BUS171 Chapter 2: Analyzing the Business Case
Chapter Objectives
Explain the concept of a business case and how a business case affects an IT project Describe the strategic planning process and why it is important to the IT team Explain the purpose of a mission statement Conduct a SWOT analysis and describe the four factors involved Explain how the SDLC serves as a framework for systems development List reasons for systems projects and factors that affect such projects Describe systems requests and the role of the systems review committee Define operational, technical, economic, and schedule feasibility Describe the steps and the end product of a preliminary investigation
What Is a Business Case?
*Business Case* = refers to the reasons, or justification, for a proposal - should be comprehensive, yet easy to understand - should describe the project clearly - should provide the justification to proceed - should estimate the project's financial impact *A Business Case Should Answer the Following Questions:* - why are we doing this project? - what is the project about? - how does this solution address key business issues? - how much will it cost? - how much will it take? - will we suffer a productivity loss during the transition? - what is the return on investment and payback period? - what are the risks of (not) doing the project? - how will we measure success? - what alternatives exist?
Preliminary Investigation Overview (Fact-Finding)
*Interaction with Managers and Users* - meet with key managers, users, and IT staff to describe the project, explain responsibilities, answer questions, and invite comments - focus on improvements and enhancements, not problems *Preliminary Investigation Model* 1) Understand the problem or opportunity 2) Define the project scope and constraints 3) Perform fact-finding (analyze organizational charts, review documentation, observe operations, conduct a user survey) 4) Study usability, cost, benefit, and schedule data 5) Evaluate feasibility (operational, technical, economic) 6) Present recommendations to management *Step 1: Understand the Problem or Opportunity* - develop a business profile that describes business processes and functions - understand how modifications will affect business operations and other information systems - determine which departments, users, and business processes are involved - systems request may not reveal an underlying problem - consider using a fishbone diagram *Step 2: Define the Project Scope and Constraints* - define the specific boundaries, or extent, of the project - define project scope by creating a list with sections called Must Do, Should Do, Could Do, and Won't Do - define project scope as clearly as possible to avoid project creep - identify constraints (a constraint is a requirement or condition that the system must satisfy or an outcome that the system must achieve) - external, internal, present, future *Step 3: Perform Fact-Finding* - gather data about project usability, costs, benefits, and schedules - analyze organization charts (understand the functions and identify people you want to interview) - conduct interviews (determine the people to interview, establish objectives for the interview, develop interview questions, prepare for the interview, conduct the interview, document the interview, evaluate the interview) - *Review Documentation* = investigate the current system documentation & check with users to confirm that you are receiving accurate and complete information - *Observe Operations* = see how workers carry out typical tasks & sample inputs and outputs of the system - *Conduct a User Survey* = a survey is not as flexible as a series of interview, but it less expensive, generally takes less time, and can involve a broad cross-section of people) - *Analyze the Data* = systems analyst might use a Pareto chart (displays the causes of a problem, in priority order, so an analyst can tackle the most important causes first) and an XY chart (shows correlation between variables, which is very important in problem solving) *Step 4: Analyze Project Usability, Cost, Benefit, and Schedule Data* - What information must you obtain, and how will you gather and analyze the information? - Will you conduct interviews? How many people will you interview, and how much time will you need to meet with the people and summarize their responses? - Will you conduct a survey? Who will be involved? How much time will it take people to complete it? How much time will it take to tabulate the results? - How much will it cost to analyze the information and prepare a report with findings and recommendations? *Step 5: Evaluate Feasibility* - Operational Feasibility = review of user needs, requirements, and expectations; look for areas that might present problems for system users and how they might be resolved - Technical Feasibility = identify the hardware, software, and network resources needed to develop, install, and operate the system; develop a checklist that will highlight technical costs and concerns - Economic Feasibility = apply the financial analysis tools; the cost-benefit data will be important - Schedule Feasibility = include stakeholder expectations regarding acceptable timing and completion dates *Step 6: Present Results and Recommendations* - Typical Report Includes: 1) Introduction 2) Systems Request Summary 3) Findings 4) Case for Action 5) Project Roles 6) Time and Costs Estimates 7) Expected Benefits 8) Appendix
Information Systems Projects
*Main Reasons for Systems Requests:* - Improved Service = to customers or users within the company - Support for New Products and Services = often require new types or levels of IT support - Better Performance = current system might not meet performance requirements *Factors that Affect Systems Projects* - Internal Factors (strategic plan, top managers, user requests, IT department, existing systems and data) - External Factors (technology, suppliers, customers, competitors, the economy, government)
A Framework for IT Systems Development
*Strategic Planning* = a dynamic process that starts with a mission statement, which is shaped by the firm's purpose, vision, and values. The mission generates goals and objectives that produce business results. *Strategic Planning Overview* - starts with a mission statement - continues with goals and objectives - long and short-term goals identified *What Is SWOT Analysis?* = comes from the mission statement and goals and objectives - An enterprise SWOT analysis usually begins with these questions: 1) What are our strengths, and how can we use them to achieve our business goals? 2) What are our weaknesses, and how can we reduce or eliminate them? 3) What are our opportunities, and how do we plan to take advantage of them? 4) What are our threats, and how can we assess, manage, and respond to the possible risks? *EXAMPLE: SWOT Analysis of a Corporate Patent* - Strengths = our patent covers valuable technology that we can use in popular products - Weaknesses = our patent has a limited life. When it expires, the technology will no longer be protected - Opportunities = we can use the technology in more products, license it to others, or seek more patents - Threats = a competitor might develop similar technology that does not legally infringe our patent *Strategic Planning for IT Projects* = careful planning can help assure that: - the project supports overall business strategy and operational needs - the project scope is well-defined and clearly stated - the project goals are realistic, achievable, and tied to specific statements, assumptions, constraints, factors, and other inputs *A New Role for the IT Department* - management and IT are linked closely, and remarkable changes have occurred in both areas - today, systems development is much more team-oriented - although team-oriented development is the norm, some companies see the role of the IT department being screening and evaluating systems requests - larger firms are more likely to use an evaluation team or systems review committee
Evaluation of Systems Requests
*Systems Request Forms* - streamlines the request process - ensures consistency - easy to understand - includes clear instructions - indicates what supporting documents are needed - submitted electronically *Systems Review Committee* ADVANTAGES - with a broader viewpoint, a committee can establish priorities more effectively than an individual - one person's bias is less likely to affect the decisions DISADVANTAGES - action on requests must wait until the committee meets - members might favor projects requested by their own departments - internal political differences could delay important decisions
Introduction
- Analysts must consider the company's mission, objectives, and IT needs - Process starts with a systems request - Preliminary investigation follows to evaluate 1) Feasibility Study 2) Fact Finding Techniques 3) Reporting to Management
Evaluating Feasibility
- Identify and weed out systems requests that are not feasible - Even if the request is feasible, it might not be necessary - Requests that are not currently feasible can be resubmitted as new hardware, software, or expertise becomes available
Overview of Feasibility
- Is the proposal desirable in an operational sense? - is it a practical approach that will solve a problem or take advantage of an opportunity to achieve company goals? - Is the proposal technically feasible? - are the necessary technical resources and people available for the project? - Is the proposal economically desirable? - what are the projected savings and costs? - Are other intangible factors involved, such as customer satisfaction or company image? - is the problem worth solving, and will the request result in a sound business investment? - Can the proposal be accomplished within an acceptable time frame? 1) Operational (will it be easy to learn and use?) 2) Economic (will benefits exceed costs?) 3) Technical (do we have the tech resources?) 4) Schedule (can we do it in time?) *Operational Feasibility* - Does management support the project? Do users support the project? Is the current system well liked and effectively used? Do users see the need for change? - Will the new system result in a workforce reduction? - Will the new system require training for users? - Will users be involved in planning the new system right from the start? - Will the new system place any new demands on users or require any operating changes? - Will customers experience adverse effects in any way, either temporarily or permanently? - Will any risk to the company's image or goodwill result? - Does the development schedule conflict with other company priorities? - Do legal or ethical issues need to be considered? *Technical Feasibility* - Does the company have the necessary hardware, software, and network resources? If not, can those resources be acquired without difficulty? - Does the company have the needed technical expertise? If not, can it be acquired? - Does the proposed platform have sufficient capacity for future needs? If not, can it be expanded? - Will a prototype be required? - Will the hardware and software environment be reliable? - Will it integrate with other company information systems, both now and in the future? - Will it interface properly with external systems operated by customers and suppliers? - Will the combination of hardware and software supply adequate performance? - Do clear expectations and performance specifications exist? - Will the system be able to handle future transaction volume and company growth? *Economic Feasibility* - Costs for people, including IT staff and users - Costs for hardware and equipment - Cost of software, including in-house developments as well as purchases from vendors - Cost for formal and informal training, including peer-to-peer support - Cost of consulting expenses - Facility costs - The estimated cost of not developing the system or postponing the project *Schedule Feasibility* - Can the company or the IT team control the factors that affect schedule feasibility? - Has management established a firm timetable for the project? - What conditions must be satisfied during the development of the system? - Will an accelerated schedule pose any risks? If so, are the risks acceptable? - Will project management techniques be available to coordinate and control the project? - Will a project manager be appointed? *Tangible Benefits* - A new scheduling system that reduces overtime - An online package tracking system that improves service and decreases the need for clerical staff - A sophisticated inventory control system that cuts excess inventory and eliminates production delays *Intangible Benefits* - A user-friendly system that improves employee job satisfaction - A sales tracking system that supplies better information for marketing decisions - A new Web site that enhances the company's image
Setting Priorities
- Will the proposed system reduce costs? Where? When? How? How much? - Will the system increase revenue for the company? - Will the systems project result in more info or produce better results? - Will the system serve customers better? - Will the system serve the organization better? - Can the project be implemented in a reasonable time period? - Are the necessary financial, human, and technical resources available? *Discretionary Projects* = projects where management has a choice in implementing them - creating a new report for a user *Non-discretionary Project* = projects where management must implement them - adding a report required by federal law - most of these projects are predictable - annual updates to payroll, tax percentages, quarterly changes