RoIs Often Lie

After more than half a decade of continuous investments by Indian corporates

into ERP projects, how many times have you heard of a really successful ERP

implementation? Considering the abysmal paybacks and pathetic success ratios

that these huge investments in ERP have generated, it is not surprising that RoI

on IT investments is dominating the boardrooms of corporate India; especially

when we consider that recessionary times are upon us**. It’s under these

circumstances that you as a CXO (CIO, CEO, CFO etc.) asking your board for an IT

project sanction are made to answer a million questions.

On the face of it, RoI=(Benefits/Costs)*100, is a simple formula. However, it’s

a tough ask applying it to actual cases when you consider that ERP projects have

both, quantifiable and unquantifiable benefits. Building a cost-based business

case for ERP starts with extracting year-by-year savings without the ERP system

in place and then estimating year-by-year savings with ERP systems in place.

Systems should also be in place so that costs are back allocated according to

the savings each business unit expects ERP to generate as this practice

discourages business units from overstating potential savings.

Jay Jay Sampath

Brand Executive, IBM eServer zSeries, ASEAN   (South Asia)

Ensuring cost savings is only the first step towards achieving success. In

order that ERP can have a far-reaching positive impact for the company, the CIO

needs to police the highly paid consultants and educate the CXO brigade about

the benefits of ERP and work hard to extract considerable value from the

investment. After all IT spending does not stop with an ERP implementation;

changes take place on an ongoing basis. An ERP implementation is no magic wand.

However, the reason why experts have so much faith on ERP systems inspite of a

large number of ERP systems not living upto their promise is because of the

strong foundation it provides. CFO’s and CEO’s need to realize that an ERP

implementation project is much more than simply generating a positive RoI.

Infact, it is instead the art of doing business in a totally new way. Thus,

decisions based totally on costs may often miss huge business opportunities. A

wise man once said, "focusing on the woods makes more sense than

concentrating on the trees." …Your opinion of these words could affect

your career!

*Large companies that employ consultants must ensure that they give them such

a business case and sensitivity analysis

**IDC India estimates that the Rs 320-crore ERP market will probably grow by

2-4% this year, against the previous year’s forecast of 11%