Tangible Benefits
Within the past year at IVK, margins have begun to tighten
and growth has slowed over previous years. Implementation of the Oracle ERP
could help create the profit margins needed to mimic years past at IVK (Austin,
Nolan, & O'Donnell, 2009, p.21). Costs to purchase the Oracle ERP program
can be seen in the Cost Assessment page of this website. Based on industry averages of companies that implemented an
ERP, overall operational cost can be reduced by 11.4% and administrative
expenses reduced by 9.3% (Aberdeen Group, 2007, p. 6). However, this cost saving is not likely to be
actualized in the first year due to the time needed to cutover and maximize the
efficiencies create by the system. Our estimate of the return of investment for
the first year was calculated based on half of these industry averages report
by. The operational and administration savings can be annualized
totaling a savings of $6,215,816.39 for IVK. Based on this estimation and the time spent to implement the Oracle system, the approximate return on
investment for the implementation of Oracle ERP at IVK would be realized in 1
year and 4 months. This return on
investment aligns with an industry study for Oracle ERP by the Panorama
Consulting Solutions group, where the companies polled averaged 16 month return
(Panorama Consulting, 2013).
Increased profits will lead to other tangible benefits such
as increased stock price and increased customer opportunity. With increased customer
opportunity, IVK can begin to gain market share and push ahead of the
competition. With the implementation of Oracle ERP, IVK would be able to
increase the amount of loans granted. Table 2 displays the current return for
each loan granted. If IVK was to increase the amount of loans granted, revenue
would increase by $1,298 with each additional loan obtained.
Table 1. Current IVK performance for Revenue on each loan
granted.
Year X
| |
Total Service Revenue
|
$233,659,896
|
Funded Loans (#)
|
180,000
|
Revenue per Loan Granted
|
$1,298
|
If IVK was to make the large investment in the Oracle ERP
system, the key concern is to implement a system which will be cost effective,
require minimal time and fast recovery to ensure a ROI. Key cost areas for the
deployment include software, consulting, personnel, and training. The aforementioned are examples of tangible
benefits. A study outlined Nucleus Research calculated the costs of software,
consulting, personnel, training, and other1 investments over a
3-year period to quantify OpenTV’s total investment in Oracle E-Business Suite.
Direct benefits quantified included IT costs savings associated with retiring
the old system and reducing manual data entry. Intangible and indirect benefits
quantified included increased productivity of managers and employees involved
in annual audits, and the change in working capital achieved by accelerating
collections attributed to the application (Nucleus, 2009).
Intangible Benefits
There are several
intangible benefits that IVK could benefit from by implementing Oracle ERP. The use of the integrated system will allow
for increased communications between departments since work between
groups/departments will be more coordinated and transparent, unlike using
various systems that often produces redundant work throughout the company. A customized dashboard will help employees to
modify their workspace and provide ease-of-use for daily tasks and
reporting. Also, it will let management
make better decisions through the use of analytics to convert large data sets
into actionable business intelligence (McKinsey, 2014). Specifically, Oracle has different reports
which can enhance revenue management, such as team performance and trending
(Harvard, 2014). Sales representatives can set up custom pages that keep them
updated with leads and opportunities (Harvard, 2014). Sales management can have
access to real time views of the historical progression of opportunities,
variances and comparisons over time, an analysis of revenues by resources or
territories, and visibility on who else has won similar deals (Harvard, 2014).
All of these items will help IVK become more competitive in the loan
marketplace and improve the customer service responsiveness.
Oracle ERP
implementation would also contribute to what Andy McAfee describes as building
a plan for a digitally modified business that requires a unified vision and
strategy as well as frequent communication (2014). The ERP system would provide the resources
needed for IVK employees to to focus on these critical strategic aims. Through increase efficiency and a commonly
shared vision, employees to devote more time to other value generating
activities. In this way, time and energy
can be spent on developing new and innovative strategies that will contribute
to a competitive advantage. (McKinsey, 2014).
ERP ROI tools:
References
Aberdeen Group. (2007).
The total cost of ERP ownership in mid-size companies. Retrieved from
http://www.meritalk.com/uploads_legacy/ whitepapers/Aberdeen-CO_Midsize_COs_0707.pdf.
Austin, R. D., Nolan, R. D.,
and O'Donnell, S. (2009). The
Adventures of an IT leader. Harvard
Business Review Press.
Castellino, N. (2012, December). SaaS and
cloud ERP observations: Is cloud ERP right for you?
Aberdeen
Group. Retrieved from
http://resources.cio.com/ccd/assets/46170/detail
Harvard
Business Review. (2014a). Bringing science to the art of selling is the only
option. Retrieved
from file:///C:/Users/Carol/AppData/Local/Temp/214821-1.pdf
McAfee, A.
(2014, May). Leading
digital transformation. Harvard
Business Review. [Webinar]. Retrieved from
http://stream1.krm.com/Mediasite5/Play/ffce91bae77d4c2db4087b6ecb48e0cf1d
McKinsey
& Co. (2014). Strategic principles for competing in the digital age.
Retrieved from
http://www.mckinsey.com/insights/strategy/strategic_principles_for_competing_in_the_digital_
age?cid=DigitalEdge-eml-alt-mkq-mck-oth-1405
Nucleus
Research. (2009). ROI case study oracle
e-business suite. (Case study report J81). Retrieved
from http://nucleusresearch.com/research/single/roi-case-study-oracle-e-business-suite/
Panorama
Consulting Solutions (2013). Clash of the Titans
2014: An independent comparison of SAP,
Oracle and
Microsoft Dynamics. Retrieved October 18, 2014, from http://panorama-
consulting.com/resource-center/clash-of-the-titans-2014-sap-vs-oracle-vs-microsoft-
dynamics/.
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