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Business case – An example

Executive Summary
DBD Software’s management have decided that the company needs to expand. An
opportunity has arisen with an existing customer for a new system. This business case
proposes how the company should react to this opportunity by investing in new staff and skills
and restructuring the business quickly. The restructuring and expansion should equip DBD to
complete the proposed contract satisfactorily and leave the company in a far better position to
meet the challenges of the IT solutions market.

Background

Opportunity
The Trent District Office has approached DBD with an opportunity.
The project will run for four years and include development, distribution, support and training
for a new weather information service for mobile devices using the internet. The project will
be worth £750,000.

Current Situation and Environmental Analysis


The proposed project will be unlike any project undertaken by the company in the past. There
are three distinctive parts: database querying, the internet communications and the mobile
device interfaces. Currently the company specialises in database design and desktop GUIs.
The current workforce is happy with the company, but unsure about the security of their jobs
in the current economic climate. This project would buoy them all and the threat, no matter
how remote, of redundancy would motivate them. As a result of the looming recession there is
also a large number of IT specialists out of work. Finding suitable staff would be relatively
easy, and pay levels that are advantageous for DBD could be negotiated.

Project Partners
The Trent District Office is a local government and as such will not cease to exist during the life
of the project. Therefore all money promises will be delivered.

Scope
The project will require investment into the technical staffing of DBD. Currently, all of DBD's
products work solely on desktop computers in Windows and Linux. The project requires
programming for hand-held, mobile devices. No previous DBD products have required the
capability to transfer the data to these various display devices. Capabilities in other areas of
IT and programming will not be provided by the project. The technological side of the business
will be affected, while the administration side will remain unchanged.

Proposed Solution
New skills will have to be acquired by DBD to proceed with the project. This will require
funding and commitment to the project at a senior level. Because of the restricted product
base the company structure has been flat, with the CEO heading the technical team. If new
technologies are to be tackled this structure will have to change to accommodate the expertise
required. Again, commitment of the CEO will have to be firm to see any changed of this type
through. New staff should be hired to meet the technical team's deficiencies and training
should be undertaken to enhance the team's skills. A project team can then be created,
blending the skills available within the company. This new team should then take possession
of examples of the hardware to be used and build a working version of the software as quickly
as possible. Bugs should then be found, improvements made and Trent District Office staff
trained until the deadline date.
Details of the options considered are available in a separate report.

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Business case – An example

Objectives

Hire an internet expert and team


DBD will have to find the initial funding for this part of the project, either through existing
finances of loans. A new expert will require a salary of approximately £40,000 (with
negotiation) and two technicians will require about £25,000 each. The new team will also
require accommodation. Enough office space in the same building as DBD's current
headquarters will cost £21,000 per annum on a 36 month contract. New IT and office
equipment will also have to be purchased at a cost of £2,000 per person.
It will take approximately 8 weeks to hire an expert, including notice to current employers.
This time will be reduced if the new expert is currently out of work. The same will be true of
the technicians. It will be probable that the experts input will be required when recruiting
technicians. Therefore the longest time required to recruit the new staff members will be 16
weeks.

Train staff to address any skill deficiencies


Costs for training have been estimated at £2,000 per person in year 0. Training for thirteen
staff members will therefore cost £26,000.
Training staff can be spaced out and interspersed with other tasks. It will therefore not be on
the critical path to project completion. Training of existing staff can start before the new staff
members are recruited, allowing them to start the database side of the Trent District Office
project.

Integrating new staff


Integration can take place once the new staff members join the company. Some form of
bonding exercises may be required such as a team building camp. A cost of £1,000 for each
staff member has been estimated for this camp, or another similar activity.
Creating the team will take approximately 3 weeks after recruitment is complete.

Projected costs for restructuring with income from contract

Projected Cost NPV


NPV –
Year Office lease1,2 Wages3 Cap Ex4 Training5,6 Outsourcing7 Total Project 7% Total
0 £0.00 £0.00 £0.00 -£39,000.00 £0.00 -£39,000.00 £0.00 0 -£580,065.29
1 -£21,000.00 -£90,000.00 -£6,000.00 -£6,300.00 -£10,000.00 -£133,300.00 £187,500.00 0.9346 £175,237.50
2 -£21,000.00 -£94,500.00 £0.00 -£19,845.00 -£2,100.00 -£137,445.00 £187,500.00 0.8734 £163,762.50
3 -£21,000.00 -£99,225.00 £0.00 -£6,945.75 -£2,205.00 -£129,375.75 £187,500.00 0.8163 £153,056.25
4 -£24,150.00 -£104,186.25 -£3,000.00 -£7,293.04 -£2,315.25 -£140,944.54 £187,500.00 0.7629 £143,043.75
-£580,065.29 £55,034.71

1
Office space for the three additional staff
2
It is assumed that a 36 month contract will be signed on the lease for additional office space, cost increases in year 4
3
Wages are assumed to be £40,000 for an expert and £25,000 for a technician in year 1
4
Cap Ex is for purchase of office furniture and equipment for new staff and a three year IT upgrade
5
Estimated training cost per person in year 0 is £2,000
6
Additional training is required in year 2 for the creation of training courses for Trent District Office support staff

7
Outsourcing includes graphic design for the interface, printing manuals and errata, production and packaging for software and fixes,
copyright registration, legal, etc.
It is assumed that all costs will increase 5% per year
NPV assumed at 7%

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Business case – An example
Benefits
The new IT team will be focused on completing the Trent District Office project.
The transformed company will be better suited to a highly competitive IT market with a more
diverse skill base.
Research has proven that innovative, flexible companies are more successful than stagnant
companies. An innovation culture and change management experience will mean adjusting in
the future will be easier.

DBD will ensure guaranteed income over the coming years from the Trent District Office and a
successful project will raise the profile of DBD considerably. More high profile business could
follow.

Project Organisation
The owners must decide who will lead the project.
They will have to hire the new IT specialist, perhaps with the aid of the new leader of the
existing team.
The new specialist will have to be heavily involved in the recruitment of his or her team
members.
The company owners will also be responsible for managing the change. They must convince
existing staff that it is in the best interests of the company and that they are not under threat.
Once recruitment is complete, the technical director will have to take responsibility for
innovation management. Ensuring that ideas are generated and that the good ones are
developed into products is paramount for DBD’s continuing success.

Risks
There is, of course, a risk that the project will fail. There are a number of reasons that this
may happen, both internal and external.
• The Trent District Office project is not obtained – changes can be halted immediately if
other, replacement, business is not quickly acquired. With the good reputation that
DBD holds with the Trent District Office, and the expertise that the company has with
the existing database this seems unlikely.
• Technical expertise is not available – training existing staff may delay the project. This
is very unlikely.
• Project failure – the reputation of the company is damaged. Projected cash flows
beyond the end of software development are put in doubt. With the right expertise this
should not be likely, a level of success should be achievable.
• Innovation culture does not take – the project still goes ahead and requirements met,
but inefficiencies cut DBD profit and the system runs more slowly due to bad coding.
This may result in damage to the DBD reputation. Good innovation management
should minimise this risk.
• Team transformation fails – resistive elements within or from outside the business
prevent successful transformation. Development seriously delayed. Good change
management should minimise this.

Acceptance

Signed_____________ Date_________ Signed_____________Date_________

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