Building The Business Case

1. 3 2 1 4 Building The Business Case Assemble IT And Business Personnel Define Initial Scope and Cost Parameters Review Functionality Contained in the Scope Measure The Benefits

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. Financial Costs, benefits and impact on business performance measures Strategic New capabilities and improved competitive position ROI Technical Benefits to IT infrastructure and support for technology strategy Operational Process improvements (Tangible and Intangible)

3. The Business Case Should Cover the Entire Life Cycle of the Solution DISCOVERY Qualification of Improvement Opportunity 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 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

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. Building The Business Case • 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

6. Building The Business Case • 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

7. @ 5% Interest Rate $152.09 $100 Year 3 Payback Period Savings Time Costs Measures for Business Case Proposals 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. 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).

10. Business Benefits - Some Examples Financials: Improve Time to Process A/P Invoice 15%-40% Improve Time to Close Books 35%-80% Reduce Term Discounts Lost 25%-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 Efficiencies 35%-80% Purchase Cycle Time Improvements 30%-80% Increase Compliance of Purchases from Government-wide Contracts 25%-50% Human Resources/Payroll: Personnel Administration Efficiencies 10%-40% Payroll Check Processing Efficiencies 15%-40% Reduced Time and Exp. Reporting 10%-20% Recruitment/New Hire Efficiencies 15%-25% Employee Self-Service Transaction Reduction 25%-50%

11. Business Benefits - Some Examples Inventory: Reduction in Inventory 10%-50% Reduction of Inventory Write-Offs 15%-40% Improvement in Inventory Turns 10%-50% Reduction in Warehouses Maintained 15%-85% Facility/Plant Maintenance: Reduction in Repair Parts Inventory 10%-40% Improved Field Service Response 10%-20% Reduction in Work Order Prep Time 25%-75% Reduction in Overtime Cost 10%-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 Costs 40%-80% Reduce Reconciliation/Budget Time 15%-30% Reduce Cost for Revenue Calculation/Analysis 40%-75%