Business Case

Shivani Parikh
Feasibility
Analysis
Design
Implement
Test
Production
Maintain
Feasibility
What is a Business Case?
A business case captures the reasoning / justification for initiating
a project or task (give Onida example)
Business case adequately captures both the quantifiable and
unquantifiable characteristics of a proposed project (e.g. HDFC
Bank wants to introduce passbooks)
Before making a final decision to proceed with software project,
management needs to satisfy itself that three basic questions
have been properly answered:

Why are we doing this?
What will it cost?
What business value do we expect to achieve?

It is often presented in a well-structured written formal document,
but may also sometimes come in the form of an informal short
verbal argument or presentation
What is a Business Case?
Business Case is documents prepared for decision-makers to show
that the proposed idea is a good one and that the numbers that
surround it make sound financial sense

Most software engineers prepare detailed technical rather than
business justifications (Migrate from Excel to MS Access,
freshers, religion)
Many of their worthwhile software proposals are rejected by
management as a consequence
Use of business cases will increase your chances of success
Target Audience
Decision makers (top management)
Funding sources including financial institutions
Partners and stakeholders: organizations and/or individuals that
are either involved, provide input, or have an interest in or
expectations from the proposal. (e.g. S&P CDOs)

Why Business Case?
To convince the target audience:
of the need for the software
of the feasibility of the software
that the software is cost effective and beneficial (e.g. student proxy)
that the software is financially viable
that the risks involved are manageable

To determine the impact of the software on the bottom line
Will this software save money, cut costs, increase productivity, speed
development or improve quality?
Are our competitors doing this? If so, what are the results they are
achieving? (e.g. Jet Airways website)
To be able to prioritize proposals (IT budget is fixed and they may have
many proposals of IT investments)
Helps determine the strengths and weaknesses of a proposal in a
systematic and objective manner
Serves as a tool to test the validity of an idea before putting the case to
others
When do we need a business case?
For every project, policy or program proposal, except when the
project has to be implemented at any cost and regardless of the
risks involved (e.g. ATMs, BOB)

Particularly needed when:

Reluctance to the proposal is foreseen
The proposal is expected to have a significant impact on either
internal infrastructure arrangements or the delivery of services
(e.g. Internet Banking)
The proposal brings substantial change in the way things are
done and/or will require a significant allocation or reallocation
of resources (e.g. ATMs)

Business case model outline
Formal business cases contain the following:

Executive summary
The need
The proposed project
Project scope
Project purpose
Planned outcome / deliverables
Project description
Proposed timeframe and milestones

External funding arrangements
Financial appraisal
Return On Investment (ROI)
Net Present Value (Discounted Cash Flow)

Risk analysis and risk management
Business case model outline
Implementation plan
Project management arrangements
Internal change management and training
External communications and issues management strategy
Quality management
Procurement strategy
Benefits realization
Post-project management
Project evaluation and post-implementation review

Assessment of and identification of options

Case Study 1
HLL has a paper based system for its employees leave
management. It is very time consuming and is prone to errors. It
has 1000 employees spread across various offices in India. It was
also very tedious to maintain paper records by HR for all its
employees for their individual leaves. HLL decided to install a
leave management software for its India operations. They invited
Infosys to give a quote for creating this software and Infosys gave
a quote of 5 lakhs rupees.

They decided to create a business case to quantify this investment

Next few slides shall detail out the business case created by them
Employee activity Time in mins
Download leave application form 5
Print the form 5
Fill the form 5
Take application to boss 5
Leave Sanction done by boss 10
Carry form to HR 5
HR checks and files records 10
Total Employee Time in mins 45
Boss Activity Time in mins
Leave Sanction done by boss 10
Total Boss Time in mins 10
HR Activity Time in mins
HR checks and files records 10
Total HR Time in mins 10
Average Employee Annual Salary 360000
Average Employee Monthly Salary 30000
No of days in this month 30
Average Employee Daily Salary 1000
No of working hours in a day 10
Average Employee Hourly Salary 100
Mins in an hour 60
Employee money spent on leave application = Average Employee Hourly Salary * 45 / 60

Employee money spent on leave application = 100 * 45 / 60
= 75 Rs

Boss money spent on leave application = Average Boss Hourly Salary * 10 / 60

Boss money spent on leave application = 100 * 10 / 60
= 16.66666 Rs
= 17 Rs
HR money spent on leave application = Average HR Hourly Salary * 10 / 60

HR money spent on leave application = 100 * 10 / 60
= 16.66666 Rs
= 17 Rs
Employee money spent on leave application 75 Rs
Boss money spent on leave application 17 Rs
HR money spent on leave application 17 Rs
Total money spent by one employee for one leave application 109 Rs
Average no of leave applications done by one employee = 10

Total Cost per employee for leave application = Total money spent by one
employee for one leave application * Average number of leave applications
done by one employee

Total Cost per employee for leave application = 109 * 10
= 1090 Rs

Total Number of employees = 1000

Total Cost for 1000 employees = 1000 * 1090
=10,90,000
= 10.90 lacs
Employee time spent 3 mins
Boss time spent 1 mins
HR time spent 0 mins
Total time spent 4 mins
No of times leave application system used by single employee 10
Total Employee time spent in a year due to system 30 mins
Total Boss time spent in a year due to system 10 mins
Total time spent in a year 40 mins
Cost per single employee due to system 66.667
Cost for 1000 employees due to system 66667
On installation of the new system the following calculations are carried out:
Case Study 2: Password Management
I have forgotten my password
I cant login
can you help me change my password? My old one just expired
why cant I just re-use my old password? I can remember that one

Chances are that nearly one out of every three times the helpdesk or IT dept
picks up the phone, its for password management issue
Passwords are necessary to provide the security and access management
required by today's enterprise. But are they costing you money?
On the one hand, password reset seems to demand an inordinate amount of
IT attention. On the other hand, in an effort to ease the need to bother the
helpdesk, end users often resort to non-secure password practices that may
actually make the organization more vulnerable
Perhaps no other investment in IT can offer the immediate return-on-
investment or end user satisfaction than automation of password
management

Cadburys US had a staff of 1000 employees and they frequently
faced the problem of forgotten password. The company decided to
install a password management solution for the same. They
invited TCS to create a business case for them to justify its cost
to senior management. TCS gave an estimate of $5600 for
password management software.

Average employee salary at Cadburys is $50,000
Average helpdesk salary at Cadburys is $50,000
Hours in a single work year are 2080

Next few slides shall detail out the business case created by them

Employee Data
Number of users 1000
Average salary of employee $50,000
Average salary of help desk associate $50,000
Hours in a single work year 2080
Help Desk Metrics
Help desk calls per user each year 10
Percentage calls related to password reset 40%
Average duration of helpdesk time for password reset call 15mins/call
Average user inactivity for password issue 20mins/call
Without a password management solution
Total no of helpdesk calls per year 10000
Total helpdesk calls per password incident 4000
Total annual helpdesk time spent on password reset calls 1,000 hours
Total annual user inactivity wasted on password reset calls 1,333 hours
Cost of user time lost for each incident $8.01 per call
Cost of helpdesk for each incident $6.01 per call
Total cost of user inactivity without password management
solution $32,051
Cost of password reset helpdesk calls $24,038
Total cost without password management solution $56,089
With password management solution
Percentage of password calls managed by solution 100%
Total no of calls covered 4000
Average duration self-serve password reset solution 3 mins
Total cost of user inactivity for user with solution $4,807
Cost of password reset helpdesk calls $0
Total cost with password management solution $4,807
ROI Analysis
Annual savings with password management solution $51,282
Less upfront software investment ($5,600)
One year dollar savings $45,682

Benefit as a multiple of cost 8.1 x
Payback period on Investment 1.3 months
Benefit as a multiple of cost = One year dollar savings / Software investment
= 45,682 / 5600
= 8.1

Payback period on Investment = Cost of software investment / Annual savings
= 5600 / 51282
= 0.1092 years
= 1.31 months
Case Study 3
ABC Company currently has a leased office-automation product which
they use for their work flow management. This leased office-automation
equipment costs $2,000 annually. This was an old system and had two
major flaws as described below and as a result they wanted to build a new
workflow system ElectroWorkFlow from Infosys.

Two problems are as described:
Automatic distribution and updating of shared files
Elimination of errors when overwriting files

Automatic Distribution and Updating of Shared Files
Administrative assistants at ABC Company spend on average three
hours a week distributing and updating shared files. ElectroWorkFlow
will automate these processes.
By automatically distributing and updating shared files,
ElectroWorkFlow will save an estimated $4,680 per year in labor costs.
Elimination of Errors when Overwriting Files
ABC Company's current office-automation product has no built-in
safeguards to prevent users from accidentally making changes to an
obsolete version of a file and then overwriting the current version with
the obsolete version. On average, users accidentally overwrite current
files with obsolete files twice a month. Administrative assistants spend
an hour correcting each problem.
By eliminating these errors, ElectroWorkFlow will save an estimated
$3,120 per year in labor costs.

Costs
ElectroWorkFlow purchase price : $10,000
Estimated life cycle : three years
Installation fee : $2,000
Annual maintenance contract : $500

Following slides show the cash flow statements over next 3 years
Year 0 Year 1 Year 2 Year 3
Costs 7/1/2006 7/1/2007 7/1/2008 7/1/2009
Equip Purchase (10,000) 0 0 0
Installation fee (2,000) 0 0 0
Maint Fees (500) (500) (500) 0
Sub total (12,500) (500) (500) 0
Savings
Leased Equip 2,000 2,000 2,000 0
Labor 0 7,800 7,800 7800
Sub total 2,000 9,800 9,800 7800
Cash Flow (10,500) 9,300 9,300 7,800
Return on investment (ROI): = (2000+9800+9800+7800/ 12500+500+500)*100
= 29400 / 13500 * 100
= 217.777 %
= 218%

Payback period = 12500 / 10500 = 1.194 = 1.2 years
Case Study 3 contd
Detailed Business case for the office automation system is
covered in the word document attached.


Business Case Assignment
carry print outs of this ppt for next lecture






Thank You