As a dynamic chief executive officer of a successful company you havehandled, expansion projects, new product lines, diversification into newbusiness segments, acquisitions, IPOs, GDRs. You have been there and done itall. You have a flair for making the right moves. Erring is alien to yoursenses.Well, but now you are confronted with a tough one. It appeared to be quitean easy call to make initially, however, during the last six months, youhave had your IT department work overtime, you have had several meetingswith IT and other consultancy firms and other appropriate "friendlycompanies". But, this nut continues to rattle your normal composure andconfidence.
So what is this tough nut?
Well, your IT department contends that with the rapid expansion of yourcompany's business, and the addition of several business lines, and withvery ambitious future growth projections, they find that the existingbusiness support systems are buckling. Also, the world is moving ontoweb-enabling their operations. The IT department contends that the need ofthe hour is a state of the art IT-enabled business system, probably withWeb-enabled features thrown in. It has also identified the appropriatesolution for the company.
So what is the problem? If the IT department says that the company needsthis IT system, so be it. After all it is an IT-related matter. Who could bea better judge? Right? Wrong.
The first mistake that is made by companies is to view such an IT projectproposal as an IT initiative. Obviously, if the purpose of the IT supportsystem is to facilitate a viable business solution, the process of itsevaluation should be conducted by the business functionaries ie, the peoplewho are going to use the system. At the most, the IT department may initiatethe process and may act as a facilitator and the assessor oftechnology-related issues.
So what is the way forward. Obviously, the secret is to evaluate it like anyother project proposal ie, you will have to assess whether it will bringvalue to the organisation. If so - how much and how soon and at what cost?After all, you will have to justify the "expensive stuff." In effect whatneeds to be done is the development of a `business case.' The followingresearch results (source: Gartner Group) provide an eye-opener tosubstantiate the need for a business case as a pre-requisite for assessingthe efficacy of an IT project: "Through 2001, 70 per cent of BPR projectfailures will be due to failure to use business modelling/performancemetrics as change agents effectively".
A recent ERP survey revealed that "27 per cent of clients have either notbeen able or did not attempt to measure business benefits ... an additional64 per cent have only measured `some' benefits. Determining benefits, alongwith lack of a repeatable `benefits process' were the top two obstacles tojustifying investments." "Through 2002, less than 25 per cent of applicationprojects will deliver hard, monetary benefits that exceed the cost of theimplementation."
Having understood the importance of developing a business case let us seewhat factors would a typical business case have to address:
Company mission and business strategy
Business and IT change-drivers
Opportunity assessment
Assessment of pain areas
Costs and benefits assessment (tangible, intangible)
Project definition
Issues and risksTypical tasks that would have to be performed while building a business casefor such a project would include - confirming the strategic intent of theenterprise, identifying critical success factors which provide direction tothe organisation, identifying cost reduction/revenue enhancement/cashliberation opportunities, identifying shareholder value-drivers, assessingchange management risks, evaluating benefits scenarios and costs vis-a-visother initiatives, and assessing potential quick hits. The returns -tangible and intangible would have to be gauged on various levels eg,shareholder value, strategic enterprise architecture, return on investmentand functional/operational improvements.
The various tools that can be used for building up a business case would beany or a mix of the following: Supply chain diagnostic, strategic enterprisearchitecture definition and design, business case methodology, balancedbusiness scorecard, dashboard management and organisational changeframework. Supply chain diagnostic is used to identify realistic improvementopportunities which create the most value for the client's enterprise andits shareholders. The diagnostic allows practitioners to provide a rapidassessment to clients as to how well the organisation is managing its supplychain along several key dimensions. The approach has a top down focus, whichstarts with integrated supply chain strategy leading to value chainprocesses with a vision towards enterprise business solutions. The strategicenterprise architecture (SEA) ensures alignment between strategy, structure,processes and technical architecture. This helps senior executives trulyunderstand the implications of the IT solution. It also highlights andprioritises where integration and commonality of business processes andinformation are most valuable.
A balanced business scorecard is a long-term performance tool that dependson a balanced approach with measures and rewards aimed at improving customersatisfaction, innovation and quality and financial efficiency. The scorecardallows high level key performance indicators (KPIs) to be translated intomeasures within the employees responsibility.
Typically, a business case development using some of the above mentionedtools would result in the following kinds of opportunities that would haveto be articulated, quantified and measured against the cost of the ITproject:
Information flow efficiency: Better integration and access to data andinformation can result in substantial improvement in all-round efficienciesand decision support at strategic, tactical and operational level.
Supply chain efficiencies: Better planning tools and visibility of theprocess will result in value chain efficiencies (eg, lower lead times,inventory reductions, less storage costs, lower scrap).
Customer responsiveness: These capabilities could be increased such asresponding to customer requests with ready and accurate information. Tosum up, a business case for the IT project can be a powerful vehicle toenable you to sell the project to the board. Otherwise it would be a case of`to be or not to be'.
The author is a principal consultant with PricewaterhouseCoopers and canbe contacted on mohan.verma@in.pwcglobal.com
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.