Intangible benefits valuation in ERP projects

Abstract

Abstract. The development, implementation and ownership of information systems, especially large‐scale systems such as enterprise resource planning (ERP), has become progressively longer in duration and more cost intensive. As a result, IS managers are being required to justify projects financially based on their return. Historically, information systems have been difficult to quantify in monetary terms because of the intangible nature of many of the derived benefits, e.g. improved customer service. Using the case study methodology, this paper examines an attempt by a large computer manufacturer to incorporate intangibles into traditional cost–benefit analysis in an ERP project. The paper reviews the importance of intangibles, lists intangible benefits that are important in ERP projects and demonstrates the use of a scheme through which they can be incorporated into traditional evaluation techniques.

Factors for the Acceptance of Enterprise Resource Planning (ERP) Systems and Financial Performance

“…These benefits have generally been categorized into two main aspects being the tangible benefits and the intangible benefit. Tangible benefits are the direct reduction in costs which have been brought about by the implementation of ERP systems in organizations [49], [53], [51] Particularly important for organization is to realize that the intangible benefits from a system are the most critical component of the ERP implementation [4]. Some of the intangible benefits of the system are based on issues such as reduced headcount of the organization, improved decision making of the organization, reduced number of complaints of the customers and the increased availability of the information to the managers using the ERP in organizations [4].…”

“…The intrinsic value of the beneficiates which organizations realize are highly difficult to quantify in cases where the fast changing markets make it impossible to measure the benefits [4]. This creates new issues for organizations, as most are unsure about the true benefits of ERP systems.…”

“…The ongoing beneficiates of systems may be based on issues such as improvements to the processes, workflow and the information access that managers have in relation to a particular system [4]. Other ongoing benefits of ERP systems to the organization may be based on the level of customer services that they can deliver to the end user, which has a higher quality and support for the customer [4]. However, more difficult to measure for the organization is in relation to the future benefits of the system.…”

“…These future benefits are not only hard to realize but also are hard to measure. For example one of the critical benefit of the ERP system has been to enable the organization to have the foresight to develop new markets, products and services, which enable the organization to change according to the changes in the market environment [4]. These benefits can be divided into the strategic, tactician and operational benefits for the organization, based on the way they can structure their ERP systems [4].…”

“…For example one of the critical benefit of the ERP system has been to enable the organization to have the foresight to develop new markets, products and services, which enable the organization to change according to the changes in the market environment [4]. These benefits can be divided into the strategic, tactician and operational benefits for the organization, based on the way they can structure their ERP systems [4]. Some have argued that ERP investments are strategic in nature, and fulfil the goal of the organization in the longer term [4], [15].…”