The intangible or qualitative benefits for all stakeholders (management, employees, customers, etc.) are not to be underestimated. These cannot be displayed in numbers or figures, but in a long-term view they will certainly support the company’s success. Despite high cost for implementing, IVK should consider to subscribe the SAP ERP system to improve processes, gain a higher revenue, and satisfy its stakeholders. These benefits might likely assist in solving customer complaints. Additionally, internal communication, different employee processes and the end user experience will improve (Austin, 2009). According to the cost analysis the total cost for IVK are estimated 939,368 USD. It’s obvious that for IVK it is only worth investing in the system if future benefits (such as quantitative and qualitative) exceed these initial but also recurring costs. Therefore we have to balance costs and benefits.
Quantitative benefits:
1. Decreasing costs including move to paperless eliminating multiple systems and increased inefficiencies
2. Increasing revenues including improved sales and marketing increased purchases by previous one-time buyers and improved customer service (reduced churn rates)
Qualitative benefits:
1. Customers will have access to their information and products faster·
2. Improved customer satisfaction (retention, new customer)
3. Decreased stress and increased satisfaction for employees
4. Access from one location by multiple individuals at any time
5. Better collaboration across different business units
6. Improved compliance (access to regulatory reporting and auditing)
7. Better decision making process
For business analytics with SAP, the average annual ROI is 112%. Within two years, 63% of companies will see a payback (Dinkel, 2010). We have calculated an estimated total annual ROI for IVK to be $1,052,092.16. This conclusion was based on the tangible and intangible benefits for SAP ERP. Additional factors going into the ROI include Net Present Value, Internal Rate of Return, and Payback period. In regards to quantitative benefits, two broad categories exist. The first category is decreasing costs, and includes the move to paperless, eliminating multiple systems and increased efficiencies. The second category is increasing revenues and includes improved sales and marketing, increased purchases by previous one-time buyers, and improved customer service leading to reduced churn rates. The use of big data to analyze customer preferences leads to predictive capabilities to increase sales. This will allow IVK to better target customers in sales and marketing campaigns. Producing new products and services is another advantage to big data analytics. Customer insights become much easier to grasp and anticipate. This type of quantitative value is difficult to estimate for IVK, due to the many unknown specifics.
As discussed previously, leasing is not an option for the SAP ERP product. There are several qualitative advantages to an ERP system that can be beneficial for both purchasing and subscribing. Customers will have access to their information and products faster. Having improved customer satisfaction can help to improve customer retention and obtain new customers via customer reviews and word of mouth feedback. Employees experience increased satisfaction and decreased stress because the system provides easy access to data and information. For example, rather than having to look at multiple locations, the ERP system allows for access from one location, by multiple individuals and at any time. Some current systems will only allow one individual at a time to access and update information and updated information is not always available. Having a subscription would be more beneficial than purchasing because system updates are provided at no additional cost whereas purchasing the SAP ERP product would require purchasing updated software.
The quality of data improves and business processes are aligned because only one system, rather than multiple systems and individuals, is needed to gather, compute, present, and disseminate information. Employees from multiple business units have access to the same information leading to cross- business unit collaboration.
Improved compliance is a large benefit too as the ERP system improves and organizes records for retention as required, organizes and presents the data to meet such regulations as the Sarbanes-Oxley Act, access to regulatory reporting capabilities software, and auditing capabilities. Having access to updated information from multiple business units, collaboration from multiple business units, improved quality, and improved compliance allows for better decision making. There are often updates to regulations and requirements.
According to the following link the effect of implementing the SAP ERP system leads to a sales growth of 16-28% (http://www.hicron.com/en/knowledge-center/top-quality-solutions/190-sap-erp-what-are-the-benefits-of-implementing-the-system). Considering the total service revenue of IVK (232.7 million USD) a 16% growth of sales would lead to an increase of revenues of approximately 37.4 million USD. This by far exceeds the total costs of the estimated costs of 939,368 USD.
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References
Sankar, D. (2013, November 26). Debunking Myths About Business Intelligence Strategy. Retrieved from: http://blogs.sap.com/analytics/2013/11/26/debunking-myths-about-business-intelligence-strategy/
Garrehy, P. (2014, September 30). Quantitative and Qualitative Benefits on Implementing a New ERP System. Retrieved from: http://www.rootstock.com/erp-blog/quantitative-and-qualitative-benefits-on-implementing-a-new-erp-system/
Proving ROI: How to demonstrate the value of your SAP Business Objects implementation and integration effort. (2010, December 24). Retrieved from: http://sapinsider.wispubs.com/Assets/Blogs/2010/December/Proving-ROI-How-to-demonstrate-the-value-of-your-SAP-BusinessObjects-implementation-and-integration
Davenport, T. (n.d.). Three Big Benefits of Big Data Analytics. Retrieved October 25, 2015, from http://resources.cio.com/ccd/show/200033967/01255260147176CION9QK0ZJ8RW/?email=leah
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