GUIA - Building a Business Case for IT Investment

7/25/2019 GUIA - Building a Business Case for IT Investment

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Building a business case for

IT investment

The Leading Provider of IT Service Management Solutions

How-to guide

Overcoming hurdles and turning innovation into reality


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How-to guide: Building a business case for IT investment

Innovation is nothing without execution. New ideas, wherever they stemfrom, are worth nothing until they make it into reality. However, in todays

tough economic climate, getting budget for IT projects can be a real

challenge. The business case is the stage at which most new innovations

are likely to stumble. No budget means no execution. No execution means

no innovation. So, developing strong business-case-building capabilities is

a critical component of an innovative, business-leading IT department.

The goal of a business case is to get the support you need (budget and

commitment) to turn an idea into reality; thus, it is an essential part of the

overarching innovation process. When youre presenting a business case,

youre selling an idea and how to execute it - creating the support and

cultural groundswellyou will need to gain consensus, push the business

case over the line and execute the plan.

Executive Summary

Introduction

So what is a business case?

Planning to build a business case

Identifying the need/opportunity

Stakeholder identification

Business objectives and outcomes

Stakeholder planning

Strategic alignment

Technology Issues

Risk profiling

Business case evaluation

Key takeaways

Contents

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Many businesses today arent just supported by technology theyredefined by technology. In digitally-defined companies like Facebook and

Amazon, the ROI of technology is indisputable, yet most organizations

have been stung by very memorable IT project failures. These failures

stick in the minds of the people who write the checks. As a result, the level

of trust in the IT department is low, and this lack of trust (combined with a

harsh economic climate) has caused business leaders to become highly

skeptical when it comes to spending big bucks on IT projects (the last time

we gave you money, you blew it!).

The barriers that stand between the IT department and the company

coffers are higher than ever before for this very reason, but the problem

is compounded by increased competition for funding from other areas

of the business (including shadowIT projects). The antidote to budget-

holder skepticism is a rigorous and compelling business case that clearly

articulates the benefits in business terms and sets out howand whenthe

project will be executed to deliver these benefits and avoid the associated

risks.

The key to success is presenting IT investment as business investment,

e.g. how spending money on IT projects will pay dividends in terms of cost

savings, productivity increase and quality improvements; some tangible

and measurable, some less tangible and less easy to quantify.

Financial figures should show compelling reasons for IT investment, but

a traditional Cost-Benefit Analysis (CBA) is only part of a business case.

Where financial analysis may be seen as the rationalpart of decision-

making, there are also other subconscious and emotional factors toconsider. How will this investment in IT make life easierfor people in the

business? How will it eliminate current frustrations? The resources required

to successfully deliver an IT project go beyondthe budget: people, effort,

motivation, commitment, knowledge and relationships are also critical

success factors.

It is important to consider how the business case will appeal to the values

of stakeholders and decision-makers. For example, introducing web-based

ecommerce and self-support tools in a very traditional organization that

prides itself on the personal touch may make economic sense (in terms

of cost savings) but it may not mesh well with the companys brand values.

It is essential that an IT business case is constructed in collaboration

with business stakeholders, so that conflicts that might kill an IT project

can be resolved as early as possible in the process. Understanding that

building a business case is an iterative and collaborative process - applying

continuous participatory evaluationthat involves both IT people and

business people is the key to success.

Introduction

The appropriatelevel of stakeholdercommitment isthe single mostimportant factortowards ensuringthe success ofan IT investment

project.Dan Remenyi, IT Investment:

Building a Business Case

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More than just a document, it is a

vehicle for gaining consensus on the

scope of a project and how it will be

executed. The goal of a business case

isnt just to get the go-ahead but to

gain support from all of the people

whose commitment will be needed to

execute the resulting IT project and

adoptthe delivered innovation.

For business executives, a business

case is in theorya decision-making tool

that encapsulates all of the relevant

information needed to evaluate a binary

decision Yes or No. However, in

reality, a business case is not just a

document to be rubber stamped by

the CEO or CFO.

It may be thought of as the end product

of a process, but that process should

involve stakeholders and decision-

makers from day one. A surprise

business case document landing on the

CFOs desk is unlikely to make the cut.

For managers of the resulting IT

project, a business case document

is a tool for keeping the project on

track. For them it is a list of objectives,

deliverables and milestones on which

a more granular IT project plan can be

hung - although again, the business

case document should not be the only

communication vehicle.

Relationships formed throughout the

process of constructing the business

shape should be maintained throughout

the process of developing and

deploying the solution to ensure that

what is delivered matches up with what

was promised.

IT solutions have a tendency to evolve

during their construction, so it is

essential to keep the objectives in mind

and stay synchronized with the ultimate

customers of the innovation project.

So what is a business case?

Generally speaking,

a business case is a

predictive evaluation of a

future state;

a defined vision of what could be,

given the right resources and support.

It acts as a justification for assigning

scarce resources in a particular area by

forecasting the benefits and contrasting

these against cost and effort.

Effectively, a business case is adetailed sales brochure: selling the

concept of an innovation, outlining how

it will work, who will benefit and how

it will be made a reality. A business

case should be as much aplanas a

justification. It should include much of

the detail necessary to execute the

innovation, once it is signed-off.

For the business case project owner

(somebody hasto own it) the business

plan document is the hub of the

business case process, capturing

what is to be done, when, why, how

and by whom. It is a focal pointfor the engagement with business

stakeholders.

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Planning to build a business case

Building a business case for an IT

investment is not a linear process.

Constructing a compelling justification

requires iterative engagement with

all stakeholder groups, building up a

business case over time that all the

stakeholders can commit to.

Stages three through seven of the

process are iterative and interrelated.

For example, changes to the scope

of business outcomes (which will

frequently occur as the business

case develops through a processof collaboration) will have a knock-

on effect on other stages, making it

necessary to continually amend the

business case as a living document.

The ultimate output of the process is

a balanced business case that makes

sense in terms of realistic goals,

acceptable timescales, manageable

risks and reasonable costs.

Of course, the size and shape (and

most importantly the cost) of the IT

investment will dictate how elaborate

the business case must be andtherefore how much planning and

preparation must go into building the

case.

For very minor IT projects with limited

impact on the business, the costs may

be absorbed within ITs discretionary

budget, making a full-scale business

case process unnecessary.

The business case is the

stage at which most IT

projects stumble, so proper

planning is essential.

Most of what IT does is founded on

some process, lifecycle model or

framework, so why would you take

a haphazard approach to building a

business case?

The production of a business case for

IT investment is a business process inits own right.

Apply project management principles

and have a defined process to help

you get the outcomes you need to

take the innovation to the next stage

authorization of your plan and budget,

combined with support from all the

relevant stakeholders.

The process

1. Identifying the need/opportunity

This stage is the initial trigger for

the project, which may stem froma business strategy change, the

Problem Management process, or

a Voice-of-the-User program.

2. Stakeholder identification Who

will be involved in/affected by the

IT project? This stage is critical

as bringing stakeholders into the

loop at a late stage can throw an IT

project back to square one.

3. Business objectives and outcomes

Defining the ultimate goals,

objectives and deliverables of the

project.

4. Stakeholder planning

Collaborating with stakeholder

groups to iteratively define and

refine the objectives and the path

to delivery (and adoption).

5. Strategic alignment Defining

how the IT project will support

the broader business goals and

objectives.

6. Technology issues Defining

the architecture, infrastructure,

hardware, software, people and

timing of delivery and associated

costs thereof.

7. Risk profiling- Identifying,

assessing and negating associated

risks.

8. Business case evaluation The

final decision-making stage,where the project will be either

commenced or declined.

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The idea that drives innovative IT

projects might stem from a change in

business strategy, from within IT (based

on performance metrics), or from the

end user community (see ourHow-to

guide: Improving ITSM by leveraging

user feedback).

Once an innovation is conceived, the

process of refining the idea, developing

a solution plan and building a business

case can begin. This stage in the

broader innovation process falls outside

of the business case process itself, but

should be recognized as the preceding

event.

Identifying the need/opportunity

The trigger for an IT project

is the identification of a

problem to be solved or

an opportunity to do things

better.

Stakeholder identification

Clearly, for an IT-driven business

project, this will require a mixture of

business and technical knowledge,

so engagement with all impacted

stakeholders is critical to gaining the

appropriate level of understanding.

Stakeholder identification is an

essential part of business case

planning. Omitting this stage invites

failure.

By proceeding with a philosophy ofcontinual participatory evaluation,

the business case can be co-evolved

through iterative collaboration with

all of these stakeholder groups to

resolve conflicts between stakeholder

requirements and achieve consensus

and commitment. In short: engaging

with the business.

But who are these stakeholder

groups?Analysis of the need/

opportunity will give pointers as to

which groups will hold a stake in a

particular IT project, by way of either

impact (the business people who will be

involved in the change) or responsibility

(e.g. the IT people that will build the

technology, or the budget-holders that

must account for it).

The stakeholder list will be different for

each business case, but there are four

main groups to look out for:

End users/owners the business

people using the technology.

IT people those that will

build, deploy and manage the

technology.

Finance, HR and procurement

staff those that are responsiblefor buying or accounting for the

supporting hardware, software,

people or other assets.

Executive management the

decision-makers and decision-

influencers.

Preparing a successful

business case isnt just

about economics - its also

about politics.

The more stakeholder groups (business

managers, end users, IT people,

finance staff, etc.) that will be affected

by an IT investment project, the

more scope for conflicting interests

which must be resolved to removeresistance and facilitate the passage

of the business case through to

implementation.

Preparing a business case requires a

deep understanding of the business

context: which departments, functions,

geographies, groups, processes,

policies and governance structures will

be affected.

In order to prepare a complete and

accurate predictive evaluation of

a future situation, both the current

business context and the step towardsthe future situation must be well

understood.

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Business objectives and outcomes

Setting out the objectives and outcomes of the IT project is the starting point of the business case process and forms an

elevator pitch that succinctly communicates the value that can be achieved. This is an essential first step, setting the direction

and tone for the entire business case and acting as an essential tool for communicating (upwards to executive management and

outwards to the stakeholder groups that will be involved in constructing/approving the other aspects of the business case).

Stakeholder planning

Clearly, some stakeholders will hold

more power than others some

executive stakeholders may hold a

veto over the entire project so it is

necessary to take into account the

stakeholder powerand weigh up the

influences.

For instance, where a conflict exists

between a large powerful stakeholder

group (e.g. sales) and a much smaller

back-office function, the business case

should accommodate the larger group,

taking into consideration the level of

business impact. The IT people leading

the business case project must beequipped to deal effectively with the

politics of the situation.

When communicating with stakeholder

groups, IT must be very careful

about how they interact. When youre

presenting a business case, youre

selling an idea. Research in social

science shows that people who sense

positivity (enthusiasm, inspiration, etc.)

are more open to new ideas.

In his book To Sell is Human, Dan

Pink explains: The effects of positivity

during a sales encounter infect thebuyer, making him less adversarial,

more open to possibility and perhaps

willing to reach an agreement in which

both parties benefit.

Conversely, taking an aggressive

stance will distance you from

stakeholders and encourage active

resistance. This will stand as a barrier

to the relationships you need to build

in order to execute your business case

process and successfully run the IT

project itself.

A successful IT investmentbusiness case cant be

developed by IT people

in isolation and then

simply be sprung on the

business at the tail end of

the process.

If you dont engage with stakeholder

groups, you are forced to anticipate

and negate every possible objection

an impossible task when IT often

fundamentally misunderstands theneeds and wants of people out in the

business.

What is required iscontinuous

participatory evaluation collaboration

with a comprehensive group of

stakeholders to build the business case

from the ground up. The business case

document is the hub of the process, but

its not 100% of the final output.

The other essential outputs are

stakeholder consensus and

commitment: consensus that there is

a strong case for the IT project, andcommitment to see the project through

to fruition.

By working together with stakeholder

groups, the IT department can shape

the business case to better fit the needs

of each group. Naturally, conflicts will

arise, and changes or compromises

must be made, but it is better to resolve

issues at this stage than to face these

conflicts once a system or service has

been built and deployed.

Customers - TheSilent StakeholderJeff Bezos, founder of

Amazon, likes to ensure thereis always an empty chair inevery meeting; a chair thatrepresents the customer ofthe business. The idea is toencourage people to alwaysremember the perspective

of the customer the mostimportant of all stakeholders.

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However, by working closely with other

business stakeholders to make the

link between the IT project objectives

and broader business objectives, the

strategic alignment analysis part of

the business case should be both

reasonable and palatable.

In general, the IT project should

contribute to at least one of the

following:

Reduced business costs (through

automation)

Improved business agility (by

speeding up business processes)

Improved quality of business

output (by improving process

quality and removing human error

from the supply chain)

By identifying and, where possible,

measuring the contribution of the

IT project to the businesss ability

to deliver better products, greater

operational efficiency and a superior

customer experience, you will be able

to establish the value of the IT project

in the context of strategic business

alignment.

There are a number of corporate

strategy models that can be used to

assist the process of mapping your

IT project to strategic value (e.g. The

Five Forces Model, Generic Strategies

Model, Value Chain Model, etc.);

however, the detail goes beyond the

scope of this guide.

Strategic alignment

Every IT project should

support the organizations

company strategy in some

way, so it is important to

ensure that your business

case articulates how the

innovation will help to

achieve these goals and

objectives.

IT projects that dont align with

business priorities are routinely rejected

by business managers and end users

because they pull in the opposite

direction and add no tangible value to

the organization.

Some organizations have a well-

documented corporate strategy, giving

you a clear starting point for tying your

IT project to it.

However, many organizations do not

articulate a formulated strategy; the

strategy isimplicit

. In this case, it

may be more difficult to pin down the

specifics of your corporate strategy

and, thus, link your IT project to these

objectives.

Identifying the strategic alignment of

your IT project is achieved through a

systematic process. Looking at each of

the project objectives, it is necessary to

map each of these to the higher level

strategic business objectives and,

where possible, the impact on business

objectives should be represented by

estimated metrics.

Some assumptions will be made, so

it is important to clearly label these

as such: presenting assumptions as

facts invites criticism from business

stakeholders and may undermine the

credibility of the business case.

An informationsystem onlyacquires valuewhen it is used aspart of a businessprocess or practicethat will result in

enhancement ofthe effectivenessor the efficiency ofthe organizations.Dan Remenyi, IT Investment:

Building a Business Case

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What are the technology-relatedcosts?

It is impossible to fully cost a complex

IT project to a granular level without

spending weeks on analysis, but

the material costs (those that are

significant) should be listed

including expenditure on infrastructure,

hardware, software, and manpower.

Accounting for the significant costs that

will be incurred is usually a fairly simple

process.

The technology part of a business caseis where IT people usually want to

focus. However, without the Strategic

Alignment part of the business case,

which shows the business value that

will be delivered, it is impossible to

weigh up the costs versus benefits. A

common mistake is to spend a lot of

time defining the shape of the solution

and not enough time setting out and

quantifying the benefits that the solution

will deliver.

Technology issues

An IT business case must include

a plan that discusses the main

technology challenges, details the

architecture of the solution, explains

how (and when) it will be constructed

and sets out the associated costs

against which the business benefits

that feature elsewhere in the business

case can be evaluated.

What is the proposedtechnology solution?

Set out the architecture of the solution

the building blocks and how theywill interoperate to solve the business

problem/challenge.

Who will implement thesolution?

Set out which technical people will

be responsible for managing and

executing the delivery project. Use the

RACI model to clearly articulate who is

Responsible, Accountable, Consulted

and Informed.

What is the schedule?

Set out the order in which the

technology building blocks will be

deployed, linked and tested. It will also

be necessary to at least pay lip-service

to a roll-back strategy at this stage

should the implementation fail to

function in the live environment.

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In modern IT environments, where

systems are typically interconnected

and interdependent, the risk of

extensive damage to business

operations, customer relationships and

brand reputation is very real.

Risks mustbe identified and

addressed. Risk is always present in

an IT project. Every silver lining has a

cloud a fact that decision-makers are

acutely aware of.

Most business leaders will have

experienced the pain of a failedinvestment that they have signed off

on. Pretending there is no risk involved

will be fatal to an otherwise sound IT

investment business case.

Consequently, neglecting risk

management, or deliberately sweeping

risks under the carpet in an attempt

to get a business case signed-off is in

itself risky.

Risks willbe uncovered and the

credibility of the business case will

be irreparably damaged. To neglect

the risk view of an IT investment is tosabotage your own business case.

The only safe path is the honest path:

to properly (and openly) identify,

address and manage risks. Without

adequate risk assessment, the course

of an IT project is left to luck. With

substantial budget (and the reputation

of IT) at stake, nothing should be

trusted to luck.

Unfortunately, there is no de

factomodel with which you can

systematically identify and address risk;

the process will be different for each

business case.

However, the nine variable approach

acts as a guide to identifying a

complete set of risks. Examining each

area will help you build up a more

complete risk profile.

Risk profiling

Risk assessments are

typically a neglected part of

the IT investment business

case. IT people are, by

nature, keen to push the

merits of technology and

underplay the risks.

At the same time, many IT

professionals are not as familiar with

risk assessment methods as their

counterparts in, for example, the

finance department.

Risk mentality is not culturally

engrained in IT people; a pervasive

trust in technology means that IT

people often view IT opportunities

through rose-tinted spectacles.

Risk is something of a slippery concept,

meaning different things to different

people, but the chief characteristic

of a risk is anything that mightpush

the project off course, prevent the

delivery of the stated benefits, or evencause damage to broader business

operations.

Knowledge Foundation Timing

Architecture Technical competence Technology platform Technology lifecycle

Development Estimation & planning Staff turnover Development tools

Business Understanding Commitment Business change

Business case evaluation

Business case evaluation is the decision point. At this stage, you should have a comprehensive business plan that sets out the

elevator pitch, details the business value that will be delivered, and defines costs against which to assess value. By this stage

you should also have general consensus on the worth of the IT project from each of the key stakeholder groups. In essence,

if you have followed an iterative process of continual participatory evaluation, the sign-off stage is a formality - to close off the

business case stage of the innovation process. If all due diligence has been performed, there should be no nasty surprises at

this stage and the business case should pass the final test with flying colors.

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Key takeaways

Source:

Business cases that outline user-driven innovations will carry more credibility than those that originate from within the IT

department, especially in organizations where the business lacks trust in IT. If the idea came from an end user group, make that

fact clear in the business case.

Process:

Building a business case is a complex process that goes far beyond simply producing an output document. Plan the process of

building a business case to maximize the chances of success.

Engagement:

Constructing a business case is a team effort. Engagement with stakeholders is the key to both pushing the business case

over the line and getting the buy-in from the people whose help you will need to execute the IT project and adopt the deliveredinnovation. Any business case that is developed purely within the confines of IT is almost certain to fail, as it will lack the

necessary groundswell.

Business focus:

Dont look at an IT investment business case as an IT project; look at it as a business project (think IT-enabled business

project). How will the companybe better off after this project? Articulating these benefits clearly to the business is the key to

gaining support.

Communication:

Use plain business language to communicate these benefits. Remember that the majority of the audience of a business

case will be non-technical staff. A great idea articulated badly is an opportunity missed. Your company culture, structure and

governance will dictate how deep your business case needs to be, but, in general, 20 pages is better than 200.

People:With the success of a business case balancing on the quality of stakeholder relationships, the IT people who are managing and

supporting the process must possess a mixture of interpersonal, communication and diplomacy skills.

Risks:

Failure to address risks will fatally damage the credibility of the business case.

Assumptions:

Questionable assumptions also undermine credibility. Any and all assumptions should be checked with the relevant

stakeholders. Always presume that weak assumptions will be targeted by business people who are cynical of the value

of IT. Building a business case is difficult enough; dont give resistant stakeholders reasons to say No, so never present

assumptions as facts and always be open to adjusting assumptions based on feedback from business stakeholders.

Foundations:

When your business case passes the test and you move on to the IT project management stage, use the business case

document as a foundation guide as a starting point for planning the development project plan, to keep the project focused

throughout, and to ensure that the benefits sold to the business are the benefits that are realized.

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Axios

For more than 25 years, Axios

Systems has been committed

to innovation by providing

rapid deployment of Service

Management software. With

an exclusive focus on ServiceManagement, Axios is recognized

as a world leader, by the leading

analysts and their global client

base.

Axioss enterprise software,

assyst, is purpose-built, designed

to transform IT departments from

technology-focused cost centers

into profitable business-focused

customer service teams. assyst

adds tangible value to each clients

organization by building on theITIL framework to help solve their

business challenges.

Axios is headquartered in the UK,

with offices across Europe, the

Americas, Middle East and Asia

Pacific. For more information about

Axios Systems, please visit us:

About the Author

www.axiossystems.com

@Axios_Systems

/axiossystems

Nigel Martin has more than 20

years of experience in global

enterprise software. Nigel has

written multiple research paperson organizational strategy and

holds a doctorate in strategy and

organizational brand development.

Nigel can be contacted at

[email protected]

Dr. Nigel MartinVP of Global Marketing
http://www.axiossystems.com/http://twitter.com/Axios_Systemshttps://www.youtube.com/AxiosSystemsmailto:nigel.martin%40axiossystems.com?subject=mailto:nigel.martin%40axiossystems.com?subject=https://www.youtube.com/AxiosSystemshttps://www.youtube.com/AxiosSystemshttp://twitter.com/Axios_Systemshttp://twitter.com/Axios_Systemshttp://www.axiossystems.com/http://www.axiossystems.com/

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GUIA - Building a Business Case for IT Investment