Show me the money – Measuring payback for SI

System integration projects provide a big boost to enterprise productivity. Sales, marketing, manufacturing and finance all benefit by improved efficiency when the new system eliminates unnecessary busy work and puts the precise information needed in front of the user.

There are hundreds of KPIs across different departments that can be used to show how SI projects save time and money while improving customer satisfaction for example, expected increases in sales revenues, average profit margins, accounts payable turnover, inventory turnover, and net profit margin.

Even though calculating these KPIs can add value to a project and increase its changes for success, few project managers take the time to quantify the business benefits of systems integration.

Calculating the KPI’s that are the most relevant for your project is well worth it.  Here are four reasons why:

1. Uncover new opportunities

When KPIs are calculated in the early stages of a project, new opportunities for improved efficiencies can be discovered. For example when automating the sales process there could also be additional benefits for finance, including a reduction in days sales outstanding, reduction in collection time for accounts receivable and time reduction to close books.

If financial analysts are involved up front, exploring all the additional benefits, the requirements of the system integration can be expanded increasing the project’s impact and value to the organisation.

2. Become more strategic

One of the struggles of IT management is to take that leap from a cost centre to an enabler of digital transformation that boosts the organisation’s bottom line.

By translating the SI project benefits into business KPIs, the benefits IT brings to the organisation become clear. For example, all ERP system integration projects can result in a reduction in inventory costs, reduction in planning cycle times and an improvement in fulfillment rates and back orders, as a result of more accessible, relevant and accurate product data. These KPIs will be more effective at getting an executive’s attention than saying that a SI project will reduce programming costs.

3. Gain quicker approvals

Providing return on investment figures using KPI’s will accelerate the time it takes for projects to be approved from finance. Analysts will be already familiar with KPI’s from other projects they have approved for the same departments.  Since the figures are generated as a team effort with the business managers, there will be the necessary buy-in from management up front which will increase the credibility, urgency, and priority of the funding request.

4. Understand requirements better

System integration projects have a reputation for becoming unwieldy.  Calculating KPIs in advance requires more detailed system requirements. In order to estimate the benefits of the improved efficiency, each process that’s automated needs to be inspected carefully, which can uncover new information that might have otherwise resulted in unpleasant surprises.

Including KPIs with a business plan can only add value to the project itself, and will position the IT department as a strategic partner. Working hand in hand with business managers to define KPIs that will measure the project’s value will boost the project’s chances for success.

Most importantly, by using KPI’s to measure the payback for system integration IT is showing their real contribution to business profitability. 

Stephan Romeder, General Manager, Magic Software Europe

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