• Demonstrate and quantify the benefits
  • Underestmating can introduce severe and early project risks
  • Include all stakeholders in consultation periods
 

Understanding ECM, justifying the cost

 

Two of most overlooked aspects of a successful IT project are:

  1. Senior level support
  2. A solid, well thought out business case

The two go hand-in-hand. Senior management usually care little about IT, but care a lot about investing money and seeing organisational benefits.

A business case is not, however, just a form to be completed. It is not just a hurdle to overcome prior to a project. It can be an important weapon in your armoury when, as often happens, setbacks occur with your project.

A business case is essential for everyone involved with the project for the following reasons:

  1. In order to obtain senior level management backing, they must have full confidence that the project is worth doing. Your project will certainly be competing against others for scarce funding that is available. It the business case is water tight and realistic, the chances of getting budget increase, even if other projects offer more potential
  2. When your project encounters difficulties (and this may be a budget overrun, or a new director that is questioning why the project ever started) the business case can be dusted down and shown to the new director why it is essential that he continues to back it, or to justify why more funds should be released.
  3. It means users have to think about whether a feature they really think is important, actually is. If you need to make cuts, and there is functionality which has little bearing on end benefits, then you can make savings.
  4. It helps to make decisions on alternative solutions

A Business case should not just be a simple ROI calculation. Showing when the costs will be incurred, and when the benefits will be realised makes it more realistic and, again, can help if a new director is questioning why you have little to show for six months of project costs, or if you are phasing in a new system and want to ensure continued funding.

Business cases are easier to present where the benefits are clearly realisable cost savings. For example, if you can state that the new system will lead to the saving of five administration staff wages, or you will be able to release a thousand feet of office space in central London, this is a good measure.

Often, you can present a business case which says "each employee will save ten minutes of processing documents each week". Many companies will see that time as being an extra ten minutes of tea breaks and not an actual cost saving. Understanding the rules of how the board judges investments is important.

Some benefits are harder to quantify. For example, the benefits may make the sales force more effective at winning bids for new work. There are often research figures that help to quantify this. For example, has it been shown that a response to a customer within 24 hours is three times more likely to win business than 48 hours? What is your average response time now?

Some benefits may support existing organisational goals. For example, centralisation of an administration function, making the workforce more mobile. What are the board’s stated objectives?

Some systems meet regulatory or contractual requirements, which the company must address. This is a good reason for your project to get the green light, but should not be relied upon. Often a company may have recently had a poor audit and the exec look to act fast. However, once the trauma of the audit has gone, the board may re-evaluate priorities.

Whilst you may focus on end-user benefits, some benefits can be gained from removing existing costs from legacy systems. So, a new system may mean that four other systems can be decommissioned, saving £x of support and software maintenance costs.

Don’t be tempted to put figures into a business case that won’t hold water. If the board spot a weakness in one aspect, they may question the whole case.

When estimating costs, make sure you have plenty of contingency. It is better to ask for too much than to have to go back for more later. There is little point running a project on a shoestring if the potential benefits are high. It represents a large risk.

Benefits from content  management/portal technologies can be found in the following areas. The list can help, but you must examine where benefits lie in your environment. You must think about the existing business processes, where the costs lie, what the existing problems are (bearing in mind that users don’t often see a problem as a problem). For example, a company we worked with recently was sending out work packs in the post. It took a day or two to get to the mobile technicians, and only a few went missing, but they didn’t see any problems with that….it’s just the way things have always been done. Of course, there was plenty of scope to remove administration costs associated with printing and posting, less aborted work from missing documents, less customer complaints, better perceived customer satisfaction from faster turnaround etc

How to discover potential benefits

  1. A workshop where the potentials of the new technology are demonstrated is a good starting point. The demonstration must NOT be a product demo, it has to be used to illustrate the way other companies have been successful
  2. Look at the processes and search for where the direct costs and indirect costs associated with each process are. For example, filling in paper based timesheets may be time consuming for the staff filling them in, but think about the back office who have to convert these to invoices. Think about the company money tied up with an extra wait of a few days which is a result of the time taken to deal with paper.
  3. If the workshop includes several different representatives, you will find that someone will be able to identify an issue with an existing system that the system owner may be oblivious to
  4. Have users brainstorm ideas for possible benefits
  5. Link the benefits to the solution so that costs are easier to estimate
  6. Look also for the difficulties in gaining the benefits. If the benefits can only be gained by a technically complex customisation that has not been done before, then warning bells should ring. Look for easy wins
  7. Sometimes benefits can only be gained through a combination of factors. Look for these. For example, if electronic distribution of documentation, online approval, scanning of incoming correspondence means that all filing cabinets can be removed and space released. Again, look at the working processes to make sure everything has been covered.

Common benefits

  1. Reduction in administration staff: are people employed mainly to process forms and documents? For example, in a finance department, some staff open post, log invoices in a database, find out who should approve them, send them and process replies. An electronic system can lead to a large proportion of staff wages being saved. Saving two wages can equate to £150,000/annum
  2. Reduction in office space used by paper filing cabinets. In large organisations, this can amount to millions of pounds/year
  3. Faster processing of cases – if it takes, on average, a full day to deal with and process a case, and making all relevant content available on demand would speed up that process by two hours, the savings across a large team that does little else but process cases can be significant (Easyjet and Dell are good examples of companies that have focused on stripping costs from their processes. In Dell’s case, they were able to work with much less inventory, ordering parts on demand and reducing the cost of their own staff processing orders)
  4. Reduction in rework from incorrect or missing documents – some maintenance departments may have figures for this
  5. Better response to customers – if a support business averages a % of turnover of customers each year, what would be the impact of reducing that turnover
  6. Costs of non-compliance with regulations – is the business being fined at present? Would the new IT system prevent or reduce the fines? (Note: boards are generally tired of business cases that say the new IT system will help to prevent director’s being sent to jail)
  7. Office space gains and reduced travel costs from a mobile workforce and home workers
  8. Reduction in existing support and maintenance of legacy systems that can be decommissioned
  9. Lower audit costs
  10. Ability to win new business
  11. Less legal costs from disputes with contractors/partners
  12. Faster incoming cash into the business (for example, where invoices can be processed faster, or tracked). Reducing this time can have significant financial benefits
  13. Better quality of product/service
  14. Greater job satisfaction of the workforce
  15. More inclusion within a team
  16. Faster induction times for staff (particularly if staff turnover is high) and earlier productivity

Generic Benefits

Various research companies have produced figures for the amount of wasted time spent looking for and re-producing work previously done. Some estimates are as high as 35% of an average worker’s day is lost this way. You could present that you anticipate a saving of, say, 5%, but don’t base your whole case on this.

Against this are the costs of software, hardware, use of external services and internal costs from doing the project – as the case with all IT projects. You will have difficulty costing services until you’ve progressed through:

  1. A scoping study – which is usually a three to five day workshop driven exercise (involving a good number of business representatives) and can produce a very high-level business case (or the basis of one)
  2. Functional Requirements or specification

Therefore, a business case should always be realistic. Ask for funding to undertake a scoping study and gather requirements before producing an updated business case, rather than taking a wild guess too soon.

You will need, of course, an outline case to show the potential benefits and a very loose estimate of costs, but make it clear the basis for your estimate, what margin for error you are assuming, what margin for error you will anticipate after further work etc.