IJCSNS International Journal of Computer Science and Network Security, VOL.11 No.1, January 2011185Justifying ERP Investment: The Role and Impacts of BusinessCase A Literature SurveyRana Abu Nafeeseh†, Abdullah S. Al-Mudimigh†††††Department of Computer Science College of Computer and Information Sciences King Saud UniversityDepartment of Information Systems College of Computer and Information Sciences King Saud UniversityAbstractERP systems are booming these days. But it suffers from highrates of failure among different industries. Consequently, clearvision, objectives and compelling justification is needed toincrease the rates of success. There are different approaches tojustify IT investment in general and ERP investment in specific.This paper focuses on Business Case approach.Acomprehensive model based on best practices for Business Caseis proposed.Key words:ERP, Business case, Justifying Investment.1. IntroductionNowadays, businesses are emerged to be expanded. Andbusiness stakeholders from different industries compete toopen new markets in new geographic areas, which indeedraise the necessity to have ubiquitous systems to followand simplifying these expanded and inflated enterpriseorganizations. Besides, they become in need to unify thefragmented business units and operations, and to controlthis non-stopping stream and of information. EnterpriseResource Planning (ERP) has been arisen to serve theseincreasing demands.Basically, ERP is large complex information systems thatintegrate and stream line the organization’s businessprocess across departmental and geographical borders.(Gulla, 2004). ERP described as business software that is:multifunctional in scope; integrated in nature; and modularin structure (Simon and Murphy, 2001); complex megapackages (Gable et al., 1997) designed to support keyfunctional areas of an organization (Sammon, and Adam,2007).However, Jose and Joan (2000) states that the definitionand measurement of ERP implementation make its successa thorny issue.2. Critical Success Factors for ERPImplementationsERP studies reporting that more than 70% of ERPimplementations fail to achieve their estimated benefitsManuscript received January 5, 2011Manuscript revised January 20, 2011because of (and not limited) unclear business strategies;cost overrun; project delay; underestimation of therequired efforts for change management (Eckartz, et al.,2009), risks, moreover, overestimating of benefits. Manystudies arguing that the success of ERP implementationdepends on key factors called critical success factors, suchas (Holland et al., 1999; Holland & Light, 1999; Bingi etal., 1999; Sumner 1999; Parr et al., 1999; Parr & Shanks,2000; Chen, 2001; Esteves & Pastor, 2001; Nah et al.,2001; Somers & Nelson, 2001; Al-Mudimigh & Zairi2001; Akkermans & van Helden, 2002; Hong & Kim,2002; Al-Mashari et al., 2003; Brown and Vessey, 2003;Umble et al., 2003; Verville & Bernardas, 2005; King &Burgess, 2006; Finney & Corbett, 2007). CSFs weredefined the first time by Rockart (1979) as “those fewcritical areas where things must go right for the business toflourish”. This paper will focus on one of the most criticalfactors in ERP project implementation, which is justifyingand planning for the ERP investment to the topmanagement or decision-makers in the organization. Itdiscusses the importance of careful planning andjustification of ERP project, and the necessity of creating aclear vision and objectives for the ERP project that isconsistent with the global strategies and goals of theorganization. And what should have done in this phasebefore starting the implementation process. The rest of thispaper will be organized as the following: III- justificationof ERP Investment, IV-Business Case, V- components ofcomprehensive Business Case, VI- best practices indeveloping Business case based on consultancy groups.3. Justification of ERP InvestmentThe desire of achieving sustainable competitive advantagefrom investing in ERP is not as probable as ERP vendorswould have organizations believe. The act of investing in amulti-million dollar ERP system is extremely risky formanagers (baker, 2006). Researchers have noted adeteriorating in evaluating IT investment in general andERP in specific (Teltumbde, 2000; Chen, 2001; Ross andBeath, 2002; Sumner, 2000). This is not a new argument inthe general IS field, where managers often have to make

186IJCSNS International Journal of Computer Science and Network Security, VOL.11 No.1, January 2011these kind of decisions without a clear and fullunderstanding of why they should invest and what theoutcome of the investment will be (Baker, 2006). Thereason for that is because the organizations find it difficultto perform such evaluation (Ward & Peppard, 2002).Sammon and Adam (2007) argued that it is related to thelack of suitable and efficient evaluation methodologies forsuch strategic investment (Sammon & Adam, 2007),therefore, Teltumbde (2000) argued that if ERP projectsconsidered as huge investment that has huge impacts onthe organization, coupled with high probability of failure,then it should be imperative that proper evaluation must beundertaken (Teltumbde, 2000). Besides, a properunderstand of what the perceptions of managers are whenthe decision is taken, and what is driving the ERPinvestment, rather, fitting the short and long termadvantages of the organization (Baker, 2006).Similarly, Davenport (2000) argued that even if theorganization had succeeded in putting ES in place, itwould probably not have received real business value fromits system because the justification including the objectivesof the project were not clear in the first place (Davenport,2000).Based on our readings, and according to the papersreviewed for this literature, we have founded that there aretwo main approaches or methodologies to justify the ERPproject Investment; IT-Investment framework (Ross &Beath, 2002, Sammon & Adam, 2007) and Business Case(Ward, et al., 2007; Davenport, 2000, Kimberling, 2006;Eckartz, et al., 2009). The paper will describe Ross &Beath Framework in brief, because the target of the paperis to focus on Business Case; its role and impacts in ERPprojects.3.1 IT-Investment frameworkAccording to Ross and Beath (2002) “the success comesfrom using multiple approaches to justifying ITinvestments. Making the business case is only oneapproach”. Basically, this framework looks to theinvestment from the point how strongly it is related to IT,so this framework does not serve ERP project investmentonly, but also other investments ranging from pure ITinfrastructure to new business model.Based on their analytical study for more than 30Companies in America and Europe, they found that theinvestments differ along two dimensions: strategicobjectives, which highlight the trade-offs between shortterm profitability and long-term growth, and technologyscope, which distinguish between shared infrastructure andbusiness solutions. And to address both dimensions thereshould be four types of investments: transformation,renewal, process improvement and experiments. Thedriver each type of investment is as the following:Transformation: (ERP project is under this type) it isnecessary when the organization’s core infrastructurelimits its ability to develop applications critical to longterm success, it is risky and the entire company will beaffected in it and everyone in the organization shouldparticipate in it.Renewal: a new technology is introduced when theavailable infrastructure become outdated. Therefore, thecompanies engage in renewal to maintain theinfrastructure’s functionality and keep it cost effective. Forexample, one financial-services firm, after deployingvarious e-business applications on its standard Windowsplatform, recognized that the Windows environment couldnot handle its transaction volume, then the companyintroduce Unix as new platform after years of adoptingWindows as a single-standard desktop environment. Thusthe company enabled the same business outcomes, butreduced downtime and maintenance costs.Process Improvement: when the company intended toimprove its operational performance, then this type ofinvestment is what it needs. Business processimprovements should be low-risk investments, becausemanagements knew with relative certainty how much itwould cost to develop and support the software, and whatbusiness value of those improvements was to the company.To reach that level of predictability, process improvementsmust build on existing IT infrastructure.Experiments: New technologies present companies withopportunities or imperatives to adopt new business models.To do that the company should have a steady stream ofbusiness and technology experiments. Successfulexperiments may lead to major organizational change withaccompanying infrastructure changes (transformation) orto more incremental process-improvement initiatives(process improvements). Figure (1) shows these four typesof investments.Figure (1): IT-Investment Framework. (Source: Ross & Beath, 2002)

IJCSNS International Journal of Computer Science and Network Security, VOL.11 No.1, January 2011Ross and Beath arguing that there might be someconfusing in distinguishing between these four types ofinvestments; this comes from the interrelationship betweenthem, as one type can lead to another. In general thisframework propose a comprehensive concept for assessingthe company’s investment, if the decision-makers realizethe actual long-term benefits that they can get from ERPpackage then their investment is of Transformation type,but if their target was a short-term profitability then theirinvestment in infrastructure is of renewal type.Sammon and Adam (2008) have proposed a method forevaluating investments in ERP packages, which is basedon Ross and Beath study, their method moves away frombusiness case towards assessing the presence and absenceof CSFs for ERP implementation at the outset of theproject (Sammon & Adam, 2008).The power of this framework is its ability and flexibility tocover different types of goals and benefits of ITinvestments including ERP projects.3.2 Business Case in Justification of InvestmentIt is another method to justify the investment. Basically, itis a generic tool to justify any investment, but this paperwill deal with it from ERP point of view. In this regard,and based on the research that have been done aboutbusiness case in ERP projects, there was a lack ofresearches that deal with BC comprehensively, we found itfuzzy and fragmented under different topics, such as, ERPproject evaluation, benefits realization, risk assessments,chartering phase, business plan, project vision andobjectives. Moreover, different frameworks andresearchers such as (but not limited) (Al-Mudimigh &Zairi, 2001; Markus & Tanis, 2000) deal with BC as itstraditional concept based on financial benefits and costs(eckartz, et al., 2009), to justify IT investments and gainbudgetary approval (Kimberling, 2006), and ignore othercritical factors or components that make it comprehensiveand compelling to succeed, and then leads to the successfulof ERP project implementation. In next coming sectionswill be dedicated to Business Case.4. Business CaseThe quality and comprehensiveness of business case has asignificant effect on the success of the investment (Ward,et al., 2007).BC definition: based on ( BusinessCase (BC) defined as: “A type of decision-making toolused to determine the effects a particular decision willhave on profitability. A business case should show how thedecision will alter cash flows over a period of time, andhow costs and revenue will change. Specific attention ispaid to internal rate of return (IRR), cash flow and paybackperiod. Analyzing the financial outcomes stemming from187choosing a different vendor to sell a company's product isan example of a business case”, from this definition wefind that BC is basically a trade-offs between cost andprofit (financial benefits), but in ERP projects the BCshould have done more than driving to budgetary approval(Kimberling, 2006), and has proven inadequate for modernIT projects (Teltumbde, 2000; Sammon & Adam, 2007).Gartner Consultancy group (2008) set an analogy betweenthe traditional BC and the compelling BC specified forERP projects. Figure (2) shows that a BC for ERP projectshould contain a plan and mechanisms to guide the project.Moreover, (Gartner, 2008; Kimberling, 2006; Markus &Tanis, 2000) arguing that the traditional BC has severaldisadvantages that make it not suitable for ERP project:- Often lack stakeholder involvement and commitment,long-term support.- May lack alignment with business objectives, or fail tolink technology to business strategic plan, do notconsider the migration of strategy.- Doesn’t clearly and credibly document the facts.- Doesn’t identify all potential benefits, who willachieve them and how they will be measured, keyperformance indicators not or poorly defined.- Isn’t focused on achieving benefits.- Often ignores major risks and mitigation strategies- Isn’t leveraged to guide the projects.- Often focus on technology, but not people and process.- Unrealistic parameters.Many research studies clarify the importance and role ofbusiness case in ERP projects, they add other roles to thetraditional role of BC to be in all as the following (Ward,et al., 2007; Robey, et al., 2000; Industry week, 1998; Zairi& Al-Mudimigh, 2010; Sammon & Adam, 2008,Kimberling, 2006):- To clearly state objectives of the investment.- Identify all of the expected benefits that will arisewhen the objectives are achieved, Ward, et al. (2007)differs between objectives and benefits, that is, theinvestment objectives are the overall goals that shouldbe agreed by all of the relevant stakeholders. Incontrast, benefits are advantages provided to specificgroups or individuals as a result of meeting the overallobjectives.

188IJCSNS International Journal of Computer Science and Network Security, VOL.11 No.1, January 2011Figure (2): Comparison between traditional and compelling (ERP) BC.(Source: Gartner, 2008)---State a benefits realization plan.To obtain fund for the investment, and to ensure thetop management support to achieving the intendedinvestment benefits.Provide the decision makers the ability to evaluatetheir preparations for their ERP implementation, andto ensure that the expected outcomes can be achieved.To enable priorities to be set among differentinvestments for funds and resources.Enabling the success of investment to be judgedobjectively.Control the project scope.Show the accomplished costs with potential benefits.directions and what are the requirements imposed byparticular business processes. Jointly they can determinehow the technology might influence the achievement ofbusiness objectives. The conclusions should be presentedby a small group from the team to the entire seniormanagement team, as the decision should be made by theCEO and senior executive team, the board of directors alsoshould be consulted, not just because of the hugeinvestment, but also because of the business changesinvolved. After making the decision the results should becommunicated to the entire organization. Figure (3) showsthe process of decision making.Gartner (2008) suggested also that the BC developmentteam may consist of Business units’ managers, Executivesponsors, budget committee, chief financial officer, chieftechnology officer, chief information officer, legislature,and project manager.Suggested Components of Business Case:Based on the discussion above, and as it is seen how BC inthe early stages of ERP project implementation is a criticalfactor to succeed, this paper proposes additionalcomponents to the BC of ERP project based on the bestpractices suggested from researchers and consultinggroups such as Panorama, Gartner, Deloitte, Hitachi, andgroup them into a model of best practices for building acomprehensive Business Case.Based on the stated points above about the important rolethat the BC played in making the ERP projectimplementation succeed, many researchers also such as(Sammon & Adam, 2007, 2008; Davenport, 1998, 2000;Ward, et al., 2007; Markus & Tanis, 2000; Al-Mashari, etal., 2010; Murphy& Simon, 2001; Holland, et al., 1999;Holland & Light, 1999; Eckartz, et al., 2009; Chen, 2001;Nah et al., 2001; Al-Mudimigh & Zairi, 2001; Somers &Nelson, 2001) state that putting a business plan and settingup a clear vision and objectives for the ERP project is oneof the most important critical success factors in ERPprojects.Another important part of the discussion is whoshould be involved in building the BC?Davenport (2000) in his book “Mission critical Realizingthe promise of ERP Systems” state that the process ofbuilding a BC might consume long time and it may takeseveral months just to gather all the needed information, soit is team work not “one man show”. The members whoshould be involved are a group of business and technicalexecutives within the company; the technologists educatethe business people on how the technology works and theimplications of particular technological choices. Whilst,the business people can determine or identify the businessFigure (3): process of decision making on BC.Components of Comprehensive BC:-Reviewing the organization vision objectives andstrategic goals, and Determine the vision and main

IJCSNS International Journal of Computer Science and Network Security, VOL.11 No.1, January 2011-objectives of ERP project under the umbrella oforganization's vision: Davenport (2000) arguing thatthe organization before justifying the ERP projectinvestment should ask what are the key strategies ofour business, both at organization level and businessunits, geographies, products, etc? because if cannotarticulate the answer at this stage, then it will not bearticulated in the new system; the organization shouldthink what it will need in the next two years, not whatit needs today, because it does not work to wait untilchallenges come up (Davenport, 2000). The businessvision should have quantifiable objectives that couldbe achieved and delivered through the ERP project(Holland & Light, 1999). Similarly, it is essential toset a clear vision and objectives for the ERP projectthat justify the triple constraints of projectmanagement goals: scope, time, and cost. It is alsoshould be understood clearly from both, the topmanagement, and project team. And setting metricsfor each objective in the project is a good practice tomake it easy to evaluate the project in subsequentstages. (Somers & Nelson, 2001; Nah, et al., 2001;Umble & Umble, 2003). It is also important to create aclear link between the ERP project and theorganization business value. (Deloitte, 2009; Hitachi,2009)Evaluating the legacy system: legacy systems arethe business and IT systems prior to the ERP thatencapsulate the existing business processes,organization structure, culture and informationtechnology (Holland, et al., 1999). Evaluating thelegacy system means to understand and documentaccurately and honestly your current “As-is” status(Deloitte, 2009). The key documents should begathered and start the evaluation, by consideringquestions such as: Are your procedures up to date? Arethere processes that could be automated? Are personnelspending overtime processing orders? Do your salesforce customer service personnel have real-time accessto customer information? The team should conductinterviews with key persons to cover additional areasand to evaluate the culture of the organization(O’Donnell). The Companies are less likely today to dotheir major exercise to understand existing businessprocesses before modifying them with an ERP project(Davenport, 2000). Though it should be done todetermine the amount of organizational changerequired to successfully implement an ERP system andto be the base line for your start in ERPimplementation, and in order to define the nature and189scale the problems that you will likely encounter(Holland & Light, 1999).-Benchmarking other companies in the sameindustry who implement ERP: the organization maylearn and benefit from other organizations in the sameindustry that implement ERP systems, and learn fromtheir success and failure (Davenport, 2000), and usethem as a starting point to improve your performance,and to get an idea of the best practices that have beendone in this regard (Ward, et al., 2007). Paradoxically,it is not easy to know the details of other organization’sexperiments in the same industry because theyconsidered as competitors and they will not spreadtheir secrets.Define the Desired State and the expected benefits: as aresult of setting up your project’s vision and objectives,evaluating your current system and processes, andbenchmarking with other organizations in the sameindustries. The outcome is to define the desired “To-Be”state and what would success look like (Deloitte, 2009). Inthis point you can start focus and search exhaustively forthe expected benefits focusing on people, processes,technology, management, and infrastructure. Try to justifythe stakeholders’ requirements and expectations from theERP project (Gartner, 2008). Hitachi (2009) and Gartner(2008) have suggested building hypotheses and scenariosaround the expected benefits that clarify them, and helpdecision-makers to understand deeply how the benefitscould be achieved. In research area we have found that theexpected benefits from IT investments ranked as thesecond most critical issue overall for organizations ofdifferent sizes specially the large one (Williams &Schubert, 2010). Research findings still identifying that theorganizations do not achieve the desired benefits or theexpected benefits from their investment (Williams &Schubert, 2009, 2010; Murphy & Simon, 2001; Davenport,2000; Esteves-Sousa & Pastor-Collado, 2000). Mainly,there are three major critical issues regarding the benefits,which are: 1) Types of benefits; Tangible and intangible 2)Benefits realization and measurement, and 3) Followingup the benefits.1)Types of benefits: researchers have been divided benefitinto two main types, Tangible benefits, which could bequantified, has a cost and could be quantitatively measured,for example, an early business information systems weretransaction processing systems that are designed to replaceworkers who perform repetitive tasks, such as payrollclerks, The determination of the costs and the benefits forthese systems was relatively easy. The salary of workers tobe replaced was compared against the cost of the system

190IJCSNS International Journal of Computer Science and Network Security, VOL.11 No.1, January 2011and hence the project’s value was estimated. On the otherhand the second type, intangible benefits, which could notbe quantitatively measured, the same as with exampleabove. That is as the systems became more complex andbegan to support other types of activities, e.g., decisionmaking, the ability to quantify their payback became moredifficult. It was clear that more and better informationimproved decision making, but it was very challenging toquantify the value of a better decision. Better decisionsrepresent one form of intangible benefit derived from theIT system, hence, Intangible benefits are the benefits thatcould not be captured or converted into quantitative value,to an organization’s business value (Murphy & Simon,2001). Many research papers tried to identify anddifferentiate between these two types of benefits, andexplore the intangible benefits such as (O’leary, 2004;Murphy & Simon, 2001; Hares & Royle, 1994).Hares & Royle (1994) have indicated two types ofintangible in IT investments. The first one is internalimprovement and the second related to the customers.Murphy and Simons (2001) have mentioned that AnnieBrooking in her book Intellectual Capital, havedecomposed intangible benefits into four areas: marketassets, market assets, items which yield market power, e.g.brand names; Intellectual property copyrights; humancentered assets like knowledge; and infrastructure assets.IT falls into the last category. She states in this regard that“It is not the value of computers and software in thebusiness, but their impact on the business’ performance”.Brooking examines Barclay’s bank, whose computer andsoftware assets equal approximately 100 million. If thoseassets suddenly disappeared, the bank would not open, soit is obvious the value of the assets is much greater thanthe cost of the assets themselves. This example leads us tothe second point, which is 2) Benefits realization andmeasurement: based on these two distinct types of benefitsmanagers have started to rely on these two types ofbenefits in order to determine a system’s contribution.Many researches have argued that identifying the benefitsarising from ERP systems, understanding theircontribution to business value, and to maximize its value isstill a key challenge for practitioners (Williams & Schubert,2010). Benefits realization is a comprehensive projectapproach, which focuses on identifying, measuring, andensuring that the business benefits are achievable throughtechnology (Kimberling, 2006). 3) Following-up thebenefits: once the expected benefits from the investmenthave been identified, then it is important to be followedalong the implementation phases to make sure of theprecision of what was meant by a particular benefit. Ward,et al. (2007) have suggested a model to trace the benefits.That is after identifying the benefits, essential pieces ofinformation added to each benefit, which are: firstly, howthe benefit could be measures and secondly, an individualwho will be the owner of the benefit, and should be the onewho gain advantages from achieving this benefit. This willmake the owner of particular benefit willing to work withthe team undertaking the project to ensure that the benefitrealized. This model also develops a benefit dependencynetwork that consist of benefits owners and change ownerwhere there is an owner for each change happened. Thiswill show how each benefit achieved and what risks mayprevent it from being achieved (Ward, et al., 2007).- Risks Assessment and mitigation planning: “risk”is a problem that has not yet happened but which couldcause some loss or threaten the success of a project if itdid (Tsai, et al., 2010). Several research studies haveinvestigated the ERP risks, six main dimensions of riskin ERP implementation have been identified by PobaNzaou, et al. (2008) and listed in (Iskanius, 2009)namely, 1) organizational, 2) business-related, 3)technological, 4) entrepreneurial, 5) contractual and 6)financial risks. Organizational risk derives from theenvironment in which the system is adopted. Businessrelated risk derives from the enterprise’s postimplementation models, artifacts, and processes withrespect to their internal and external consistency.Technological risk is related to the informationprocessing technologies required to operate the ERPsystem – for example the operating system, databasemanagement system, client/server technology andnetwork. Entrepreneurial or managerial risk is relatedto the attitude of the owner-manager or managementteam, while contractual risk derives from relations withpartners and financial risk from cash-flow difficulties,resulting in an inability to pay license fees or upgradingcosts, for example ( Poba-Nzaou, et al. 2008; Iskanius,2009). Aloini, et al. (2007) refer these six dimensionsof risks to ERP risk factors that listed in Iskanius,(2009) as the following: 1) inadequate ERP selection, 2)poor project team skills, 3) low top managementinvolvement, 4) ineffective communication system, 5)low key user involvement, 6) inadequate training andinstruction, 7) complex architecture and high numbersof modules, 8) inadequate business processes, 9) badmanagerial conduction, 10) ineffective projectmanagement techniques, 11) inadequate changemanagement, 12) inadequate legacy systemmanagement, 13) ineffective consulting servicesexperiences, 14) poor leadership, 15) inadequate ICTsystem issues, 16) inadequate ICT supplier stabilityand performances, 17) ineffective strategic thinkingand planning, 18) inadequate financial management.Gartner (2008) suggested that risk assessment shouldstart in BC, and list all the expected risks in theorganization, and put plans to mitigate these risksimpacts. If the organization does not have such plan forrisk, this will put the organization in a challenge of costoverrun, uncontrolled scope or shifting the timeline ofimplementation.

IJCSNS International Journal of Computer Science and Network Security, VOL.11 No.1, January 2011-Cost in relation with benefits and risks: afterestimating all the expected benefits and assess all theassociated risks for ERP project. Then a full businesscase should determine how much it will cost to achievethe desired state (Deloitte, 2009). The organizationshould assess the cost considering the trade-offs withbenefits (tangible and intangible) and expected risks;this will be in a cost-benefits and cost-risk analysis,preferable to convert the targeted improvements andbenefits to financial results (Deloitte, 2009; Gartner,2008).Blueprint: blue print is the project plan and schedulethat ensure to implement the ERP software in a waythat supports the organization business operations,ultimately saving time, money, and risk whileincreasing business benefits. Below are the expectedactivities to be done in blueprint plan (Panorama, 2010;Holland & Light, 1999; Robey, et al., 2000) as thefollowing:- Develop a detailed implementation project plan,including scope, activities, milestones, and resources.- Conduct a risk assessment and risk mitigation plan.- Establish the project core team, project charter, andproject controls.- Define software vendor technical scope and systemrequirements.- Define business process workflows, identifyimprovements, and start implementing processchanges.- Define roles and responsibilities in the new ER

from investing in ERP is not as probable as ERP vendors would have organizations believe. The act of investing in a multi-million dollar ERP system is extremely risky for managers (baker, 2006). Researchers have noted a deteriorating in evaluating IT investment in general and ERP in specifi