A study conducted by SAP suppliers and various research companies found SAP adoption resulted in sales growth from 16 to 28% and an increase in efficiency ranging from 10 to 16% ("SAP ERP – What are the benefits of implementing the system?"). For IVK, a sales increase of 16%, in the form of service, would equate to an incremental $37MM in additional revenue. In addition to overall efficiencies, IVK has other modules of their business that an ERP could benefit. Human capital management, sales, and financing are all modules that support IVKs business operations. Each of these would result in improvements to IVK’s bottom line; 4% savings in Human Capital, 22% in sales and 25% in FICO financing respectively. All of these improvements cannot be effectively realized with IVK’s current system.
("How SAP Users hold the keys to Business Process Improvement ")
From the qualitative Winshuttle customer study performed from January 2013 to March 2014 (see the full assessment here), it can be assumed that IVK will experience an increase in efficiency ranging from 10 to 16% ("SAP ERP – What are the benefits of implementing the system?"). Winshuttle observed these factors by identifying usability gaps, intangible benefits and benchmarks. These values can be compiled from real savings of improved productivity, decrease in cost of service, lead time reduction, faster service look-up, improve key processes’ visibility, use available information to make critical business decisions for the company and automated ordering and payment. In addition to the cost savings, increased organizational transparency, accurate and faster data, improved customer response, more risk controls and strategic planning are added benefits of IVK using SAPs ERP system. Without such a system, It is much harder to place a dollar figure to those intangible benefits. These benefits could also assist in solving customers complaints and increase the end users experience as well as employee process and internal communication (Austin, 2009). Furthermore, SAP's new HANA database management system runs queries 3000 times faster than hard-disk based systems, and SAP Value Calculator estimates that firms can increase their value in areas like Customer Service by 50% at a recurring value of $6 million.
IVK’s current legacy system is inadequate and riddled with security risks, with the implementation of the SAP ERP Business Suite we propose that the company would realize the tangible benefits discussed earlier that could amount to an approximate $37MM dollar increase in revenue. This increase in revenue alone will offset the total cost of ownership evaluation of $1.3MM, see previous TCO analysis here. It can also be assumed that IVK will experience positive impacts to the financial health and growth of the company as a result of a low estimate of 20% reduced total cost of ownership for this system that includes fewer needs of additional hardware and software. (Forrester) This estimate means that IVK will realize a savings of $260,000.
The other less tangible benefits that IVK will experience will produce an estimated 16% improvement to the bottom line. Again, this dollar figure could result in up to an additional $37MM. While these types of improvements and efficiencies are harder to place a price tag on, they can be the fulcrum that tips a company from just a qualifying company to a strong competitor. (ERP)
As can be seen the benefits to implementing SAP’s ERP systems far outweigh the initial and total cost of ownership evaluations. The projected savings should be realized around the three year mark according to a Forrester article on SAP.
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