Making a Business Case
Analysis of the justification for undertaking the project
Feasibility study
Business case: before major resources committed
Requirements specification
Business case: confirmed in light of req spec
Design
Business case: confirmed once dev costs estimated
Development
Business case: revisited before deployment
Operational
Benefits realisation checked
establish costs and benefits, supports decision on if seems worthwhile to proceed
Check costs are still justified give benefits (more detail on benefits)
if in house developed, revisit after design as better idea of costs
Check business circumstances haven't changed, assure system is still needed
Develop in house
Commercial off the shelf solution (COTS)
If any benefits have not been achieved
Retrievable?
Over time organisation gets better at deciding which benefits are/aren't achievable
Feasibility checking
Business
Technological
Financial
Timeliness
Organisational fit
Cultural fit
Process compatibility
Within competencies
Legality/regulations
Availiblility
Reliability
Maintainability
Security
Compatibility
Proven
Within budget
Funds available or can be borrowed
Acceptable return on investment
Acceptable cash flow
Fast enough payback
Problems found != don't go ahead. No project management skills? Hire people = increased budget requirements/increased risk
Impact risk assessment
Usually included...
Introduction
Management summary
Background
Options
Benefits
Costs
Impacts
Risks
Investment appraisal
Conclusions and recommendations
Appendices
Set the scene, what it's all about
Summarise nature of problem. Options considered. Recommended course with justification. Persuasive.
Business background, problem to be solved or opportunity to be seized
All options considered, including consequences of no action. Preferred option in more detail.
Tangible and intangible
Short and long term cost of undertaking project
Senior management consider these other impacts to the business/people
Risks and actions to deal with
Contrast financial costs and benefits over time, and asses when, how much, the project pays for itself
Summarise, recommendations when necessary
Detailed info - technical details etc - available for consultation
Sections
Identifying, Evaluating, Selecting options
Identify possible options
Shortlist options
Evaluate shortlist
Take forward to business case
All options considered, including doing nothing at all
Reasons why it's not a good idea
In practice, range of options may be limited
Shorten long list to 3 or 4 - including doing nothing
Evaluate using criteria of feasibility assessment
Ball-park costs and benefits
Detailed costs/benefits for preferred option
Assessed options taken forward to business case
Cost-benefit analysis
Tangible
Intangible
Provable in advance
Savings from decommissioning old system / reduced headcount
Cannot be proven in advance
Immediate
Longer-term
Depends on research available - market research on web based shopping
Reasonably provable in advance?
Enjoyed or incurred at the start
Later, longer timescale
Risk Analysis
Full risk appraisal is often impossible at business case stage, scoped/planned in outline
2 types, often can merge
Business risk
Project risk
Reputation damage
Delay or adversely affect the project itself
Identify risks
Assess
Description - situation or circumstance that may give rise to risk
Impact - if risk occurs, could be multiple impacts
Scale of impact - how badly would the risk affect the organisation (small, moderate, large... catastrophic?)
Probability - how like is it? Low, medium, high
Avoidance - how can the probability be lowered?
Mitigation - how can the scale of the impact be reduced?
Owner - who is responsible for managing the risk?
Impact analysis
Adopting a new approach to recruitment?
New behaviours?
New management style?
Make managers aware so they can be taken on board to make the project a success
Investment Appraisal Techniques
How long will it take to recover the investment
Payback / break-even calculation
Doesn't take into account "time value for money" e.g. interest on a loan
Discounted Cash Flow
Internal rate of return
simple, straight forward, good assessment of project in low times of low interest
Takes into account interest, and adjusts future cash flows to factor in cost of capital
Difficult to work out correct discount rates
Some subjective judgment from management accountants
Single headline number to represent the return on investment, to compare with cost of capital
Doesn't take into account sheer size of project