Business case training: The concise case for software-as-a-service

Software-as-a-service is no longer new. Economically, it's a superior way to buy software. When buying software, the SaaS option is the default decision. Incurring the extra costs of an on-premise deployment are only justified for the largest organizations with complex enterprise environments and unique security and privacy requirements. This probably means just the big financial institutions, telecommunications, and health care. Everybody else is better off with a SaaS solution. Read on to learn the concise case for SaaS...

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Business case training: The difference between a business case and a business plan

A business case and a business plan are similar concepts. Both make an argument for an investment and outline a plan to deliver it. For a business case, the investment argued for is project. For a business plan, the investment argued for is a company. Read on to learn the key differences and similarities.

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Business case training: The two metrics you really need

When you write a business case you need two (and no more) types of metric. First, operating metrics to measure the improved business performance your project will deliver. Second, financial metrics to value the improvement and calculate the return on investment (ROI).

Operating metrics

These will vary with the specific performance improvement initiative. Examples include:

• Sales: Increase online conversion rates.
• Costs: Lower processing cost per application form.
• Productivity: Increase volume of transactions processed per labor hour.

Financial metrics

Once you have an operational improvement, then, you need to put a value on that improvement. If it's an additional sale that should be straightforward (but use contribution, not gross revenue).

Next, you need to measure ROI. We recommend calculating two measures (and, again, no more than two):

• Net present value: Discount the expected net cash flows of your project at a rate that reflects their risk.
• Payback period provides a quick-and-dirty indicator of how long your initial investment is hanging out there before it gets paid back.

Metrics you don't need

For the purposes of writing a business case, anybody offering to calculate or provide business case training on the following is wasting your time:

1. Simple undiscounted ROI (every project has risk, you can't ignore it).
2. Projecting income statements and balance sheets (these are accounting concepts, you are making an economic decision).
3. Average rate of return (ignores time and risk).
4. Return on capital employed (see point 3).
5. Return on assets (see point 3).
6. Any kind of monte carlo simulation (you don't have the data and it's analytical hallucination for 99% of IT projects.

Business case training: What is payback?

Payback answers the question: How soon do I recover my cash investment?

You calculate payback as:

Stream of cash inflows divided by the original cash investment

So, if an investment produces a $100 a year for five years and the original investment is $300, then, the payback period is three years.

Payback is a useful, rough guide for assessing risk when doing any kind of IT due diligence. The longer the payback period the greater the risk.

It has limitations though:

• Says nothing about the timing of cash flows (no discounting);
• Ignores cash flows after the payback period;
• Tells you when your investment principal is paid back, but is silent on the return on your capital.

Payback is, in summary, a solid supplement to an ROI analysis built around a net present value or discounted cash flow analysis.

For more ultra-concise, practical information on IT business cases and IT due diligence, please see the The Business Case Checklist.

Business case training: What is a business case?

Simply put, a business case provides good reasons (or an argument) for a proposed action, usually, an investment.

An IT business case makes the argument for an IT project, product, or service.

ROI models are only part of the business case. A good business case has words and numbers pulled together into a cohesive, well-structured argument.

Business cases do three things:

1. Quantify and value a business opportunity. Your technology product or service is simply a means to this end.
2. Justify the investment of resources based on a sound (not self serving) return on investment (ROI) model. This financial model calculates the expected benefits (always the trickiest part), total costs, and the overall return on investment.
3. Serve as a plan to deliver the business opportunity. Business cases help sequence work based on its value, which, then, drives the more traditional task-based project plans.

For more ultra-concise, practical information on IT business cases and IT due diligence, please see the The Business Case Checklist.

ROI selling: The 8 habits of highly effective salespeople

Fundamentally, customers buy your ROI, not your technology. This principle is at the heart of the eight habits of highly effective salespeople. The habits range from selling ROI wrapped in a business case to intelligent pricing. Read more...

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ROI checklist: How to check your real return on investment

Business cases too often lack rigor in their ROI calculations or conciseness in making an argument for a project or product. The medical profession has recently made checklists more scientific and offers valuable lessons for anyone who has to write a business case or use an IT due diligence checklist. I just finished reading Safe Patients, Smart Hospitals: How One Doctor's Checklist Can Help Us Change Health Care from the Inside Out by Peter Pronovost and Eric Vohr. For the business case writer and ROI calculator, it offers several lessons...

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Software start up: agile managers needed

Writing business cases and business case training are what I do.But most of this year, I have been working with a software start up in the the non-profit sector. We are creating software to measure, track, and evaluate financial, social and environmental impacts -- the triple bottom line. In effect, it is a business case with a (very) complicated benefits line. Having worked on start ups in the mid-1990s and early-2000s, here's the 7 ways software start ups have changed in 2010 (at least, for me).

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IT due diligence: why you need a checklist

IT due diligence is more efficient and effective with a checklist. An IT due diligence checklist will reduce errors, help you make faster, better decisions, and increase IT value. This article covers the 7 reasons why you should use a checklist to produce high-ROI IT investments.

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Write a great IT business case

A top-quality business case offers big advantages to everybody in the IT due diligence process. For the business case writer, a persuasive well-written business case increases the chances of funding. For the business case reviewer, having all the key information collected in a business case makes IT due diligence easier and quicker. For critical stakeholders, a quality business case increases the probability of a profitable project. Read on to learn how to grade your business case and make it great.

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How to stop white paper pollution

The average white paper is a long-winded press release. It has few signs of original thinking, compelling content, or hard-working words. Average content undermines your brand warns Jakob Nielsen, the usability expert. He calls it Information Pollution. So, how do you stop polluting and write a perfect white paper? There are five principles.

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IT due diligence lessons from KKR

IT due diligence remains casual, inconsistent, and produces mediocre investment returns. In contrast,top private equity firms, like KKR (the original Barbarians at the Gate), have built their business on intense due diligence. Without it, they won't invest. Read this article to learn the 10 lessons IT due diligence practitioners can learn from KKR.

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Write a white paper like the Mad Men

David Ogilvy, founder of Ogilvy & Mather, and a heavy influence on the hit show, Mad Men, wrote the most famous headline ever. Many people can still quote it nearly 50 years later. Read this article to learn the 8 timeless lessons he offers white paper writers on how to produce great work.

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White paper writing problems

SUMMARY: A review of a white paper by the best known name (its only guru) in the white paper writing industry revealed 10 problems to avoid.

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ROI the wrong way

SUMMARY: The technology analyst industry has dumbed down the definition of ROI. It's easy to understand, but ignores fundamental financial principles, and contributes to IT's poor investment results. This article offers you three ways to protect yourself.

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