Benchmark - Enterprise Resource Planning (ERP) as a Business Solution

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t quality and lower costs or funding for product research and development on product innovations. Thus, managers need to show that the solution they want would be not only a good IT investment but also a good business investment.

To gain support and a “go‐ahead” decision, every manager must often create a business case. Similar to a legal case, a business case is a structured document that lays out all the relevant information needed to make a go/no‐go decision. The business case for an IT project is also a way to establish priorities for investing in different projects, an opportunity to identify how IT and the business can deliver new benefits, gain commitment from business managers, and create a basis for monitoring the investment.7

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Sections or Components

Descriptions

Executive summary

One‐ or two‐page description of the overall business case document summarizing key points

Overview and introduction

Brief business background, the current business situation, a clear statement of the business problem or opportunity, and a recommended solution at a high level

Assumptions and rationale

Issues driving the proposal (e.g., operational, human resources, environmental, competitive, industry or market trends, or financial)

Project summary High‐level and detailed descriptions of the project: scope, objectives, contacts, resource plan, key metrics, implementation plan, and key success factors

Financial discussion and analysis

Overall summary followed by projected costs/revenues/benefits, financial metrics, financial model, cash flow statement, underlying assumptions, and total cost of ownership (TCO) analysis

Benefits and business impacts

Summary of business impacts followed by details on nonfinancial matters such as new business, transformation, innovations, competitive responses, organizational, supply chain, and human resource impacts

Schedule and milestones

Entire schedule for the project with milestones and expected metrics at each stage; if appropriate, can include a marketing plan and schedule

Risk and contingency analysis

Analysis of risks and ways to manage those risks, sensitivity analysis of scenarios, and interdependencies and the impact they will have on potential outcomes

Conclusion and recommendation

Primary recommendation and conclusions

Appendices Backup materials not directly provided in the body of the document, such as detailed financial investment analysis, marketing materials, and competitors' literature.

FIGURE 8.4 Components of a business case.

The components of a business case vary from corporation to corporation, depending on the priorities and decision‐making environment. However, there are several primary elements of any business case (see Figure 8.4). Critical to the business case is the identification of both costs and benefits, both in financial and nonfinancial terms.

In building, it is particularly important for the business case to describe the benefits to be gained with the acceptance of the project. A useful framework for identifying and describing both financial and nonfinancial benefits was created by Ward, Daniel, and Peppard8 (Figure 8.5). The first step in this framework is to identify each benefit as innovation (allowing the organization to do new things), improvement (allowing the organization to do things better), or cessation (stopping things). Then the benefits can be

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classified by degree of explicitness or the ability to assign a value to the benefit. As shown in Figure 8.6, benefits fall into one of these categories:

Financial: There is a way to express the benefit in financial terms. These are the metrics that are most easily used to judge the go/no‐go decision because financial terms are universal across all business decisions. An example is improvement in profit.

Quantifiable: There is a way to measure the size or magnitude of the benefit, but financial benefits are not directly determinable. For example, a firm might expect a 20% increase in customer retention, but to determine the financial benefit of resulting increased sales, it would require an analysis of what items they would buy. Most business cases revolve around quantifiable benefits, so it is important to ensure the collection of a comprehensive list of quantifiable benefits and any associated costs.

Measurable: There is a way to measure the benefit, but it is not necessarily connectable to any organizational outcome. Management must ensure alignment with the business strategy. For example, many organizations collect satisfaction or web engagement data and are able to detect improvements.

Observable: They can be detected only by opinion or judgment. These are the subjective, intangible, soft, or qualitative benefits. Things seem better but no measures are available. For example, customers might be expected to be happier or less argumentative.

FIGURE 8.5 Classification framework for benefits in a business case. Source: Adapted from John Ward, Elizabeth Daniel, and Joe Peppard, “Building Better Business Cases for IT Investments,” MIS Quarterly Executive 7, no. 1 (March 2008), 1–15.

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Benefits Innovation: Chat Function and Customer Support Forum

Improvement: Remodeled Facebook Page

Cessation: Reduce Phone Support Needs by 90%

Financial Fewer returns; higher sales

Sales from redemption of special coupons by new customers

Overall costs reduced

Quantifiable Shorter customer wait time

Number of new customers Wait time for phone lines

Measurable Higher customer satisfaction scores

Number of “shares” by new customers

Overall customer service satisfaction scores

Observable Fewer complaints Supportive comments on the page

Decrease in verbal complaints by phone‐ in customers

FIGURE 8.6 Benefit examples for a business case.

Consider the example of a small manufacturing firm that hopes to differentiate itself with excellent customer service but that has customers who are confused from time to time, an expanding customer support department, long customer wait