1.  SAP AG 2001 ROI Business Case 1 321 Assemble IT And Business Personnel Define Initial Scope and Cost Parameters Review Functionality Contained in the Scope 4 Measure The Benefits Building The Business Case

2.  SAP AG 2001 ROI Business Case 2 What is a Business Case? A business case outlines the overall business benefits that justify the initial and on-going commitment of time, resources, and funding for technology projects. ROI Operational Process improvements (Tangible and Intangible) Technical Benefits to IT infrastructure and support for technology strategy Financial Costs, benefits and impact on business performance measures Strategic New capabilities and improved competitive position

3.  SAP AG 2001 ROI Business Case 3 The Business Case Should Cover the Entire Life Cycle of the Solution OPERATIONS & CONTINUOUS BUSINESS IMPROVEMENT Assess baseline value for ongoing business performance Measure business performance against industry best practices Justify continuous business change and performance tuning Realize continuous improvement IMPLEMENTATION Incorporate business case as part of implementation methodology Ensure KPI’s are measured throughout implementation Use business case for scope/change control Use integrated content to monitor project risk performance EVALUATION Develop business strategy Identify business solution Align industry solution with key process indicators (KPI’s) Estimate total cost of ownership Use integrated content to develop business case DISCOVERY Qualification of Improvement Opportunity

4.  SAP AG 2001 ROI Business Case 4 Business Case Development - Objectives Identify critical business processes and prioritize by impact on company operations (largest/most important results) Identify opportunities for improvement/problem areas/pains Identify key business drivers (current and future) Select relevant benefit areas to quantify Gather data regarding current environment Utilize metrics and internal information to formulate anticipated benefit levels Select measurements that will enable continuous monitoring during implementation and beyond

5.  SAP AG 2001 ROI Business Case 5 Assemble business and IT leads for each area Define Initial Project Scope and Cost Parameters Implementation (internal/external consulting by project phase) Infrastructure/hardware requirements and maintenance Software license costs and maintenance Level of detail required in the business case Training and change management requirements Testing tools and other costs Functionality Review Identify business drivers and pain in current processes Identify benefit opportunities enabled by proposed solution Identify challenges and obstacles Building The Business Case

6.  SAP AG 2001 ROI Business Case 6 Measure the Benefits Data Collection & Analysis  Collect baseline data (in current legacy systems)  Calculate benefit opportunities  Identify required changes in business processes Build the Business Case  Document benefits and assumptions based on the expected new functionality  Establish timeframe or horizon  Be careful to not double count benefits Building The Business Case

7.  SAP AG 2001 ROI Business Case 7 NPV = Net Present Value = The value today of a series of cash flows received in the future based on a given interest rate (e.g., 5%). Payback = The time period needed before net savings equal initial and ongoing costs (breakeven). Measures for Business Case Proposals $100 Year 3 $152.09 @ 5% Interest Rate Savings Costs Payback Period Time IRR = Internal Rate of Return = The interest (discount) rate that causes the net present value of a project to just equal zero (0). If the project’s IRR is greater than the cost of capital, the project is acceptable; otherwise, it should be rejected. The calculation of IRR assumes that the cash inflows will be reinvested at the same rate as the internal rate of return.

8.  SAP AG 2001 ROI Business Case 8

9.  SAP AG 2001 ROI Business Case 9

10.  SAP AG 2001 ROI Business Case 10 Business Benefits - Some Examples Human Resources/Payroll: Personnel Administration Efficiencies 10%-40%Payroll Check Processing Efficiencies 15%-40% Reduced Time and Exp. Reporting 10%-20%Recruitment/New Hire Efficiencies15%-25% Employee Self-Service Transaction Reduction25%-50% Financials: Improve Time to Process A/P Invoice 15%-40% Improve Time to Close Books35%-80% Reduce Term Discounts Lost25%-75% Process Improvements Due to Elimination of Reconciliations, Duplicate Data Entry, etc.15%-45% Purchasing: Reduction in New Item Inventory 10%-30%Reduce Cost of Materials/Services 2%-6% Procurement Process Efficiencies35%-80%Purchase Cycle Time Improvements30%-80% Increase Compliance of Purchases from Government-wide Contracts25%-50%

11.  SAP AG 2001 ROI Business Case 11 Business Benefits - Some Examples Inventory: Reduction in Inventory 10%-50%Reduction of Inventory Write-Offs 15%-40% Improvement in Inventory Turns10%-50%Reduction in Warehouses Maintained15%-85% Facility/Plant Maintenance: Reduction in Repair Parts Inventory 10%-40%Improved Field Service Response 10%-20% Reduction in Work Order Prep Time25%-75%Reduction in Overtime Cost10%-20% Reduction in Cost to Re-Enter Work Order Data into Payroll 100% Project Management/Systems: Reduce Project Reporting Costs 5%-20%Reduce Project Set-Up Costs 30%-50% Reduce Invoicing Costs40%-80%Reduce Reconciliation/Budget Time15%-30% Reduce Cost for Revenue Calculation/Analysis 40%-75%

12.  SAP AG 2001 ROI Business Case 12 Strategic Benefits Infrastructure - Customer is building an infrastructure that is critical for supporting growth. Integration - End-users will be on one integrated system. Information need only be entered once and all authorized users have access to real-time, accurate data. Legacy systems that remain can be interfaced for passing information between systems. Scalability - The system will enable Customer to adapt and be flexible to changes occurring due to growth (existing facilities and new acquisitions), industry transformations, etc. Internet Capabilities - Web-enabled processes will ensure that employees use the system productively with minimal training requirements. These processes will also provide greater information dissemination across the Customer organization. Identifying the strategic benefits for this project, in addition to the tangible (quantifiable) benefits, is critical to the business case.

13.  SAP AG 2001 ROI Business Case 13 Strategic Benefits Standardization - One integrated system will ensure standardized data elements for employee records, standardized reporting, and standardized business process flows across the organization. Information Flow and Workflow - A single data repository ensures that accurate information is routed to the end-users (clerical staff, managers, etc.) to initiate actions, approvals, and decisions. Clear and effective transactional audit trails enhance data integrity. Automated workflow enhances process efficiencies and the transmission of relevant data. Improved Reporting - The reporting structures within SAP enable accurate, accessible, and timely reporting to end-users at all levels. End-users have the tools to create their own queries to capture the data that is pertinent to them.

14.  SAP AG 2001 ROI Business Case 14 Strategic Benefits Regulatory Compliance - Updating human resource and payroll government regulations and guidelines within the system is easy, and clear and effective transactional audit trails enhance data integrity. High-Value Activities - It has been indicated (by research firms) that 80% of HR activities are devoted to lower-value, routine, transactional tasks. Efficiencies in these areas will enable HR personnel to devote more time to higher value activities like employee welfare programs, benefits administration, career planning, etc.