Enterprise Value Creation and Collaboration

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Glomark-Governan Releases New Study – Reducing the Risk and Increasing the ROI of ERP Implementations

Dublin, OH, United States, 02/29/2008 - A research study released today by Glomark-Governan research analysts shows how executives can reduce their exposure to economic risk, and increase the probability of achieving the desired economic outcome and ROI of any ERP initiative.

Today, when either investing in a new ERP system, or upgrading an existing system, most companies prepare a business case to assess the potential benefits and costs of such a project. Glomark-Governan’s ERP Research Study, conducted in February 2008, indicates that 85% of the ERP business cases prepared today do not include an objective risk analysis. In such an analysis, it is imperative that companies not only weigh the economic costs and benefits, but also identify which risk factors may potentially lead to a project’s economic failure. For example, one renowned research organization indicates that inventory levels can be reduced up to 24% with an ERP implementation, while another research firm states that inventory levels could potentially be reduced as much as 75%.

The Glomark-Governan ERP Research Study also found that the range of possible improvements achieved with an ERP implementation vary considerably; and the range between worst and best case results in ERP benchmarks is wider than most people realized in the past. To illustrate, Glomark-Governan analysts found that, in the past, industry benchmarks showed that companies who implemented ERP systems decreased their inventory levels by 10% to 25%. Today, the industry benchmarks indicate that this range now spans from 4% to 75%.

Relying solely on benchmarks from research studies is clearly not sufficient to make an accurate and objective assessment of the ROI for an ERP project. There are, however, some risk analysis models, including a Monte Carlo simulation, which can assist companies in maximizing the probability of an ERP project’s success.

“A detailed risk analysis on the forecasted benefits of an ERP is critical to achieve positive operational and economic results,” says Gustavo Benitez, a consultant with Deloitte and former IT manager at Vitro, a glass manufacturing company.

Economic risk analyses are imperative for identifying those assumptions and benefits that truly minimize risk, and therefore increase the accuracy of the expected ROI for any large investment initiative.

Glomark-Governan helps enterprises around the world by providing them the methodology, training, consulting and software tools necessary to assess, communicate and measure the economic value of investments in technology and services initiatives. Glomark-Governan has enhanced and refined its Economic Value Creation (EVC™) methodology for more than a decade, bringing to market a proven, complete solution that allows companies to justify their solutions’ value, define operational and performance metrics, assess economic risk, and quickly create project-specific business cases.