Enterprise Resource Planning (ERP) can be a blessing or a curse. Many companies find ERP systems help them make better-informed decisions. Others discover too late that their purchase has been based more on faith than good judgment, and run up tens or even hundreds of millions of dollars in extra costs and schedule delays.

How, then, can senior managers ensure that their companies build a sound business case for deploying ERP systems? And what can they do to guarantee that the promised benefits are not eclipsed by the costs of integration, process redesign, and training? One answer is to take a cost-based approach to the business case. Another is to be aware of common pitfalls.

Is ERP for us?

ERP systems (made by SAP, Baan, and PeopleSoft, among others) have received much attention for their potential to help companies make more effective decisions. The plaudits are often deserved. ERP can reduce the financial reporting, purchasing, and support expenses of management information systems (MIS), and lead to more timely analysis and reporting of sales, customer, and cost data. One large pharmaceutical company has used it to consolidate manufacturing support operations such as purchasing and vendor management; as a result, it...