasks are interdependent, and should be performed together so that they inform the decision-making process.
Task 1: Define how ERP project addresses business strategy
Task 2: Identify key stakeholders
Task 3: Form business case team
Stage 2. Business Impact
This stage provides the crucial data gathering needed for compiling the business case, because most ERP projects have a significant impact on major business processes in an organisation. During the initial strategise and plan life cycle phase, the business case data collected is often very high level, with a number of assumptions made that must be verified during the architect life cycle phase (see "ERP Life Cycle: How to Transition From 'Strategise and Plan' to 'Architect'").
Many organisations get bogged down during the architect phase, delving into minutiae that will not be used or that quickly become dated. Be wary of the "analysis paralysis" phenomenon — a common problem in many ERP projects, especially in organisations embarking on major ERP investments for the first time. The project manager and project sponsor should keep a close eye on the project's timeline and resource effort expenditure during this stage to mitigate this risk.
Task 1: Document Current State
Task 2: Determine Future State
Task 3: Determine Gaps/Risks/Benefits
Task 4: Quantify Benefits and Risks
Stage 3. Option Evaluation
This stage determines the options the business case will consider, and how to evaluate them by building the evaluation model and analysing the results of the business impact stage. Parts of this stage can be performed concurrently with Stage 2, if the business case team is of sufficient size to do this.
Task 1: Determine Options
Task 2: Determine Evaluation Criteria and Weightings
Task 3: Create Model
Task 4: Populate Model, Analyse Results and Determine Preferred Option
Stage 4. Documentation And Review
This stage documents the findings of the previous stages. It also reviews the business case at strategic points in the project's life cycle.
Task 1. Write/Compile Business Case
Task 2. Revisit Business Case
Key Findings Of The Report
Gartner’s analysis finds that Postmodern ERP projects are as much about business processes and organisational change management as they are about technology. Post-implementation value is hard to determine when no ROI is articulated and no baseline assessment is created before the project starts, as no before-and-after comparisons are possible. Although business cases must be reviewed and updated regularly, most organisations never get them off the shelf once they're approved.
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