Chapter 2: Analyzing the Business Case

What Is a Business Case?

• A business case refers to the reasons or justification for a proposal.

• Should be comprehensive yet easy to understand.

• Should clearly describe the project, provide justification to proceed, and estimate the financial impact.

Strategic Planning Process

• Definition: Identifying long-term organizational goals, strategies, and resources.

• Focus: Long-term planning (3, 5, 10+ years).

• IT is an essential part of supporting strategic goals.

• IT managers participate in strategic planning and prepare for both long-term and immediate IT needs.

Strategic Planning Steps

1. Mission Statement

   • Reflects the firm's vision, purpose, and values.

   • Focuses on long-term challenges and goals.

   • Emphasizes the importance of stakeholders and corporate responsibility.

2. Goals and Objectives

   • Companies set one-year, three-year, and five-year goals.

   • Goals are broken into short-term objectives.

   • High-priority objectives are Critical Success Factors (CSFs), which must be achieved to fulfill the company’s mission.

3. Strategic Planning Results

   • Tactical plans like creating a new website or training customer support teams.

   • Objectives translate into day-to-day business operations.

SWOT Analysis

• Definition: A process to evaluate Strengths, Weaknesses, Opportunities, and Threats.

• Focus can be on:

  • A specific product or project.

  • An operating division.

  • The entire company.

  • The mission statement itself.

• Helps avoid unrealistic, unprofitable, or unachievable goals.

Key SWOT Analysis Questions

1. Strengths: What are our strengths, and how can we use them to achieve our business goals?

2. Weaknesses: What are our weaknesses, and how can we reduce or eliminate them?

3. Opportunities: What are our opportunities, and how do we plan to take advantage of them?

4. Threats: What are our threats, and how can we assess, manage, and respond to the possible risks?

Strategic Planning for IT Projects

• IT project planning is essential for business success.

• Important considerations:

  • Aligning IT projects with overall business strategy and operational needs.

  • Ensuring project scope is well-defined.

  • Ensuring goals are realistic, achievable, and aligned with company strategy.

• IT managers must review each IT-related proposal, project, and systems request to ensure a strong business case.

The Role of the IT Department

The IT department's role has evolved from gatekeeper to team-oriented development using approaches like:

• Agile methods

• Joint Application Development (JAD)

• Rapid Application Development (RAD)

Deciding how to evaluate systems requests depends on company size:

• Small companies – IT personnel coordinate with users and managers.

• Large companies – A systems review committee evaluates proposals.

Main Reasons for Systems Projects

A systems request is made for various business or operational reasons .

Main Factors for Systems Requests

1. Improved Service

   • Enhancing customer experience and service.

   • Examples: Online self-service portals, real-time order tracking.

2. Better Performance

   • Current systems may be outdated or slow.

   • Performance limitations can hinder company growth.

   • Example: Upgrading network speed to handle higher transaction volumes.

3. Support for New Products and Services

   • New business services require modern IT infrastructure.

   • Examples:

     • Software vendors implementing automatic updates.

     • Delivery services using RFID tracking systems.

4. More Information

   • Managers need accurate data to make strategic decisions.

   • Example: A company wants real-time business intelligence dashboards.

5. Stronger Controls

   • Implementing security measures like encryption, user access levels, and biometric authentication.

   • Protecting sensitive data and ensuring compliance.

6. Reduced Costs

   • Systems may be too costly to maintain or operate.

   • Companies might upgrade or replace inefficient legacy systems to save costs.

Factors That Affect Systems Projects

• Every business decision is influenced by both internal and external factors, and IT projects are no exception​.

Internal Factors

1. Strategic Plan

   • Determines the overall company direction.

   • Business goals that require IT generate system requests.

   • A technology-driven plan fosters innovation and investment.

2. Top Management

   • Executives initiate large-scale projects.

   • Focus on goals like efficiency, cost reduction, and improved customer service.

3. User Requests

   • As users become more reliant on IT, they demand better system performance.

   • Examples:

     • Enhancements to websites and data analytics.

     • Improving usability and customer self-service features.

4. IT Department

   • IT staff recommend changes based on:

     • Technology advancements.

     • Outdated infrastructure.

     • Increased data processing requirements.

5. Existing Systems and Data

   • Legacy systems with outdated architecture may require upgrades or replacements.

   • Examples:

     • Slow mainframes that delay business operations.

     • Outdated security systems that put company data at risk.

External Factors

1. Technology

   • New emerging technologies create opportunities for IT improvements.

   • Examples:

     • Adoption of cloud computing.

     • Transition to electronic payment systems.

2. Suppliers

   • Systems must be compatible with suppliers’ technologies.

   • Example: Implementing Electronic Data Interchange (EDI) to share inventory data.

3. Customers

   • Demand for improved customer service and personalization drives IT innovation.

   • Examples:

     • Self-service portals for customer support.

     • Mobile applications to improve user experience.

4. Competitors

   • Competitor innovation forces organizations to enhance IT capabilities.

   • Example: E-commerce companies improving delivery times.

5. The Economy

   • Economic downturns may limit IT budgets, while growth periods promote innovation.

6. Government

   • Regulatory compliance requires IT system updates.

   • Example: New data protection laws impacting data storage and cybersecurity.

Business Case and Feasibility Study

• A business case provides justification for a proposal.

• Feasibility Study: Assesses whether a systems request is worth pursuing.

Types of Feasibility Studies

1. Operational Feasibility

   • Determines if the proposal is desirable from a practical perspective.

   • Evaluates how well the system will support the company's goals.

   • Identifies potential challenges for users.

2. Technical Feasibility

   • Examines available technical resources.

   • Identifies hardware, software, and network requirements.

   • Assesses technical support availability.

3. Economic Feasibility

   • Evaluates costs vs. benefits.

   • Includes projected savings and potential intangible benefits (customer satisfaction, company image).

   • Determines if the proposal is a sound business investment.

   • Total Cost of Ownership (TCO) is an essential part of this analysis.

4. Schedule Feasibility

   • Assesses whether the project can be completed within an acceptable timeframe.

   • Considers:

     • Control over scheduling factors.

     • Firm timetable from management.

     • Risks associated with accelerated schedules.

     • Availability of project management techniques and a designated manager.

Setting Priorities

Establishing Priorities

• After eliminating non-feasible system requests, the next step is to establish priorities for the remaining projects.

• The highest priority projects are those that provide the greatest benefit at the lowest cost in the shortest time.

• Project prioritization ensures that critical IT resources are allocated efficiently.

Factors That Affect Priority

When assessing the priority of a project, the following factors should be considered:

• Cost Reduction:

  • Will the proposed system reduce operational costs?

  • If so, where, when, how, and by how much?

• Revenue Generation:

  • Will the system increase company revenue?

  • If so, where, when, how, and by how much?

• Information Improvement:

  • Will the new system provide better information to support decision-making?

  • Are the results measurable?

• Customer Service Enhancement:

  • Will the project improve service quality for customers?

  • Will it increase efficiency or responsiveness?

• Internal Operations Improvement:

  • Will the project improve the organization’s internal operations?

  • Will it streamline processes or increase productivity?

• Project Implementation Timeline:

  • Can the project be implemented within a reasonable time period?

  • What are the expected short-term and long-term results?

• Resource Availability:

  • Are the necessary financial, human, and technical resources available to support the project?

Weighing Project Benefits and Trade-Offs

• Not all projects will score highly in all priority areas.

• Some projects may not directly reduce costs but could provide important strategic benefits.

• Other projects may reduce operating costs but require significant initial investment.

• Certain projects may be highly beneficial but require several years before delivering measurable results.

Discretionary and Nondiscretionary Projects

• Discretionary Projects:

  • These are optional projects that management can choose to implement based on available resources.

  • Example: A project to develop a new data visualization dashboard for marketing analytics.

• Nondiscretionary Projects:

  • These are mandatory projects that must be completed due to regulatory requirements, legal mandates, or critical system failures.

  • Example: A new tax reporting system required by updated federal regulations.

• Committee Review of Nondiscretionary Projects:

  • Some argue that nondiscretionary projects do not need committee review because they are mandatory.

  • Others believe that all projects should be reviewed to ensure realistic resource allocation.

  • Many organizations plan ahead for predictable nondiscretionary projects (e.g., annual tax updates) to avoid unexpected resource constraints.

Preliminary Investigation Overview

Definition

• Preliminary Investigation: The process of analyzing a systems request to determine its feasibility before investing in further development.

• Is the initial phase in the systems development life cycle (SDLC),

• The preliminary investigation assesses the viability of a proposed system.

• Helps to determine whether the request aligns with business goals and should proceed.

Objectives of the Preliminary Investigation

• Understand the business problem or opportunity that initiated the request.

• Determine whether the new system is feasible based on operational, technical, economic, and schedule feasibility.

• Identify constraints and requirements for the proposed system.

• Provide management with a Preliminary Investigation Report containing findings and recommendations.

• Identify the most suitable fact-finding techniques to gather relevant data.

Six Steps in the Preliminary Investigation

1. Understand the Problem or Opportunity

   • Define the business problem or opportunity that led to the systems request.

   • Identify the affected departments, employees, customers, and business processes.

   • Common problems include:

     • New products or services require updated IT support.

     • The current system is inefficient, outdated, costly, or not scalable.

     • System may fail to support business objectives.

2. Define the Project Scope and Constraints

   • The project scope defines the boundaries of the system.

   • Scope:

     • Defines project size and goals.

     • Identifies what is inside and outside the project scope.

   • Constraints: Conditions that the system must satisfy or comply with.

     • Internal constraints: Budget limits, software/hardware compatibility.

     • External constraints: Government regulations, deadlines, competition.

       PRESENT VERSUS FUTURE Is the constraint something that must be met as soon as the system is developed or modified, or is the constraint necessary at some future time?

       INTERNAL VERSUS EXTERNAL Is the constraint due to a requirement within the organization, or does some external force, such as government regulation, impose it?

       MANDATORY VERSUS DESIRABLE Is the constraint mandatory? Is it absolutely essential to meet the constraint, or is it merely desirable?

3. Perform Fact-Finding

   • Fact-finding is necessary to gather data for the feasibility study.

   • Fact-finding techniques:

     • Analyze organization charts: Understand the structure of the company.

     • Conduct interviews: Gather input from key stakeholders.

       1. Determine the people to interview.

       2. Establish objectives for the interview.

       3. Develop interview questions.

       4. Prepare for the interview.

       5. Conduct the interview.

       6. Document the interview.

       7. Evaluate the interview.

     • Review documentation: Study policies, procedures, and reports.

     • Observe operations: Gain insights into business processes.

     • Conduct a user surveys

     • Analyze the data

       Pareto chart is drawn as a vertical bar graph. The bars, which represent various causes of a problem, are arranged in descending order so the team can focus on the most important causes.

       The XY chart, sometimes called a scatter diagram, is another problem-solving tool. Often, an analyst looks for a correlation between two variables.

4. Analyze Project Usability, Cost, Benefit, and Schedule Data

   • Usability: Ensure the system meets operational requirements and is easy to use.

   • Costs: Estimate Total Cost of Ownership (TCO) including development, maintenance, and training.

   • Benefits: Identify both tangible and intangible benefits (cost savings, efficiency, customer satisfaction).

   • Schedule Feasibility: Determine if the project can be completed on time and within constraints.

5. Evaluate Feasibility

   • The project is analyzed for four main feasibility factors:

     1. Operational Feasibility – Determines if the system will be used effectively.

     2. Technical Feasibility – Ensures availability of hardware, software, and expertise.

     3. Economic Feasibility – Weighs costs vs. benefits (TCO, ROI, tangible and intangible benefits).

     4. Schedule Feasibility – Examines timing constraints and project risks.

6. Present Recommendations to Management

   • Final step in preliminary investigation.

   • Key contents of the report:

     • Problem or opportunity statement.

     • Findings from the investigation and feasibility results.

     • Alternative solutions.

     • Recommended course of action.

     • Next steps and estimated schedule.

A typical report might consist of the following sections:

• Introduction - the first section is an overview of the report. The introduction contains a brief description of the system, the name of the person or group who performed the investigation, and the name of the person or group who initiated the investigation.

• Systems Request Summary- the summary describes the basis of the systems

  request.

• Findings - the findings section contains the results of your preliminary investigation, including a description of the project's scope, constraints, and feasibility.

• Case for Action - a summary of the project request and a specific recommendation. Management will make the final decision, but the IT department's input is an important factor.

• Project Roles - this section lists the people who will participate in the project, and describes each person's role.

• Time and Cost Estimates - this section describes the cost of acquiring and installing the system, and the total cost of ownership during the system's useful life. Intangible costs also should be noted.

• Expected Benefits - this section includes anticipated tangible and intangible benefits and a timetable that shows when they are to occur.

• Appendix - an appendix is included in the report if you need to attach supporting information.

Evaluation of Systems Requests

• Systems Review Committee (or Computer Resources Committee): Evaluates and prioritizes system requests.

• Systems Request Form:

  • Ensures consistency in evaluating requests.

  • Includes clear instructions and sufficient space for required details.

  • Typically submitted electronically.

  • Requests can lead to immediate action in critical situations (e.g., system failures).

Preliminary Investigation

• Conducted when a systems request is received.

• Involves gathering data through:

  • Studying organization charts.

  • Interviews.

  • Reviewing documentation.

  • Observing operations.

  • Surveying users.

• Aims to evaluate project feasibility and define scope.

• Project feasibility evaluation includes:

  1. Operational Feasibility: Determines if the system will be used effectively.

  2. Technical Feasibility: Ensures sufficient technology and expertise.

  3. Economic Feasibility: Evaluates cost versus benefits, including Total Cost of Ownership (TCO).

  4. Schedule Feasibility: Determines if the project can be completed within a reasonable time frame.

Evaluation of Systems Requests

• Many IT departments receive more requests than they can handle.

• A systems review committee evaluates and prioritizes requests.

• Companies use systems request forms for clarity and uniformity in submission.

Strategic Planning for IT Projects

• Key aspects:

  • Aligning IT projects with business strategies.

  • Defining project scope and goals.

  • Ensuring realistic and achievable objectives.

  • Identifying relevant factors, constraints, and assumptions.

Evaluation of Feasibility and Project Prioritization

• Systems requests are evaluated based on:

  • Costs: Direct and indirect expenses.

  • Potential savings and revenues.

  • Strategic importance to the organization.

  • Timelines and deadlines.

• Feasibility studies continue throughout system development.