ERP Due Diligence - Critical First Steps

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ERP projects can be very complex, time consuming and costly, but they also can have a huge impact to your business by improving productivity, streamlining key processes and enabling growth.  Business leaders must carefully examine all aspects of their business operations before embarking on an ERP implementation project.  An effective assessment requires a deep understanding of business operations and ERP capabilities in order to determine how those capabilities are likely to translate into benefits, costs, and risks given a company’s particular circumstances.

Internal due diligence can take several forms.  Two of the most common are described below.

Feasibility Assessment

This form of internal assessment is intended to justify the potential investment in an ERP project.  In effect, it is used to support a go/no-go project decision.  Critical elements in a feasibility assessment include:

  • Determine if the Return On Investment (ROI) and other quantifiable gains justify an investment in the project.
  • Compare the benefits of ERP against the associated risks.
  • Assess human resource capacity and skill sets to support the implementation project.
  • Confirm executive sponsorship, organizational support, and capacity for change.

Business Process/Systems Review (BPSR)

This form of internal assessment is intended to identify, define and document all of the critical business requirements for ERP.  This includes a complete review of business processes as well as IT/server systems that support the business applications.  The result is a comprehensive report that documents workflow, processes and reporting requirements and provides a complete set of ERP requirements that can be given to each ERP vendor to communicate needs.  It can also include a software Fit/Gap Analysis that catalogs identified disconnects and shortcomings of the current software and systems configuration as matched against the primary functional requirements of the business. Critical elements in a BPSR include:

  • Corporate growth objectives and business models.
  • Reporting requirements.
  • Business process analysis, including:
  • Business process maps
  • Core, non-negotiable requirements
  • Performance improvement requirements
  • Internal control and risk management requirements
  • IT systems and technology requirements

Although feasibility and BPSR assessments are treated separately above, they’re oftentimes undertaken together during a common internal due diligence phase.  Many companies shortcut this process in an effort to save money or expedite the implementation project.  By investing the time and effort to conduct a thorough assessment of your ERP requirements, benefits, costs and risks, you will significantly increase the probability of success and user acceptance.

To learn more about how you can conduct an internal assessment to prepare for your ERP project, contact Ray Scarborough at 864-751-3295.

By AcumenIT.

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