1. Making the Case for IT
Chapter 4

2. Objectives
Recognize that IT impacts the business model through its effects on sources of business value: costs, revenues, and assets
Learn how to analyze and document how IT can potentially impact value sources
Understand the importance of effective execution and monitoring in the delivery of IT-enabled business value

3. A Business Case
an argument, usually documented, that is intended to convince a decision maker
to approve some kind of action
to select the option that best serves the organization (to do and not to do…)
articulate a clear path to an attractive return on investment (ROI)
if a restaurant’s manager notices that the business doesn’t make enough money on Sunday evenings to cover operational costs, presenting that fact to the owner may be compelling enough to make the business case for closing the restaurant at 5 p.m. on Sunday
Including…
Business rationale for CRM, including estimated costs and payback
Competitors’ usage of CRM
CRM software available over the Internet at a monthly fee

4. IT doesn’t matter!? Nicolas Carr, 2003
1980s: lock in key supplier and customers, and build proprietary capabilities using IT
1990s: IT…a commodity, part of the infrastructure
Based on PC, mainframe, early client-server…
“the scarce resource never was technology, it was always the set of managerial capabilities needed to create value with that technology”
Open standard, networked IT infrastructure has dramatically
increased the range of business opportunities that can be pursued
Decreased the cost and time required to launch them

5. Outline “Legacy” mindset limitations
The “IT business value” mindset: framing opportunities

6. “Legacy” Mindset Limitations
project-by-project basis within traditional budgeting cycle
Stand-alone computers housed within a single data centre
Piecemeal, hodgepodge
Expensive to keep critical systems up and running
80% yearly IT budget on maintaining and managing IT infrastructure
Leaving few resources to be directed towards creating proprietary business value

7. Using Business Models to Frame the Business Case for IT

8. The “IT business value” mindset: framing opportunities
How executives make decisions about strategies to pursue, capabilities to build, and the investments required to achieve business goals
Can IT drive cost savings?
IBM case (staggering loss )
Reduce number of data centre
Reduce number of CIOs
Convert to common Internet-standard network
Reengineering back-office business processes
Centralised shared-services model of IT infrastructure services and corporate back-office functions

9. Can IT be used to drive revenue growth?
Enhance revenue-generating capabilities
Revenue-generating processes
IBM’s new product development process
Online and self-serve customer service centres
Business intelligence
Provide real-time, relevant and actionable information
Launch new products, services, or solutions
Embed IT
New IT product and service offerings
iTunes, MyBoeingFleet.com
Add value to existing product and service offering
Nike’s ID online service enables customers to design their own shoes

10. Can IT be used to drive asset efficiency?
How many dollars of revenue are generated form every dollar of assets?
Financial assets: cash, marketable securities, accounts receivable
Tangible: physical inventory, physical facilities, equipment, and software
Goodwill: value of intangible asset
Value of acquisitions, value of intellectual property and patent
Knowledge assets?? (expertise of people, proprietary information)
IT assets
IT operating infrastructure (people, middleware, call centre, data centres, network centres)
Enterprise solutions (ERP, CRM, HR, DBMS, , tools, people)
Specialised business solutions
Executive leadership and governance systems
Take an underperforming asset off its books
shitting it down, writing it off, or outsourcing it
E.g. outsourcing legacy IT infrastructure
Does outsourcing really lower the cost? (hidden costs)

11. Can IT be used to create sustainable advantage?
Not just take the lead, but also continue to innovate over time
Virtuous cycle

12. Developing the business case for IT
Tell a compelling story that answers three questions
Why this?
Why now?
Why you?
Should be updated throughout the project

13. Components of a business case pitch
Executive summary
Problem/opportunity
Why important, to whom
Team expertise, benefits
Why you, when?
User and problem description
Project description
Project team
Project sponsors, partners, vendors
Relevant expertise, experience, power, connection
Alternatives
Why they are not chosen
Stakeholders and benefits
Potential barriers and how to overcome them
Operations
Key capabilities and resources needed
Financial and metrics
Best-case/worst-case scenarios
Implementation, status and traction
Milestones
Risk
Closing slide
Summarise the business case
Open the discussion to answer questions, discuss issues
Sources and bibliography
appendices