Tom, I am in the process of planning for an ROI upgrade project. We have two objectives: to learn the targeted version (mySAP ERP) and to be able to calculate the ROI for each module. Could you suggest the key steps/tasks in the project to get to a calculated ROI for each potential process improvement? Thanks in advance for your help.

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Your strategy to define project goals at the outset puts your organization on the right track. Determining ROI starts with measuring the right data; after all, you can't calculate what you don't quantify. Be sure the ROI measurements are aligned with corporate success, and that this IT project, like all others, drives bottom-line business value.

Going into the project, understand that ERP projects typically:

  • Take 6 to 18 months to implement.
  • Deliver payback in 12 to 24 months after project start. Deployments and user adoption take time, and business change needs to occur around the technology platform.
  • Have risk adjusted returns range from 100 to 400%, making them some of the best projects in a company's portfolio.
To maximize returns:
  • Stay on course with current decisions until the dust settles. Don't consider radical changes or platform switches as a knee-jerk reaction.
  • Demand quick payback from any project and be sure to do financial due diligence that takes transition risks and costs into account.
  • Continue with upgrade plans, as long as the business case is still sound and risk of transition is factored.
Continue plans to improve specific business processes, but select the lowest-TCO, highest-ROI solutions to ensure quick payback and reduce risks.

This was first published in October 2004

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