This week’s class was about ERP evaluation. It tells us about ERP v benefits. We analyze cost by calculating the Return on Investment (ROI). It is the ratio of the project’s benefit to the value of project’s cost. The major problem while calculating ROI is that we cannot account for the intangible benefits and costs. For the same reason ROI is sometimes considered as a waste of time.
Other approaches besides ROI are Net Present Value (NPV), and Internal Rate of Return (IRR). By far ROI has proved to be the most widely used method for calculations.
It is difficult to calculate the returns from an ERP implementation because the company perceives of profit in different way. The returns expected are not monetary but intangible benefits such improvement in the processes, efficient and effective work environment.
A large share of the cost is the “Professional services” offered by the vendor followed by “in-house staff costs”. Other costs include IT infrastructure and software licensing.
Some facts about ROI pointed by Peerstone Survey tell us good and positive things about ROI. When asked 200 companies; 63% companies achieved some form of benefit. 39% of these companies achieved ROI. Successful implementation have shown to have their ROI target before launch of the ERP project. Companies that use ROI have shown more success than others.
Before jumping in the pool of tangible and intangible benefits to find a solution for ROI, there are certain questions that should be answered. Issues such as reasons for considering ERP, its scope, budget, timeframe and estimated income generation from the project should be answered beforehand.
Other approaches besides ROI are Net Present Value (NPV), and Internal Rate of Return (IRR). By far ROI has proved to be the most widely used method for calculations.
It is difficult to calculate the returns from an ERP implementation because the company perceives of profit in different way. The returns expected are not monetary but intangible benefits such improvement in the processes, efficient and effective work environment.
A large share of the cost is the “Professional services” offered by the vendor followed by “in-house staff costs”. Other costs include IT infrastructure and software licensing.
Some facts about ROI pointed by Peerstone Survey tell us good and positive things about ROI. When asked 200 companies; 63% companies achieved some form of benefit. 39% of these companies achieved ROI. Successful implementation have shown to have their ROI target before launch of the ERP project. Companies that use ROI have shown more success than others.
Before jumping in the pool of tangible and intangible benefits to find a solution for ROI, there are certain questions that should be answered. Issues such as reasons for considering ERP, its scope, budget, timeframe and estimated income generation from the project should be answered beforehand.
