Business Case Analysis

Business Case Analysis

Proposed SoftShoeStyle PLM System

Cost and Benefit Projections for 2011 2013
By
Company Product Development
Group
For
Your CFO or Capital Review
Committee
{DD} {MONTH} {YEAR}
Business Case Analysis
DD Month Year Company Name Slide 2
Presentation Overview
A. Introduction
Proposed action
Business objectives and motivation
Opportunities threats & constraints
B. Business Case Methods
Scope and boundaries of the case
Scenarios analyzed
Major assumptions
Cost model
Rationale for benefits
C. Cost and Benefit Projections,
2011 2013
D. Risk and Sensitivity Analysis
E. Recommendations and Conclusions
A. Introduction
E. Recommendations
& Conclusions
D. Risks &
Sensitivity
C. Projections
B. Methods
Slide Footers
Replace on Slide Master with your own date and name.

Business Case Analysis
DD Month Year Company Name Slide 3
Case Subject: Proposed Action
Subscribe to and implement the SoftShoeStyle
system, as proposed by global trading
systems, inc., {Month, Year}.
Proposal includes:
XX concurrent user licenses of the SoftShoeStyle
system paid on a monthly subscription basis
Download of MySQL database and license
Training for designers/product developers
Purchase of training/installation and/or integration
services
Additional hardware purchases during the second
and third years of implementation.
A. Introduction
Business Case Analysis
DD Month Year Company Name Slide 4
Case Subject: Business Objectives
Reduce costs in targeted areas in product
design and manufacturing
Meet the more complex needs of
footwear/retail industry customers
Quick generation of custom design details
Faster response to change requests
Better support customer requirements
Reduce product development lead time (time
to market)
Have all design data in one corporate database

A. Introduction
Business Case Analysis
DD Month Year Company Name Slide 5
Opportunities
Market Share: Reaching design process
improvement objectives will enable {Company}
to increase market share by XX% within three
years
Cost savings: Greater productivity and shorter
design times will save:
Concept design phase costs(XX%)
Detail style-spec phase costs (XX%)
Spec change reduction and improved change
management (40%)
Manufacturing costs (35%)
Raw materials costs (30%)
A. Introduction
Business Case Analysis
DD Month Year Company Name Slide 6
Threats and Constraints
Design downtime and disruption during
transition to the new system must be negligible
R&D budgets for 2011 2013 cannot rise more
than XX% above current (2010) level
A. Introduction
Business Case Analysis
DD Month Year Company Name Slide 7
Business Case Purpose
To provide {Companys CFO or Capital Review
Committee} with the necessary financial
projections, financial metrics, and assessment
of contingencies and risks, to support a
decision either to accept or not accept the
SoftShoeStyle proposal.
Decision will be made {at the Capital Review
Committee meeting, DD MM Yr or by DD MM
Yr.}
A. Introduction

DELETE THIS BOX BEFORE PRESENTING
Business Objectives

Business objectives complete the business case subject statement, what the case is about. Good subject statements are built around objectivesbusiness
objectives, financial objectives, functional objectives, or operational objectives.

Why move the focus from action to objective? Reaching objectives has financial and other business value that can be made tangible. The value of an action
that is unrelated to an objective (Training design engineers, or purchasing a database license) is much harder to quantify in a compelling way. In brief,
when a proposed action supports an objective (and all proposed actions do, in a rational environment), the appropriate subject for the business case is the full
range of resources and actions required to reach the objective.

_________________________________________________________________________________________________________________________
Contents of this box Copyright 1998 2003, Solution Matrix Ltd. All Rights Reserved. For more detailed coverage, see the whitepaper Business Case
Essentials or the Business Case Guide, ISBN 1-929500-01-7.



Business Case Analysis
DD Month Year Company Name Slide 8
Case Purpose: Financial Metrics
The {CFO/Capital Review Committee} requires
financial projections and financial metrics:
3-year total cost of ownership (TCO)
Projected 3-year net cash flow including cost and
revenue impacts
3-year net present value (NPV)
3-year return on investment (Simple ROI)
Projected market share impact
Risk and sensitivity analysis will identify:
Critical success factors and contingencies
Risk factors that might change results
A. Introduction
Business Case Analysis
DD Month Year Company Name Slide 9
Analysis Scope and Boundaries
Time
Analysis period: {3 Fiscal years, 6 Seasons (=3
years), 3 Calendar Years??}
Organizations impacted
Design/Product Development
Overseas office(s) and/or Suppliers
IT
Customer service
Geography
Headquarters site only; Headquarters and {Country}
or {Agent} office(s)
B. Methods
Business Case Analysis
DD Month Year Company Name Slide 10
Scenarios Analyzed
1. Business as Usual
Assumes no SoftShoeStyle implementation
2. Proposal Implementation
Assumes implementation as proposed
3. Incremental Impacts
Incremental impacts =
Proposal scenario Business as Usual
B. Methods
Business Case Analysis
DD Month Year Company Name Slide 11
Major Assumptions
Implementation begins {MM YY}
Learning curve complete in 2 weeks
Implementation and transition to the new PLM
system have no negative impact on product
development process times
Salary increases average no more than X%
annually for 2011-2013
SoftShoe Styles monthly subscription rate
remains the same
Market size continues to grow X% per year for
2011-2013
B. Methods
Business Case Analysis
DD Month Year Company Name Slide 12
Cost Model
B. Methods
SSStyles Life - Cycle Phase Cost impacts
under all
scenarios
SSStyles Acquisition
and Start Up
Year 0 and Year 1
SSStyles
Operational Phase
Year 2 and Year 3
Software
Monthly Subscription - - SoftShoe Style
- -


Monthly Subscription costs

Hardware
Server system upgrades
Client system (desktop) purchase
Server system upgrades
Client system (desktop) purchase
Personnel
Initial training
Designer productivity
Continuing training
Designer productivity
R
e
s
o
u
r
c
e
s


Services
Optional

SW installation and integration
services

SW integration services


Business Case Analysis
DD Month Year Company Name Slide 13
Benefits Analyzed
Objective: Reduce costs
Lower cost of design/pd collaboration
More efficient change management
Increased personnel productivity
Objective: Meet the more complex needs of
footwear industry customers
New design customization possible
Faster response to customer change requests
Better support of customer requirements
Objective: Reduce product development time
Fewer changes, earlier changes
Simultaneous design and development phases
Earlier sampling

B. Methods
Business Case Analysis
DD Month Year Company Name Slide 14
Data Sources
{Company} 2010 2013 Business Plans
SoftShoeStyle web site www.softshoestyle.com
Vendor Proposal for services
2009 capital and operating budgets
30 day trail evaluation and feasibility study
conducted at headquarters site MMYY
Published industry averages and best-in-
class figures

B. Methods
Business Case Analysis
DD Month Year Company Name Slide 15
Financial Projections
C. Projections

DELETE THIS BOX BEFORE PRESENTING

FINANCIAL PROJECTIONS

The centerpiece of the business case will be a financial model. A model is a representation or analogy of something else. It is easier to
examine the behavior of a model than it is to examine the thing it represents: model airplanes, mathematical models of subatomic events, and
algebraic models of a national economy all serve this purpose.
The simplest of financial models include the familiar pie chart, which shows how 100% of a sum is distributed in major components, or the
basic business equation (Profit = Sales RevenueCosts), which shows how costs and revenues work together to produce profits.
Business case results, however, are usually presented in cash flow statements and not as income. This is because cash flow shows directly
the financial consequences of an action, whereas income also incorporates accounting conventions such as depreciation expense, allocated
costs, and possibly other factors that are less direct reflections of the action.
The business case will include cash flow statements and an income statement only if Projected income is one of the financial metrics that
meets the purpose of the case.
The case financial model may be nothing more than a single cash flow statement (see Cash Flow Statement below). In more complex
settings, however, the complete financial model may include several cash flow statements in spreadsheet form, as well as tables or graphs
that show the behavior of key variables, or relationships between them. In complex settings, the overall financial model is truly a system of
interrelated models.
The heart of the financial model and the heart of the business case will be a cash flow statement for each scenario in the case, usually
implemented in spreadsheet form and having the structure shown below. A summary like this must be created, in order to develop other
financial metrics for the case, such as net present value (NPV), total cost of ownership (TCO) of internal rate of return (IRR), payback period,
and various return on investment (ROI) figures. The Projections slide above shows only the summary financial metrics, leaving the large and
detailed cash flow spreadsheets to the written report.

Contents of this box Copyright 1998 2003, Solution Matrix Ltd. All Rights Reserved. For more detailed coverage, see the whitepaper
Business Case Essentials or the Business Case Guide, ISBN 1-929500-01-7.


Business Case Analysis
DD Month Year Company Name Slide 16
Projected Cash Flow
C. Projections
Business Case Analysis
DD Month Year Company Name Slide 17
Cumulative Cash Flow
C. Projections
Business Case Analysis
DD Month Year Company Name Slide 18
Cost Savings Example
SoftShoeStyles Impact on Change Costs
C. Projections
% of Total
Changes
Now
% Total
Changes
with
SoftShoe
Style
Average $
Per Change
Net Difference per
Year
Concept
Design Phase
41% 51% $ 200 ($ 10,000)
Detailed
Design Phase
30% 26% $1,200 $ 54,000
Testing and
Prototype
Phase
19% 19% $ 9,600 0
After Start of
Production
10% 4% $ 24,000 $ 120,000
Annual Savings: 164,000 $
Business Case Analysis
DD Month Year Company Name Slide 19
Recommendations & Conclusions
Based on the business case analysis
presented here:
We recommend that the {CFO/Company
Capital Review Committee} vote to fund the
SoftShoeStyle Proposal from global trading
systems, inc.
E. Recommendations
& Conclusions
Business Case Analysis
DD Month Year Company Name Slide 20
Risks

D. Risks
Business Case Analysis
DD Month Year Company Name Slide 21
Recommendations & Conclusions
In order to minimize risks and maximize returns from
{Companys} investment in SoftShoeStyle, we further
recommend that {Company}:
Begins working with GTS consultants immediately to
plan the ERP integration project
Ensures that {Company} IT staff and resources are
committed to the SoftShoeStyle installation and
integration
Appoints a transition manager responsible for ensuring
that existing line projects are completed on time without
disruption during the transition
Requests and reviews quarterly reports on the financial
measures outlined in the business case report and
progress toward the important business objectives
outlined earlier in this presentation

E. Recommendations
& Conclusions