Managing Business Cases - Rust Repor's CIO's Corner: Marco Tapia talks to Leigh Berrell

by Marco Tapia

in management-it-consulting,

February 25, 2011

Managing IT business cases

February 25, 2011

Leigh Berrell

CIOs and IT executives are under increasing pressure to provide business cases for IT projects, clearly identifying how a project will generate savings, enhance productivity, and even play a part in revenue generation.

One clear example is the upgrade or implementation of new IT infrastructure. New servers, back-up systems, storage, and network links—once considered to be a routine and rubber-stamped expense—often now require a business case before project or acquisition funding is released.

In the Rust Report’s first edition of CIO’s Corner, PicNet’s MD Marco Tapia (MT) speaks to Leigh Berrell about the successful management of business cases. Leigh is former CIO at Skilled Group and VP of IT at P&O Ports North America. He has implemented systems and IT solutions around the world in different businesses, cultures and economic climates, and provides some valuable insights on how to construct a compelling business case, as well as achieve and report on desired outcomes.

MT: What are the fundamental components of a good business case?

The three ‘F’s: Fact, Faith or Fear, and that it is important to structure the case accordingly to gain credibility at the executive table:

Fact-based business cases rely on a convincing demonstration of undeniable positive net benefit to the company, and will clearly spell out the ROI, IRR or NPV expected of the project (depending on your CFO’s preferred method).  An example is the replacement of aging infrastructure where savings in maintenance costs, power consumption and administrative effort will outweigh the cost of the new hardware within a reasonable time frame.  You must ensure that all claimed benefits are fully identified and are indisputable.  If you are claiming savings in administrative effort, for example, ensure you indicate precisely how that will translate into a financial benefit – either through reduction of permanent staff, displacing contractors, or avoiding future hires. Get the facts right, and it will be an easy win.

Faith-based business cases are generally for transformational initiatives where there is belief that an initiative will produce a desired positive outcome, but it can’t be easily proven. While these usually promise the greatest business value they are usually the hardest to launch due to uncertainty. My recommendation to CIOs is don’t try this alone – foster unwavering support from affected business unit leadership and work with them to develop a range of possible scenarios, ensuring that the business case holds up in all cases. If the initiative will generate revenue then be explicit about how that will eventuate, how it will be managed, and how it will impact existing revenue lines. Ensure you and the business management jointly present the business case and aim for a mid-point outcome so as not to “overcook” the expected results – your future credibility will depend on it.

Fear-based business cases relate to compliance initiatives where the expected benefit is providing a level of comfort and assurance for the Executive and Board that some lurking malevolent event will be averted.  Think Sarbanes-Oxley, PCI compliance and Disaster Recovery. The key to these cases is research and credible risk assessment. Your executive and board will be looking to make a judgement call based on a credible risk assessment, so don’t overate the dangers, and don’t overstate the potential losses – just make sure you provide all the relevant facts in an easily digestible form. If you have done your job correctly, you will be able to sleep soundly at night knowing you advised them well.

MT: What is the one mistake most people commonly make?

Any initiative should fall fairly cleanly into one of these three categories, and the executive will be looking for a clear message in the business case as to which applies. Mixing fact, faith and fear approaches will just clutter that message.

MT: How can a CIO best present headcount or productivity benefits?

I often see claims such as “this initiative will save 10 minutes per day for all staff”. In some companies, if you sum those claims across all business cases, then everyone could take the week off!

The rule is to express any benefits in terms well understood by the executive, and be very specific. If you are claiming productivity improvement, then you must identify the operational and financial impact. Claiming staff will gain 10 minutes per day is of no benefit if they use that time to check Facebook. Explain how those 10 minutes will drive capacity improvements in other areas, or how they will lead to an eventual reduction in headcount. And add a timeline so the claim can be verified in a post implementation review.

If you are claiming headcount reduction, for example from an automation project, then you should identify the specific roles that will be impacted, rather than a generic FTE count, to make it a real claim. One CFO advised me: “Don’t claim you will cut heads unless you give me their names and phone numbers”. And of course, if there will be redundancies arising from a project, ensure you factor those costs into the business case to fairly represent the benefits.

It is also crucial to ensure any assessment of headcount reduction is practical, rather than theoretical. I’ve spent a lot of time in Transport and Logistics where well intentioned automation initiatives have come unstuck because planned downsizing was blocked by unions, and the automation systems became an expensive overhead. If IT is to be seen as a savvy business partner, you will need to consider all these factors.

MT: How important is it to maintain credibility in a business case?

All too often I have seen I.T. staff manipulate business cases to “get them over the line” – typically working backwards from a required recommendation rather than reaching that recommendation on the merit of the case. That approach inevitably ends in tears, as project costs blow out beyond expectation and projects fail to deliver the stated outcomes. Once you have misled your Executive with a poor recommendation you will struggle to regain credibility, so don’t be afraid to withdraw support for a bad business case early, rather than wishing you had later.

MT: Do you have any tips on reporting on outcomes to the executive?

Providing reliable feedback on outcomes to the executive is particularly important. So plan and diligently perform post-implementation reviews, providing a comparison of outcomes to those predicted in the business case. Remember, nothing builds confidence like success!

Marco Tapia (MT) – PicNet’s Managing Director ( is a former CIO with broad national and international experience and an enthusiastic supporter of Australia’s I.T. innovation