Why Conduct an ERP Feasibility Study?
We seem to be receiving more requests this year than in years past regarding the ability to conduct an ERP Feasibility study. We attribute this to a host of factors. First, many businesses are conglomerating systems, and are trying to determine what their best plan of action is in regards to their enterprise resource planning procedures. Second, more and more businesses are experiencing unprecedented data growth; which in turn is causing them to evaluate how they manage their data and how well their current system is equipped to deliver value to the organization. No matter the bevy of circumstances that could be leading companies to conducting an ERP feasibility study, the number one question we get regarding these type of engagements is, “should we be conducting an ERP feasibility study, and how do we know it’s the right place for us to start”?
Generally, the idea of an ERP feasibility to starts with a very similar question. Companies ask themselves if they should be changing, upgrading, conglomerating, integrating, or customizing their current ERP system, and can’t initially answer the question with a high degree of certainty. This usually leads to conversations around the idea of conducting an ERP feasibility study. If your business can’t decipher the clear best plan of action regarding your current system, it’s worth reaching out to an expert to determine if there is a current best practice in place for your situation. If the expert that you consult presents you with multiple options that you’ve already been considering, an ERP feasibility study may be the right course of action.
What Is an ERP Feasibility Study?
An ERP feasibility study is an analysis of a business model or operational approach in regards to your ERP system. The focus of a feasibility study is to answer the very fundamental question “should we go ahead with this project?”
The ERP feasibility study occurs on the front end of an ERP project. It is a significant step in a conversation for integrating systems, upgrading ERP software, migrating vendors or implementing an agile ERP system if a merger or acquisition is in the works (a growing trend).
What are the Benefits to an ERP Feasibility Study?
The answer to the aforementioned question is especially important when determining long-run ROI. If the industry model or aggregate demand changes, the study then becomes a lengthy project in itself and difficult to gauge internally without sourcing unbiased expertise.
Silo leaders, engineers, sales people, and CEOs affix to their own ideas. They rationalize problems, wish away worry, and invest in themselves; it is only natural. Essentially, it’s the overall reason investors, lenders and sponsors insist on sourcing an independent assessment. Internalizing an ERP feasibility study is often a catalyst for disaster. More times than not, the IT budget coordinator and developer are one in the same, seeking to cut costs where they can. The results are generally useless and resources poorly spent. Ultimately, the committee is brought myopic conclusions about the business.
There is often a contrast of opinion among departments regarding the necessity of an ERP project, and the betterment of investment dollars. However, it is the key to starting a cooperative. The differences in attitudes about the project strengthen the ERP feasibility study.
- First, it allows the project committee perform a SWOT analysis inside the organization. The committee can then determine if the project in question is worthy of investment, or if they’ll need to consider an alternative ERP project solution.
- Second, it brings a high level team round table to identify and acknowledge road blocks of the business model inhibiting new growth.
- Lastly, the committee will utilize feedback from the study to expertly develop goals of the project, some of which might not have been acknowledged initially. The revised outline of goals is the foundation for developing the scope of the IT project — resources, time and budget.
As more conversations are stimulated about the business, the ERP feasibility study case improves. It’s important to analyze internal conditions and business processes to determine the best approach to the project. If the initial undertaking of the project isn’t correctly focused on calculating returns and fails to nurture buy-in, the results of ERP feasibility study may not be fully supported by the entire organization. It’s imperative that data be drawn to support the ultimate study conclusion.
What Does an ERP Feasibility Study Determine?
An ERP feasibility study targets three primary areas: industry or market, technical resources, and financing. Aggregating the results of each of these elements will determine if the project is plausible.
The dynamics of a company reflect the industry and market in which they do business. ERP projects among industries largely differ in scope and are determined by products, logistics, service offerings and customers they serve. The study should evaluate the long-term potential an ERP project could bring to the industry and end user.
Financing is fundamental to investing in any infrastructure project, however it should not be the overall factor in the final decision making process. At this point, it is only necessary to take a break-even analysis to determine at what point new revenue will equal the cost of receiving the revenue following the ERP project. This provides key sponsors with a margin of safety, or a point which the new value presented to the business exceeds its overall cost.
Where to Turn for Help
If your business is currently weighing in on an IT project you should contact our enterprise software experts to further discuss the merits of a move like this for your organization. We’ve successfully helped dozens of businesses preform ERP feasibility studies to help make smarter decisions around IT software solutions. Visit our services page for more info.