Business Case in IT Project Life Cycle

In an IT project life cycle, a business case is the first deliverable which provides a detailed analysis of the feasibility study, the cost and risk involved in the project, the benefits, and the organisational value of the project. It is not a budget plan but it provides the management with all the detailed information with the help of which, one can de­cide whether to fund the project or discard the project plan.

The main purpose of developing a business case is to find out how the IT solution can create business value. There are many benefits of developing an IT project, some of which are as follows:

• It can increase the profit margins of an organisation.
• It can provide services in an efficient manner.
• It can improve customer satisfaction by providing fast access of information at any time.
• It can improve communication within or outside the organisation.
• It can help in decision-making.
• It can improve reporting capabilities.

Instead of the above­mentioned benefits of IT projects, there are many IT projects that failed to return the benefit to the organisation. Most of these IT projects failed because they started without a de­ tailed analysis or understanding of the costs and risks involved in the project. Thus, an IT project should be selected on the basis of the val­ ue that it will bring to the organisation. The business case will show how the investment in the IT project will bring business value to the organisation.

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IT Value Chain

The IT value chain is developed by Michael Porter, an American aca­ demic. It is a high level model used to describe how an organisational goal is aligned with the organisational strategy. The ultimate goal of the IT value chain is to provide maximum value to the organisation. While the project is completed, the actual achievement of the project is compared with the Measurable Organisational Value (MOV) in or­ der to determine if the project is successful or not. MOV is the overall goal and measures of success in an IT project.

Project Goal

Apart from the organisational objective, a project has also some defi­ nite goals. However, the goals of the project support the overall objec­ tive of the organisation. The goals of the project are usually defined in terms of its scope, schedule, budget and quality as shown in Figure

As shown in Figure above, each goal is equally important for the overall success of the project.

Developing the Business Case

The business case should show how the cost involved in the IT project can lead to increase in the business value.

The following are the processes that should be carried out to develop a business case:

• Selecting a core team: A core team should be selected for devel­ oping a business case. The core team should have a manager, IT specialists, business specialists, etc. They should be well aware of the opportunities, limitations as well as risks that can be involved in IT.
  
  
• Defining Measurable Organisational Value (MOV): The main purpose of selecting a core team is to define the risks and benefits of the project and then identify the alternatives that can benefit the organisation. For this, the IT project must support the goal and objective of the organisation.
  
  The process of managing the IT proj­ect is guided by MOV. A MOV can never be defined until the goal of the project is clearly defined or understood. MOV should be mea­ surable and verifiable to determine whether a project is successful or not. It provides value to the organisation as it guides in taking decisions and managing the IT projects.
  
  
• Identifying alternatives: An organisational problem can be solved through various strategies. More than one strategy should be cho­ sen to solve a particular organisational problem so that there can be some alternatives in case the first approach fails. The alterna­tives should have a potential solution to the organisational prob­lem.
  
  
• Defining feasibility and accessing the risk: Defining feasibility and accessing risk is very important. Feasibility can be viewed in many terms, such as economic feasibility, technical feasibility, or­ganisational feasibility and other feasibility. Risk focus on deter­ mining the right and wrong in the project. It also determines how the organisation will avoid or minimise the risk involved in the project.
  
  
• Defining total Cost of Ownership (TCO): Total Cost of Owner­ ship (TCO) will include the direct and indirect cost as well as the ongoing cost. It is a list that includes the impact of cost. so, while preparing the business cases, TCO plays a very important role as it determines all sorts of cost.
  
  
• Defining total Benefits of Ownership (TBO): Total Benefits of Ownership (TBO) includes all the direct and indirect benefits as well as the ongoing benefits that are associated with the projects. TBO can be arrived at from increased high value work, improved work accuracy and efficiency, accurate decision-making, improved customer service, etc.
  
  
• Analysing alternatives: After determining the cost and benefits involved in the project, all the alternatives are compared to each other. The two most common ways to analyse the alternatives are financial models and scoring models. Financial models are based on profitability or cash flow, whereas scoring models are based on weightage score.
  
  
• Proposing and supporting the recommendation: When alterna­ tives are identified and analysed, it is required to choose any one of them. If the analysis was done carefully, the recommendation would be relatively easier.