An ERP business case is a proposal that assesses the benefits, timeline, and potential risks of implementing new ERP software.
It justifies the costs and resources involved with deploying a new system to key stakeholders. A business case also provides project governance and drives internal alignment within the organization.
Learn how to build a convincing proposal for adopting a new ERP system, and use our business case template to get started.
ERP integrates vital business processes across a company, allowing marketing, accounting, project management, and CRM to talk to one another and present employees with a unified, real-time version of “the truth.”
An ERP business case goes beyond rationalizing expenses to stakeholders. It also serves as a project plan, defining objectives and KPIs to measure the new system’s progress and helping to identify any potential issues post-implementation.
Building this proposal might seem extraneous if you’ve already received approval to initiate a new ERP application. However, a business case keeps the entire digital transformation on track. In addition, it provides benchmarks even after the new system is in place.
Ultimately, you’re showing corporate decision-makers how a modern ERP system is crucial in executing your business strategy. Because the modules within an ERP platform “talk” with one another, your company’s communications, reporting, and processes will run more efficiently, boosting your bottom line.
Beyond providing a cost-benefit analysis of implementing new software, a business case also directs your ERP project. Here are the six objectives you will meet when building a proposal.
Use our business case template to take a structured approach to your ERP proposal. Present inadequacies within your current system, create a cost-benefit analysis, and calculate your ROI in a clear, concise document.
This template contains sections for the following:
You can download our free ERP business case template here:
To write a compelling ERP business case, you can approach the potential advantages and disadvantages of implementation from multiple angles. Here are seven critical steps for drafting an effective proposal.
Assess pain points in the current system: Identify and gather data on the issues in your existing system. For example, you could quantify losses due to data silos and inefficient communication. Maybe your sales department over-promises orders that production cannot fulfill. Because an ERP system integrates these different operations, you could eliminate losses by deploying a new platform.
Determine the benefits of a new ERP solution: Pinpoint specific advantages to upgrading your ERP; consider potential cost reductions like eliminating support fees for customizations or finding a new platform with lower licensing costs. Show how a new application will positively affect revenue and sales growth and capture intangible benefits like enhanced customer satisfaction.
Evaluate available ERP solutions: Consider implementation time and costs, deployment options, training and support resources, and the functional fit of ERP software to your specific industry and organizational goals. For example, a manufacturing company would choose a platform with manufacturing ERP features like scheduling, shop floor control, and quality management.
Estimate project costs: Expenses include implementation and licensing fees, ongoing maintenance costs, data migration, training, and any hardware or software upgrades required to run the core ERP application. Rather than relying solely on ERP vendors for the total cost of ownership, research expenses unique to organizations like yours for the complete picture.
Calculate return on investment: Analyze tangible and intangible benefits and contrast these with projected costs. Tangible benefits include reduced costs and increased revenue. Intangible benefits include improved organizational processes and better customer experience.
You can use the following formula to determine the ROI ratio
(total value of investment - total cost of ownership / total cost of ownership) x 100.
The higher the ratio, the better your ROI will be.
For example, you’ve determined that a new ERP will reduce the need for labor hours dedicated to checking for manual data entry errors. It will also increase touchpoints between customers and sales agents, increasing revenue. Altogether, the 5-year value the ERP will bring to your company is an estimated $1,000,000. The 5-year investment is $500,000.
($1,000,000 - $500,000 / $500,000) x 100 = 100%.
Implementation of this new system represents a 100% ROI.
Consider the risks: Assess liabilities like project delays, incompatible ERP and company workflows, cost overruns, and implementation failure. Utilize a prioritization framework like a risk assessment matrix to rank liabilities based on their impact. Using this matrix, develop a risk management plan to help mitigate those potential risks.
Create and present a high-level implementation plan: An implementation plan should include your risk management plan, a broad deployment timeline, a list of required resources, and expected results for the top decision-makers in your organization. This will require an understanding of individual stakeholders’ concerns and expectations. Address these questions at a high level and clearly explain how you will measure progress during implementation. Set measurable objectives and KPIs to see where your business is post-implementation. On average, successful implementations take 4-6 months but can take longer depending on company size, project scope, and required customizations. Ensure stakeholder buy-in throughout this process by communicating consistently with senior management and team members.
Stakeholders need evidence that the benefits of your new ERP software will outweigh the risks and expenses associated with the change. Here are some ways to get critical decision-makers on your side.
What are the benefits of ERP?
An ERP platform addresses business needs by automating processes and connecting different departments. ERP benefits include the following:
Why upgrade your ERP system?
There are many potential benefits of upgrading your ERP system:
How does cloud ERP differ from on-premise solutions?
Some striking differences exist between cloud and on-premises ERP:
On-premises software refers to applications installed onto a dedicated data center or local infrastructure. Cloud-based software is ideal for organizations with multiple locations and is hosted remotely in a third-party data center.
Cloud-based applications offer Software-as-a-Service (SaaS) subscription pricing models, while on-premise solutions incur one-time perpetual licensing fees.